Today the securities fraud lawsuit industry has become one of the biggest areas of lawsuits in America. Generally, a class action involving securities is brought by a stock holder of a company on the behalf of other stockholder or shareholders. This type of lawsuit is typically referred to as a shareholder class action, although sometimes the term is used interchangeably with securities class action. If you own stock and want to investigate a company for a shareholder class action, please contact us.
When are Securities Class Actions Filed against a Company?
When stock prices drop, stockholders or shareholders may wonder what’s happening with the company. Sometimes stock price changes are normal. But sometimes stock prices are affected by a company’s wrong doing.
Companies who hide information from their investors may be sued for hiding information. Other times, companies show alot of profit but the stock doesn’t hold value for a long time because the profit is not real.
Sometimes companies “cook the books;” or they are doing things that seem profitable but are really just a sham. Usually in shareholder class actions there is a drop in the stock price, but not always. In most cases, a securities class action is limited to a very specific period of time. This period of is known as a “class period”.
Most of the time, securities class actions will be brought under the anti-fraud provision of the federal securities law, concerning rule 10b-5 of the Securities Act of 1933, and section 10(b) of the Securities Exchange Act of 1934.
What the Security Act Prohibits
The Securities Act is the main law that regulates the initial offering of securities, allowing investors to sue parties when their registration statement, containing the prospectus, includes misleading or false information. A registration statement is a document that is required by the Securities Exchange Commission before an offering that outlines all of the important information there is to know about the company’s operations, management, and financial condition.
