What is Securities Litigation and Securities Arbitration

Securities attorneys and lawyers can practice is a wide variety of areas.

Transactional Securities Attorneys

Certain securities attorneys focus on transactional securities work which includes counseling issuers, underwriters and placement agents in private and public offerings under the Securities Act of 1933; advising on mergers and acquisitions or going private transactions; and preparing regulatory filings required under state and federal securities laws under the Securities Exchange Act of 1934, Sarbanes Oxley and the Dodd-Frank Act.

Securities Litigation and Arbitration Attorneys

Other securities laws may focus on securities litigation and arbitration. Securities litigation and arbitration cases are prosecuted and defended by securities attorneys on behalf of various parties including shareholders, private and publicly-traded companies, officers, directors, and senior management,  individuals and institutional investors, stock brokers, brokerage firms, broker-dealers, underwriters, investment banks, pension funds, and hedge funds.

In addition to recouping lost assets, private securities litigation also augments the efforts of federal regulators to pursue wrongdoers and to provide a deterrent to future violations.

Derivative Actions

Derivative actions are lawsuits brought by shareholders on behalf of the company against senior managers and officers.  Generally, the claim is brought where the shareholders believe that the senior managers are breaching their fiduciary duties to the company through malfeasance.  Plaintiffs may seek both injunctive relief (directing the end of the wrongful acts) and may seek compensatory damages to be paid  by the rogue managers directly to the company.

State & Federal Lawsuits

In lawsuits and arbitration, securities lawyers may allege violations of state or federal securities laws and may also allege common law claims including breaches of fiduciary duty or fraud depending on the factual scenarios.  Retaining a securities attorney to initiate a securities lawsuit may be the only means for for a shareholder to recover asset or investment losses caused by corporate fraud or malfeasance.  Such actions may be filed in state or federal court depending upon the type of claims asserted.

Class Actions

In addition to individual lawsuits, securities class actions may be filed on behalf of classes of shareholders who have similar interests and similar claims.  Because of the significant expense in engaging in securities litigation against large, publicly-traded companies, class actions provide means for recovery for shareholders with a small financial stake in the litigation.

Securities class actions are filed by securities attorneys who represent individuals who seek to serve as class representatives.  Class representatives must have claims similar to the other members of the class and must be approved by the court.  If a settlement is achieved between the class representative and the defendants, class members generally have three options:  (1) participate in the settlement for their pro-rata share; (2) opt-out of the settlement (and pursue their claims in separate litigation); (3) participate in the settlement, but object to certain parts of the settlement – such as the allocation of the settlement or object to the amount of attorney’s fees sought by the class attorneys.


Some securities disputes arise in the context of a stock broker/client relationship.  In most circumstances, a customer will enter into an agreement to arbitrate any disputes that arise between him and his broker in connection with his brokerage account.  For example, a dispute may arise when a broker is involved with the solicitation or sale of an unregistered security which leads to a loss of the customer’s investment.  Often the brokerage agreements specify that such disputes will be resolved before FINRA dispute resolution.  Arbitration can differ drastically than litigation in state and federal courts for securities attorney.  For example, there is no jury in FINRA arbitration, there are very limited rules of procedure and discovery and there are very limited grounds to appeal a FINRA arbitration award.



A Sarbanes-Oxley Act of 2002 (“SOX”) claim begins with United States Department of Labor’s Occupational Safety and Health Administration (“OSHA”), where “no particular form of complaint” is required, except that it must be in writing nd “should contain a full statement of the acts and omissions, with pertinent dates, which are believed to constitute the violations.” 29 C.F.R. § 1980.103(b). OSHA then has a duty, if appropriate, to interview the complainant to supplement a complaint that lacked a prima facie claim. 29 C.F.R. § 1980.104(b)(1). If the complaint, as supplemented, alleges a prima facie claim, then OSHA initiates an investigation to determine whether a violation occurred. At some point, OSHA must decide if the complainant has stated a prima facie complaint. When OSHA finishes its investigation and makes a decision, either party may object and ask for a hearing before a Department of Labor Administrative Law Judge. 29 C.F.R. § 1980.106.

What are the Elements of a Sarbanes-Oxley/SOX Whistleblower Claim

On July 30, 2002, Congress enacted the Sarbanes-Oxley Act (“SOX”), as part of a comprehensive effort to address corporate misconduct and fraud. The SOX whistleblower protections were included in response to “a culture, supported by law, that discourage[s] employees from reporting fraudulent behavior not only to the proper authorities . . . but even internally. This ‘corporate code of silence’ not only hampers investigations, but also creates a climate where ongoing wrongdoing can occur with virtual impunity.” See Corporate and Criminal Fraud Accountability Act of 2002, S. Rep. 107-146, at 5 (May 6, 2002).  The SOX whistleblower provisions are contained in Title VIII of the SOX, designated as the Corporate and Criminal Fraud Accountability Act of 2002. Section 1514A prohibits covered employers and individuals from retaliating against employees for providing information or assisting in investigations related to certain fraudulent acts. That provision states:

(a) Whistleblower Protection For Employees of Publicly Traded Companies.–No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee–

(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire, radio, TV fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by–(A) a Federal regulatory or law enforcement agency; (B) any Member of Congress or any committee of Congress; or (C) a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct); or

(2) to file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.

18 U.S.C.A. § 1514A.

To prevail on a § 1514A claim, a complainant must prove by a preponderance of the evidence that: (1) she engaged in activity or conduct that § 1514A protects; (2) the respondent took an unfavorable personnel action against her; and (3) the protected activity was a contributing factor in the adverse personnel action. However, relief may not be granted if the respondent demonstrates by clear and convincing evidence that it would have taken the same adverse action in the absence of any protected behavior. 29 C.F.R. § 1980.109(a).