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How can Rule 10b-5 help victims of securities fraud?

Hubbard Snitchler & Parzianello

Victims of securities fraud, or other related bad acts, are not just high-earners and the ultra-wealthy. Many residents of Southeast Michigan can get caught up in trading schemes that benefit the person who thought the scheme up but at the expense of innocent investors.

Many of these investors wind up losing up to tens or even hundreds of thousands of dollars that they may have intended for retirement or some other important family expense.

Unfortunately, too many times, those who effectively steal from investors are able to get away with it.

After all, proving that someone committed fraud traditionally is difficult because it is hard in any circumstance to prove that someone intentionally lied or acted deceptively.

Rule 10b-5 has been interpreted to allow a private right of action

The federal regulation commonly called Rule 10b-5 can help victims who are trying to corral their money back from a crafty broker or other party.

Rule 10b-5 prohibits a wide range of underhanded activity. In addition to imposing penalties for false statements, it also bars lies of omission, such as when a company goes out of its way to hide poor performance or other unflattering news.

It also prohibits what is commonly called insider trading, where people with off-market information, legally called material non-public information, use it to get an unfair advantage when trading securities.

As part of its mission, the Securities and Exchange Commission enforces Rule 10b-5 both through civil litigation and, in some cases, by initiating criminal proceedings.

However, the law does allow residents of Southeastern Michigan the option to pursue those who perpetrate securities fraud and other dishonest financial behavior directly if these bad actors violated Rule 10b-5.

In order to do so, they will have to show how the violation led to their harm.

Victims of securities fraud in the Detroit area may have options for getting relief both in federal court and in the Michigan courts. They should not give up hope.  Still, it is important that they understand their options and consider them carefully.

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