There may or may not come a time in an entrepreneur’s life or during the life a business to be presented with investment opportunities. While any kind of investment has a risk factor, an investment can also be an exciting opportunity—as long as you protect yourself, and your business, particularly from securities fraud.
Suspecting securities fraud can be scary and confusing. After all, what’s going to happen to your investment? What about the capital you invested? What will happen to your business? All these are legitimate questions to ask if you suspect securities fraud.
If you believe you have been the victim of securities fraud, then you need an experienced West Palm Beach business litigation attorney to represent you and your business.
An experienced business litigation attorney represents customers, investors, and businesses, and helps to protect them in the event of fraud, abuse or financial mismanagement.
Visit here to read more about how a West Palm Beach business litigation attorney can help you.
What are “Blue Sky” Laws?
Most business owners and investors are aware that the federal government regulates securities and that the United States Securities Exchange Commission (“SEC”) is the entity responsible for that regulation and oversight.
However, not everyone knows that individual states also have their own rules and regulations governing securities that are generally referred to as “blue sky laws”.
“Blue sky laws” provide for the registration of securities brokers and dealers and also mandate penalties for deceptive and/or fraudulent practices.
The state of Florida signed the Investor Protection Act (FSIPA) back in 2009 in effort to become one of the leading states to enforce and regulate securities fraud.
FSIPA is comprehensive legislation crafted to protect the public from deceptive and fraudulent practices in connection with the sale of securities in the state of Florida.
Essentially, FSIPA is violated if someone or entity directly or indirectly engages in any scheme, act, practice, or misrepresentation which operates as a fraud with respect to the sale or purchase of a security.
Check out this article to read more about a Ponzi scheme.
Any violation of FSIPA may result in cease and desist orders, civil and administrative fines, and, if the violation involves more than $50,000 from five or more individuals, criminal felony charges and penalties.
How to Register Securities
Unless they are exempt from registration, securities may not be sold unless they are properly registered with the Florida Department of Banking and Finance.
To sell them without this registration is illegal. And the Department may deny or revoke registration if the terms of the sale or offer are not “fair, just, or equitable”.
In order to register securities, you must file specific information and documentation with the Department. Additional exhibits, documents, and statements must also be filed typically within 30 days of the registration. This process is complex and must be done with the utmost attention to detail.
Read more about the rules governed by the Florida Department of Banking and Finance here.
What Constitutes a Violation of FSIPA?
If a securities issuer falsifies or withholds material facts regarding a particular investment, then he or she is committing fraud and violating FSIPA.
This area can be comprehensive and complex.
Sometimes the devil is in the details.
If you plan to issue securities but do not know if you are complying with FSIPA, then you should consider working with a West Palm Beach business litigation lawyer as soon as possible—preferably prior to issuing the securities.
In addition to mandating certain civil and criminal penalties for those violating FSIPA, the act also provides that the offending party must reimburse a claimant’s attorney’s’ fees if he or she successfully prevails in a resulting lawsuit—including an appeal.
Yet, it is important to note that this is double-edged sword. If an investor brings a claim against a securities issuer and is unsuccessful in proving that securities fraud was committed, the issuer may recover its attorney’s fees incurred in defending the action.
What are Rescission Damages?
In most cases, the best option for the investor who purchased securities by an issuer who committed a violation of FSIPA is to have the transaction rescinded.
This refers to an act that serves to “undo” the transaction, and FSIPA provides for such a remedy. Essentially, every sale of a security made in violation of FSIPA may be rescinded at the election of the purchaser.
Here is a mathematical formula that can help explain how rescission damages are calculated and paid:
Damages = (consideration paid + interest) – (value of security when sold + income received)
To read more about how to calculate rescission damages, check out this site here.
Legal Advice from an Experienced West Palm Beach Business Litigation Attorney
If you feel like you purchased securities from someone who may have violated FSIPA, then you should contact an experienced West Palm Beach business litigation attorney who can evaluate your case and help you bring an action against the issuer of the securities.
A knowledgeable West Palm Beach business litigation attorney will be able to guide you through this complex and complicated process, and ensure your rights are protected along the way.
Visit here to learn about how you can get started with a West Palm Beach business litigation attorney.