Shareholder Rights and Derivative Actions

Shareholder Rights and Derivative Actions

Sometimes a CEO or other corporate insider puts the value of a company at risk by committing crimes such as wire fraud or embezzlement. When a shareholder believes that a director or officer has harmed the corporation by breaching a contract or breaching their duties, the shareholder can assert their rights and seek relief. One option is to file a derivative lawsuit. This article discusses shareholders rights and derivative actions, including information on the following:

  • The shareholder’s role in the corporation
  • The requirements for filing a derivative action
  • Shareholder activism

Corporate Roles

The shareholders (also called stockholders) are investors who own shares in the corporation. The directors have obligations and duties to both the shareholders and the corporation itself. This role differs from that of the officers and executives who handle corporate governance by running the operations of the corporation, although the roles can overlap.

Derivative Actions and Shareholder Rights

Being a shareholder comes with certain duties, responsibilities, and rights. Shareholders have a general range of rights concerning the corporation, which include:

  • ownership in a portion of the company;
  • ownership transfer rights;
  • voting rights; and
  • an entitlement to dividends.

One of the most significant shareholder rights is the right to sue an officer or a director who has harmed the corporation. This type of litigation is referred to as a shareholder derivative action or lawsuit. Unlike a securities class action suit, where individual investors and shareholders are seeking relief, the derivative action includes the interests of all shareholders and permits them to file on behalf of the corporation.

Shareholders often bring derivative suits against their corporation to try to resolve conflicts between the shareholders and the officers, directors, or board members who have harmed the corporation through mismanagement or other wrongdoing. For instance, a shareholder of the fast food corporation Wendy’s filed a derivative action against its directors and officers for its security practices that ultimately led to a massive data breach.

Requirements for Shareholder Derivative Lawsuits

Many states require that a plaintiff must be a stockholder at the time of the alleged improper conduct in order to file a derivative action. Others require that the shareholder own stock at the time of the improper conduct and continuously throughout the resolution of the lawsuit; this is referred to as the “continuous ownership requirement.”

Notice Requirements

Prior to filing the suit, the affected shareholders must demonstrate that they informed the company’s management of the problems in writing and that the directors decided against pursuing any action. If management fails to comply, the shareholders must show that the management’s conduct adequately harmed their position and that they refused to resolve the issues.

The shareholder must give notice (on their own or at the expense of the corporation if ordered by the court) to the other shareholders that the action has been initiated, providing them the opportunity to join the lawsuit.

Damages for the Corporation

If a shareholder prevails, they won’t recover individually; any recovery obtained from a derivative action is for the corporation only. However, a shareholder will generally receive legal expenses from the corporation.

Shareholder Activism

While a derivative suit is a very specific way to affect corporate governance, shareholder (or stockholder) activism is another more broader means to promote interests through shareholder rights, especially voting rights. Shareholder activism occurs when shareholders attempt to use their power to pressure management and affect a corporation’s behavior resulting in favorable results for the shareholder or to promote broader political or social causes, As an example, some Apple investors have sought to pressure the company to address smartphone addiction, especially among children. This can be achieved through various actions including litigation, proxy contests, publicity campaigns, and more.

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It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Lawyer for Excessive Use of Margin

Purchasing securities “on margin” equates to investing with borrowed funds. The risks of trading on margin are unsuitable for many investors. If a financial adviser encourages margin trading without regard for a client’s investment profile, or without a client’s full understanding of the risks involved, the client can potentially seek to recover any money lost as a result of the margin transaction.

Lawyer for Excessive Use of Margin


An investor can buy securities using money borrowed from a brokerage firm (rather than paying for the securities in full). This is known as “buying on margin.”

Buying on margin requires opening a margin account and depositing an initial amount of purchased securities. The initial account equity (margin) is used as collateral to borrow money and purchase additional securities. Like other types of loans, interest is charged on the amount borrowed until it is repaid.


The risks involved with trading on margin include:

  • Securities purchased on margin do not break even, or earn at least the amount of interest charged on the loan, resulting in the loss of funds.
  • Securities used as collateral drop in price and the firm issues a “margin call,” which requires the customer to repay all or part of the loan. The customer is not entitled to a time extension on a margin call.
  • The client has limited control over their margin account. For example, the firm can force the sales of margin account securities without notice, sell securities without contacting the client, and increase margin requirements at any time.


Margin investing isn’t an appropriate strategy for most investors. Margin loans, however, can be highly profitable for brokerage firms (because of the interest paid on borrowed money) and for brokers, who might be paid a fee based on the size of the client’s loan.

Investment professionals must understand a client’s investment profile, including their willingness and ability to incur risk. Before a client opens a margin account, they should fully understand how margin transactions could affect their portfolio.

If your broker misrepresented the risks of a margin account, opened an unauthorized account in your name, or made excessive trades in your account, any lost money may be recoverable through a legal claim.


Once reserved strictly for wealthy, financially sophisticated investors, hedge funds have become increasingly popular investment vehicles for traditional investors. Often, this is achieved through investment in “funds of hedge funds.” Because I’m a securities lawyer, I’ve seen both good and bad from this.

Both hedge funds and funds of hedge funds have risks that are inappropriate for most investors. Financial advisers may make exaggerated and misleading claims about these funds in order to lure potential investors. Hedge fund managers have also been known to defraud investors.


Hedge funds are a type of investment fund. Like mutual funds, hedge funds pool the money of many investors and follow a specific investment strategy. But that is about as far as the similarities go.

Unlike mutual funds, hedge funds are not regulated by the Securities and Exchange Commission (SEC), and therefore do not offer many of the investor protections that mutual funds and other registered investment products do.


Hedge fund investment is usually limited to wealthy individuals and institutional investors. But funds of hedge funds—an indirect way of investing in hedge funds—typically require lower minimum investments that make them accessible to a broader investor class.

While funds of hedge funds may be registered SEC products, the underlying hedge funds are not. Funds of hedge funds thus carry the same investment risks that hedge funds do.


The risks of investing in hedge funds and funds of hedge funds include:

  • Not SEC Registered: Because hedge funds are not required to be SEC registered, they are not subject to mandatory reporting rules. As a result, it can be very difficult for investors to gauge a hedge fund’s performance. This can make it easier for a hedge fund manager to commit fraud.
  • Speculative Investing: Hedge fund managers are paid based on the fund’s performance, which gives them an incentive to maximize positive performance. This can lead to sophisticated (read: risky) investment strategies such as short selling, derivatives investment, leveraging, and hedging.
  • Illiquidity: Hedge fund investors may be unable to recoup their investment money if they want to opt out of the fund.
  • Expensive: Hedge funds usually have numerous fee layers and impose higher investor costs than mutual funds.
  • Tax Complexity: Hedge funds’ complex tax structure can present delays and difficulties during tax season.


Hedge fund misconduct commonly occurs in the context of how the fund was sold.

Unless you are a wealthy, financially sophisticated investor, a hedge fund is mostly likely an unsuitable investment. And even if you are an accredited investor, an adviser must accurately present important information about the hedge fund. Any misrepresentations or omissions of material facts could constitute misconduct.

For non-accredited investors, funds of hedge funds may be suitable investments—however, their growth forecasts, risks, and drawbacks must be accurately presented.

Absent any misconduct in the sales stage, hedge fund managers and operators can commit investment fraud. Examples of fraudulent hedge fund conduct include providing phony account statements, not disclosing conflicts of interest, misappropriating investor funds, and operating Ponzi schemes.

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When you need legal help about business or securities issues, call Ascent Law and get your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

Misleading Investors in Structured Notes

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.


In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.



The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

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Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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SEC Charges Executives with Stealing

It’s important to keep in the loop as a Securities Lawyer. For example, the Securities and Exchange Commission charged two former executives at a credit card processing company with masterminding a fraudulent scheme to steal millions of dollars through phony expense reimbursements, inflated invoices, and other improper accounting tactics.

SEC Charges Executives with Stealing

The SEC’s complaint alleges that iPayment’s then-senior vice president of sales and marketing Nasir N. Shakouri and then-executive vice president and chief operating officer Robert S. Torino routinely reimbursed themselves for payments that were never actually made to third-party vendors using their personal credit cards.  They also allegedly conspired with vendors to inflate invoices and receive kickbacks from the overpayments, and claimed improper commissions and bonuses related to other corporate funds they improperly diverted in various ways.

The SEC’s complaint also charges three other iPayment executives – Bronson L. Quon, John S. Hong, and Jonathan K. Skarie – with participating in the scheme and helping Shakouri and Torino falsify books and records to hide the thefts of corporate funds.  Quon, Hong, and Skarie were allegedly rewarded for their assistance with misappropriated iPayment funds.

“As alleged in our complaint, these executives manipulated iPayment’s internal accounting systems, lied to the external auditor, and caused approximately $11.6 million in losses to the company,” said Sanjay Wadhwa.

In a parallel action, the U.S. Attorney’s Office for the Central District of Utah today announced criminal charges against Shakouri and Torino.

The SEC is seeking disgorgement of ill-gotten gains plus interest and penalties as well as officer-and-director bars.


The Securities and Exchange Commission today announced that it has entered into an arrangement with the National Bank of Belgium to enhance cooperation and information sharing regarding expanded services by Euroclear Bank, which provides clearance and settlement through its operation of the Euroclear System.

Brussels-based Euroclear Bank is subject to prudential supervision and oversight by the National Bank of Belgium as a credit institution and as a clearing agency.  The SEC granted Euroclear’s predecessor an exemption from registration as a clearing agency in 1998, allowing it to provide clearing services for U.S. government securities.  On Dec. 16, 2016, the SEC approved Euroclear’s application to modify its exemption from registration, enabling it to also provide limited clearing agency services for U.S. equity securities.

On March 9, 2017, the SEC and the National Bank of Belgium added an addendum to their 2001 Understanding Regarding An Application of Euroclear Bank for an Exemption under U.S. Federal Securities Laws regarding Euroclear’s clearing activities in the U.S., enhancing their ability to exchange information about Euroclear’s new services.

“This addendum will expand the signatories’ ability to cooperate and exchange information related to Euroclear Bank and augment the SEC’s oversight of Euroclear Bank’s activities under its exemption order,” said Paul A. Leder, Director of the SEC’s Office of International Affairs.


The Securities and Exchange Commission today announced fraud charges against a Ukraine-based trading firm accused of manipulating the U.S. markets hundreds of thousands of times and the Utah-based brokerage firm and CEO who allegedly helped make it possible.

The SEC’s complaint alleges that Avalon FA Ltd touted itself to traders as a destination to engage in layering, a scheme in which orders are placed but later canceled after tricking others into buying or selling stocks at artificial prices, resulting in illicit profits.  Avalon allegedly made more than $21 million in the layering scheme involving U.S. stocks during a five-year period.  According to the SEC’s complaint, Avalon also made more than $7 million in illicit profits through a cross-market manipulation scheme in which the firm bought and sold U.S. stocks at a loss in order to manipulate the prices of the stock and its corresponding options so that it could then profitably trade at artificial prices.  Avalon allegedly used traders in Eastern Europe and Asia to conduct its trading, and the firm kept a portion of the profits and collected commissions from the traders.

The SEC’s complaint also describes fraud charges against Avalon’s named owner Nathan Fayyer and Sergey Pustelnik, who allegedly kept his controlling interest in Avalon undisclosed and embedded himself at Lek Securities as a registered representative, using his position to facilitate the schemes.

The SEC further alleges that Lek Securities and its owner Samuel Lek made the schemes possible by providing Avalon with access to the U.S. markets, approving the cross-market trading scheme, and improving its trading technology to assist Avalon’s trading.  According to the SEC’s complaint, Lek Securities also relaxed its layering controls after Avalon complained.  Avalon was the highest-producing customer for Lek Securities in terms of trading commissions, fees, and rebates generated.

“As alleged in our complaint, Avalon openly marketed itself as a destination for manipulative trading, and Lek Securities opened the gate to allow the schemes into the U.S. markets despite repeated warnings that its customer was manipulating the market,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement.

After filing its complaint in U.S. District Court for the Southern District of Utah, the SEC obtained an emergency court order freezing Avalon’s assets held in its account at Lek Securities as well as freezing and repatriating funds that Avalon has transferred overseas.


The Securities and Exchange Commission today announced an emergency court order to freeze assets in two brokerage accounts used last week to reap more than $1 million in alleged insider trading profits in connection with a merger announcement by telecommunications companies.

According to the SEC’s complaint filed in U.S. District Court for the Southern District of Utah, highly suspicious transactions have been detected surrounding last week’s announcement that Liberty Interactive Corp. had agreed to acquire General Communication Inc.  The traders, who are currently unknown, allegedly used foreign brokerage accounts in the United Kingdom and Lebanon to purchase call option contracts through U.S.-based brokerages and on U.S.-based exchanges in the days leading up to the April 4 public announcement of the acquisition.  The court’s order freezes the foreign accounts’ assets contained in the U.S. brokerages.

According to the SEC’s complaint, some of the risky options positions taken in these accounts represented virtually 100 percent of the market for those options.  Following the acquisition announcement, General Communication’s shares rose more than 62 percent and the brokerage account customers allegedly sold the bulk of the contracts.

“As alleged in our complaint, the timing, size, and profitability of the trades as well as the absence of any recent trading by the accounts in these particular securities make the transactions highly suspicious,” said Michele Wein Layne.  “We don’t hesitate to act quickly and proactively to freeze accounts and prevent proceeds from dissipating while we continue to investigate dubious transactions and identify the traders behind them.”

The emergency court order obtained by the SEC requires the traders to repatriate any funds or assets located outside the U.S. that were obtained from the alleged insider trading.  The traders are prohibited from destroying any evidence.  The SEC’s complaint charges the unknown traders with violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5.  The SEC is seeking a final judgment ordering the traders to disgorge their allegedly ill-gotten gains plus interest and penalties and permanently enjoining them from future violations.

Free Initial Consultation with Lawyer

It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews

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The Securities Filing Lawyer

the securities filing lawyer

A ѕесuritу iѕ a trаdаblе finаnсiаl asset. The tеrm соmmоnlу rеfеrѕ to аnу fоrm of finаnсiаl instrument, but itѕ lеgаl dеfinitiоn varies by jurisdiction. In some jurisdictions the tеrm specifically еxсludеѕ finаnсiаl inѕtrumеntѕ оthеr thаn еԛuitiеѕ and fixеd inсоmе inѕtrumеntѕ. In some jurisdictions it includes some instruments that аrе сlоѕе to еԛuitiеѕ and fixеd inсоmе, е.g. еԛuitу warrants. In ѕоmе соuntriеѕ аnd lаnguаgеѕ thе term “ѕесuritу” iѕ commonly uѕеd in day-to-day parlance tо mеаn аnу fоrm of finаnсiаl inѕtrumеnt, even thоugh the underlying lеgаl аnd rеgulаtоrу rеgimе may not hаvе ѕuсh a broad definition.

Sоmеtimеѕ it iѕ diffiсult to know whiсh part оf thе lаw аррliеѕ tо your саѕе, еѕресiаllу if you are dеаling with whаt аn оutѕidеr mау viеw аѕ a соmрliсаtеd financial dispute. If уоu hоld Utah ѕесuritiеѕ, where do you go fоr hеlр? Rеѕt assured, there are аttоrnеуѕ in business аnd financial lаw who саn аdviѕе you in rеgаrdѕ ѕесuritiеѕ thаt you mау hold. But until уоu hаvе rеtаinеd the services of a lосаl lаwуеr, let’s gеt up tо ѕрееd оn thе tеrminоlоgу оf ѕесuritiеѕ lаw ѕо уоu are rеаdу fоr your first арроintmеnt.

Securities inсludе ѕhаrеѕ of corporate ѕtосk оr mutuаl funds, corporation оr gоvеrnmеnt iѕѕuеd bоndѕ, ѕtосk options оr оthеr орtiоnѕ, limitеd раrtnеrѕhiр unitѕ, аnd vаriоuѕ other formal invеѕtmеnt instruments. InUtah, ѕесuritiеѕ mау bе issued bу соmmеrсiаl companies, gоvеrnmеnt аgеnсiеѕ, local аuthоritiеѕ аnd intеrnаtiоnаl аnd ѕuрrаnаtiоnаl organizations (ѕuсh as thе World Bаnk). Thе рrimаrу goal оf рurсhаѕing ѕесuritiеѕ iѕ invеѕtmеnt, with аn еvеntuаl aim оf receiving income оr сарitаl gain; (capital gаin being the difference bеtwееn a lоwеr buying price аnd a highеr ѕеlling price).

Sесuritiеѕ аrе brоаdlу саtеgоrizеd intо thrее categories.

  1. Dеbt securities:

Thеѕе inсludе debentures, bonds, deposits, notes аnd соmmеrсiаl рареr (in some circumstances). If you hold one оf thеѕе debt ѕесuritiеѕ, уоur Utah ѕесuritiеѕ attorney will аdviѕе that you are usually еntitlеd tо thе рауmеnt of рrinсiраl аnd intеrеѕt оn thеѕе. Thеrе may аlѕо be соntrасtuаl rights a gооd lаwуеr will advise уоu of, inсluding the right to information.

Debt securities are uѕuаllу fixеd term securities rеdееmаblе at thе еnd of thе tеrm, thеу may bе ѕесurеd or unsecured or protected bу collateral. Dеbt ѕесuritiеѕ mау offer ѕоmе соntrоl to invеѕtоrѕ if thе соmраnу is a start-up оr аn еѕtаbliѕhеd business undеrgоing ‘restructuring’. In thеѕе cases, if intеrеѕt рауmеntѕ аrе missed, the creditors mау tаkе control of thе соmраnу and liԛuidаtе it to rесоvеr ѕоmе оf their invеѕtmеnt. Pеорlе fаvоr buying dеbt securities bесаuѕе оf thе uѕuаllу higher rаtе of rеturn thаn bаnk dероѕitѕ. However, dеbt ѕесuritiеѕ issued bу a gоvеrnmеnt (bоndѕ) uѕuаllу hаvе a lower interest rаtе than ѕесuritiеѕ iѕѕuеd by commercial соmраniеѕ. Thiѕ аррliеѕ nаtiоnаllу and tо Utah securities.

  1. Eԛuitу ѕесuritiеѕ:

Cоmmоn ѕtосk iѕ thе mоѕt рорulаr tуре оf equity ѕесuritу. Investors are саllеd ѕhаrеhоldеrѕ and thеу оwn a share оf the еԛuitу intеrеѕt of сарitаl ѕtосk оf a company, truѕt or раrtnеrѕhiр. It is likе ѕауing ѕоmеоnе whо invеѕtѕ in еԛuitу ѕесuritiеѕ is buуing a tinу раrt оf a соmраnу (or a lаrgе раrt, depending on уоur budget!). Aѕ аn invеѕtоr уоu аrе nоt nесеѕѕаrilу еntitlеd tо аnу рауmеnt, likе thе rеgulаr intеrеѕt payment оf a dеbt ѕесuritу. If a соmраnу goes bankrupt it is роѕѕiblе tо lose your еntirе invеѕtmеnt, аѕ ѕhаrеhоldеrѕ gеt раid lаѕt. If thiѕ hарреnѕ it might bе a gооd timе to call уоur Utah ѕесuritiеѕ lаwуеr fоr advice.

On thе рluѕ side, investing in еԛuitу ѕесuritiеѕ саn givеѕ a shareholder access to profits аnd сарitаl gаinѕ, ѕоmеthing debt ѕесuritiеѕ will nоt. The hоldеr оf debt securities rесеivеѕ оnlу intеrеѕt and repayment of principal no mаttеr hоw wеll thе iѕѕuеr реrfоrmѕ finаnсiаllу. Equity invеѕtmеnt may аlѕо оffеr соntrоl of thе business оf the issuer.

  1. Dеrivаtivе contracts:

If you have invеѕtеd in fоrwаrdѕ, futures, орtiоnѕ and/or ѕwарѕ уоu hаvе рrоbаblу purchased a dеrivаtivе. A derivative is реrhарѕ оbviоuѕlу, dеrivеd from some оthеr asset, indеx, еvеnt, vаluе оr condition (knоwn as thе undеrlуing аѕѕеt). Rаthеr thаn trаdе or еxсhаngе thе underlying asset, dеrivаtivе trаdеrѕ enter into agreements tо еxсhаngе саѕh оr assets over timе bаѕеd оn thе undеrlуing аѕѕеt. A simple еxаmрlе iѕ a futurеѕ contract: аn аgrееmеnt tо еxсhаngе thе underlying аѕѕеt аt a future date.

The nаmе given tо securities whеrеbу ownership is rеgiѕtеrеd with thе iѕѕuing соmраnу or thеir аgеnt.  Sесuritiеѕ thаt are unаvаilаblе fоr sale duе tо rеѕtriсtiоnѕ placed upon thеm аt thе timе of iѕѕuе.  This is thе common method fоr hаndling ѕесuritiеѕ. It provides thе iѕѕuing соmраnу with the nесеѕѕаrу ѕtосkhоldеr infоrmаtiоn nееdеd to рау оut dividends аnd dеlivеr notices of imроrtаnt соmраnу асtivitу.

Thеѕе securities cannot be ѕоld оr transferred tо other investors unlеѕѕ сеrtаin сritеriа аrе met undеr rеgulаtiоnѕ.

Attorney for Securities Law

If the Utah Division of Securities is calling you or if you’ve been sued on a securities issue, or if you need to file a securities registration, call Ascent Law for your free consultation (801) 676-5506. We want to help you!

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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Why Do We Have Securities Laws in Utah 801-676-5507

Why Do We Have Securities Laws in Utah?

Attorney Greg Lyle answers this question:

As Greg explains in that video, there is a reason the Securities & Exchange Commission exists. There is a federal SEC and there is a Utah SEC.

The USA Securities and also Exchange Commission was started in 1934 in action to the wonderful stock exchange crash of 1929. Congress created the SEC in the hopes that it would serve as an independent and non-partisan agency that would certainly assist manage the handling of securities in the UNITED STATE. Many thanks to the accident of 1929, Congress additionally established numerous brand-new securities laws that the SEC was created to impose.

The primary task of the SEC is to apply a collection of laws, a lot of them established from 1933-1940 that help safeguard capitalists of securities and also the economic climate in its entirety. Congress has offered the SEC the right to bring civil cases against companies that they really feel have actually committed a collection of criminal offenses, such as expert trading, scams, or business that have provided incorrect information. The SEC additionally works together with neighborhood cops, the FBI or the CIA in pursuing criminal fees when the correct laws have actually been damaged.

One of the manner in which the SEC collects information about numerous business to ensure that it could see if any of them have actually broken the law is be calling for that openly held firms submit records four times a year and afterwards a yearly record, as well, revealing their economic numbers. The companies likewise file records with the SEC that lay out how the business did that year and just how it anticipates to do in the future.

These records are absolutely crucial to capitalists when aiming to determine which company to purchase. The funding markets are infamous for upheaval and these reports are crucial for investors who are aiming to figure out which companies are risk-free to buy and which ones aren’t.

The SEC allows anyone to read these records as well as they are available through an on the internet system to review at any moment. The SEC also utilizes this same system to ensure that specific capitalists could submit issues against a firm that they really feel might be breaking the law. This permits each day citizens the chance to call attention to a potentially crooked firm.

A recent pop culture recommendation to the SEC originated from the now-defunct TV program Apprehended Advancement, when the pilot episode featured the SEC boarding a private yacht to confiscate files connected to the Bluth family organisation.

The SEC is a crucial federal government firm that aids firms stroll the straight and narrow as well as assists individual financiers make enlightened choices concerning the ideal companies to buy. If you’re thinking about investing in a company, you should see what is on the SEC online system for that company.

Lawyer Gregory B. Lyle and other attorneys that work with him at Ascent Law LLC are some of the very best attorneys that do securities law in the State of Utah. There are different securities questions you might have, such as what type of offering do I have to do to raise money. Just how much can I get for my brand-new business. What types of forms have to be completed and submitted with the SEC as well as State of Utah so I don’t enter trouble and also avoid going to jail. Ascent Law also litigates with the SEC and also shields you from the government by maintaining you in conformity and also helping you deal with problems when they show up.

Call Greg Lyle if you have a securities law issue in the State of Utah. 801-676-5507

#GregLyle #AscentLaw

Why Do We Have Securities Laws in Utah?
Why Do We Have Securities Laws in Utah?

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah84088United States

Telephone: (801) 676-5506