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Misrepresentations and omission in 10b-5 claims

Hubbard Snitchler & Parzianello

Securities fraud is more widespread than many people realize, wreaking havoc on unsuspecting investors who wanted nothing more than a little financial stability. This is unacceptable. While the criminal justice system may take action against those financial professionals who wronged you, the truth of the matter is that criminal charges aren’t going to get you your money back. That’s why you need to consider civil action by filing a 10b-5 claim.

Securities fraud, misrepresentations and omissions

When people think of securities fraud they often picture a professional who engages in a Ponzi scheme or some other blatant act in his or her own interests. While this type of fraud occurs on a regular basis, it’s not the only type of illegal activity that can result in financial harm to investors. In fact, in many instances investors are simply misled to make decisions that they otherwise would not have made if they had been fully informed.

That’s why it’s important to look back to see what you were advised of before making a certain investment decision. Was the true nature and the risk of the investment fully disclosed to you? If not, then you may have a basis for legal action. The same holds true if the information disclosed to you about the investment was false.

Addressing “material fact”

In order to succeed on a securities misrepresentation or omission claim, you have to show that the untrue statement or the omission in question dealt with a “material fact” of the security transaction in question. What constitutes a “material fact?” In short, a material fact is any fact that the average investor should be made aware of before engaging in a security transaction. That’s a pretty broad definition that gives you a lot of room to craft your legal argument.

Intent and reliance

If you’re going to bring a claim against your broker, then you need to be prepared to prove not only misrepresentation or omission of a material fact, but you also have to show that your broker intended to deceive you and that you relied on that deception to make the financial decision in question. This might require you to dig deep into the facts of the case by obtaining email communications, phone logs, and other internal documents from your broker’s practice. Subpoenaing and deposing witness might also help lay the foundation upon which you can build your claim.

Proving damages

To succeed on one of these claims you also have to show that you were financially harmed by the fraud, misrepresentation, or omission in question. While that may mean demonstrating the amount of investment lost, you might be able to expand the scope of your damages. This is because the law doesn’t define the “actual damages” that are recoverable.

Generally speaking, you’re most likely to recover out-of-pocket damages, which is the difference between the purchase price and the fair market value of the security, absent misrepresentations and omissions, at the time it was purchased. Calculating and proving the full extent of your damages can be complicated, though, which is why it’s best to discuss these matters with an attorney who is experienced in this area of the law.

Be confident as you proceed with your claim

Securities litigation can be challenging, and the process can be fraught with legal nuances that can have tremendous implications for your case. For these reasons, you may be best served by having a legal professional on your side who not only knows the law, but who also understands how the securities world works. There are very few firms out there that can provide that kind of representation. We’re proud to say that we’re one of them.

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