Los Angeles Securities Fraud Litigation Attorney

It is common for companies to raise money from investors in order to continue or expand their business operations. This is true with start-up companies, established non-public companies, and companies listed on a stock exchange like the New York Stock Exchange.

When a company offers investors an opportunity to invest, that vehicle is called a “security”. A security is broadly defined and includes a stock or evidence of indebtedness like a bond or promissory note. A security also includes an “investment contract” defined as a contract, transaction, or scheme whereby a person invests his or her money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.

When a company makes an offer to sell a “security” in California the company needs to qualify that security under both the federal securities law and the California securities laws. Qualifying a security can be a lengthy and expensive process.

The securities laws offer that under certain circumstances a company can be exempt from qualification. In order to offer or sell a “security” in California the “security” has to be either qualified or exempt from qualification.

When somebody purchases a “security” and they lose money, it is common that want to get their money back by filing a lawsuit against the issuer of that security. One strategy is to determine if the issuer’s security was qualified or exempt from qualification.

It is common that private companies fail to either qualify their security or take steps to assure the security they offer is exempt from qualification. If the issuer offers or sells an unqualified securities or fails to assure their security is exempt from qualification, the investor can seek a return of their investment.