Securities trouble.
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What is securities law and who does it cover?

Securities law is the set of federal and state rules that govern how investments are offered, sold, traded, and disclosed. The headline federal statutes are the Securities Act of 1933 (governing how new securities are offered), the Securities Exchange Act of 1934 (governing trading and ongoing disclosure), the Investment Advisers Act of 1940, the Investment Company Act of 1940, and the Sarbanes-Oxley and Dodd-Frank acts. Each state also has its own "Blue Sky" laws.

The agencies and forums you may end up dealing with include the Securities and Exchange Commission, FINRA (the self-regulatory organization for broker-dealers), state securities regulators, the Department of Justice for criminal cases, the Commodity Futures Trading Commission for futures and certain crypto products, the Public Company Accounting Oversight Board for auditor matters, and federal courts for class action securities litigation.

Common situations where you need a securities attorney

Securities work splits into two broad categories — transactional (helping you raise money, list, or comply) and disputes (defending or pursuing claims). Specific triggers to call counsel:

• You received an SEC subpoena, FINRA Rule 8210 request, or formal investigation notice. Do not respond before talking to securities counsel. Anything you say can be used against you, including in a parallel criminal case. Counsel will negotiate scope, assert privilege, and prepare witnesses.
• You are a broker, advisor, or registered representative facing a customer complaint, U4 disclosure event, or termination for cause. A bad U5 can effectively end your career. Counsel can help you negotiate the language and pursue expungement.
• You lost money in a brokerage account because of unsuitable recommendations, churning, unauthorized trades, or outright fraud. Most customer disputes are resolved in FINRA arbitration. The deadlines are short (usually 6 years) and the procedures are specific.
• You are a private company raising money from investors. Almost every capital raise involves the sale of "securities" under federal law. Even friends-and-family rounds need an exemption (Regulation D, Rule 506(b) or 506(c) being the most common). Getting the offering documents wrong can give every investor the right to ask for their money back, with interest.
• You are taking a company public, doing a SPAC, direct listing, or major secondary. The disclosure documents (S-1, F-1, 10, proxy statements) are intricate. The liability for material misstatements is significant.
• You are a public company dealing with periodic reporting, insider trading policies, 10-K and 10-Q drafting, Section 16 filings, or an unusual transaction.
• You are a board member or officer facing a derivative suit, class action, or Caremark claim. Personal liability is on the table. So is your D&O insurance — and the insurer wants its preferred panel counsel.
• You are a whistleblower under SEC, CFTC, or IRS programs. Awards range from 10 to 30 percent of recoveries above $1 million. The procedural rules are highly specific.
• You operate in crypto, tokens, or digital assets. The SEC treats most tokens as securities. The CFTC treats some as commodities. Both view the same market as theirs to police.

The SEC enforcement process — what to expect

SEC enforcement matters typically follow a predictable arc. Knowing the stage you are at tells you what to do next.

1. Matter Under Inquiry (MUI) — informal review. Often a phone call or letter from staff asking for documents or context. Anything you say is voluntary, but it is not privileged from the SEC.
2. Formal order of investigation — staff has internal authority to issue subpoenas, take testimony under oath, and compel documents. You and your employees may be called for "on-the-record" testimony, which is essentially a deposition with very high stakes.
3. Wells notice — a written notice that the staff intends to recommend an enforcement action. You get the chance to make a "Wells submission" — a written argument and sometimes oral presentation to the Commission explaining why no action should be brought.
4. Settlement or charges — most enforcement matters settle. The SEC publishes detailed orders. Settlements typically include disgorgement, civil penalties, prejudgment interest, undertakings (conduct restrictions), and sometimes industry bars or officer-and-director bars.
5. Litigation — if not settled, the SEC sues in federal court or files an administrative proceeding. Constitutional challenges following SEC v. Jarkesy have changed the landscape — many cases that previously went to administrative law judges must now be tried in federal court before juries.

Throughout this process, the SEC may share information with the Department of Justice, state regulators, FINRA, and foreign authorities. A single set of facts can produce SEC civil charges, parallel criminal charges, FINRA proceedings, and private class actions — all at once.

FINRA arbitration — how customer disputes get resolved

Almost every brokerage account agreement includes a clause requiring disputes to go to arbitration before FINRA. This is good news for customers in some ways — arbitration is faster and cheaper than federal court — and challenging in others. There is no jury, no expansive discovery, very limited appeal rights, and the panel of arbitrators is made up of part-time decision makers from a mix of industry and public backgrounds.

Common claims in FINRA arbitration:

• Unsuitability — the broker recommended investments that were not appropriate for the customer's risk tolerance, age, or objectives. Reg BI (Regulation Best Interest) raised the bar for brokers in 2020.
• Churning — excessive trading designed to generate commissions rather than serve the customer.
• Unauthorized trading — trades placed without the customer's permission.
• Misrepresentation — false statements about an investment's risks, fees, or past performance.
• Failure to supervise — claims against the brokerage firm itself for not catching the broker's misconduct.
• Breach of fiduciary duty — for investment advisors and certain types of broker conduct.
• Selling away — broker sold investments outside their firm's approved product list.
• Margin abuse, options misuse, complex product sales to inappropriate customers.

The clock matters. Most FINRA claims must be brought within 6 years of the events giving rise to the dispute. Many state law claims are shorter. If you suspect a problem, do not wait years to talk to counsel.

Capital raising — the most common privately-issued securities

Every time a private company sells stock, convertible notes, SAFEs, or similar instruments, federal and state securities laws apply. The deal does not get done without an exemption. The most common exemptions and structures:

• Regulation D Rule 506(b) — sales to up to 35 non-accredited investors plus unlimited accredited investors, with no general solicitation. Most early-stage rounds use this.
• Regulation D Rule 506(c) — sales only to accredited investors, with verification of accredited status, but general solicitation allowed.
• Regulation A+ — "mini IPO" allowing public solicitation up to $75 million in a 12-month period. SEC review required.
• Regulation Crowdfunding (Reg CF) — small offerings up to about $5 million through registered crowdfunding portals.
• Rule 504 — small offerings up to $10 million.
• Section 4(a)(2) and Rule 144A — private placements to sophisticated investors and qualified institutional buyers.

Each of these has specific document, filing, and disclosure requirements. Form D filings with the SEC, blue sky filings with the states, accredited investor verification, bad actor checks, integration analysis, and disclosure documents need to be done correctly the first time.

Public company work and the IPO process

Going public — through a traditional IPO, direct listing, SPAC, or APO — is one of the most lawyer-intensive things a company can do. The S-1 (or F-1 for foreign issuers) is a multi-hundred-page disclosure document that must accurately describe the business, risk factors, financials, executive compensation, and shareholder rights. Underwriter counsel, issuer counsel, and auditor independence all need to be coordinated.

After the IPO, the work shifts to ongoing reporting (10-K, 10-Q, 8-K), proxy statements, Section 16 reporting for officers and directors, insider trading windows, Reg FD compliance, related-party transactions, audit committee work, and earnings call disclosures. Public company counsel work goes hand in hand with the corporate secretary and chief financial officer.

Crypto, digital assets, and tokens

The SEC's position, beginning with the DAO Report in 2017 and continuing through dozens of enforcement actions, is that most tokens are securities under the Howey test. The CFTC treats Bitcoin and Ether as commodities, with continuing enforcement against unregistered futures and swaps. State money transmitter laws also apply. The result: launching, exchanging, lending, or staking digital assets without legal counsel is risky in ways that are hard to overstate.

Recent legislation (the Financial Innovation and Technology for the 21st Century Act, ongoing market structure debates) is reshaping the rules, but enforcement under the existing framework continues.

Whistleblower programs

If you have inside knowledge of securities violations, three federal programs reward original information that leads to enforcement actions of more than $1 million: the SEC, the CFTC, and the IRS. Awards are between 10% and 30% of money collected. Procedural rules are specific — you must file a tip in the right form, before the right deadlines, and through the right channels. Mistakes can disqualify you from the award. Anti-retaliation protections also apply if your employer fires you for reporting internally or to the regulators.

What does a securities attorney actually cost?

Customer-side FINRA arbitrations are usually contingency — you pay nothing unless you recover. Defense work, transactional work, and most regulator response is hourly. For early-stage capital raises, ask for a flat fee. For ongoing public-company or fund counsel, ask about retainer arrangements. The biggest cost surprise in securities matters is parallel proceedings — one set of facts can produce SEC, FINRA, state, criminal, and class action work all at once.

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