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Misrepresentations and omissions of material facts in connection with the sale of securities is a violation of Section 10(b) the federal securities laws.
When a broker tells you something important about a security, or its issuer, the company, or makes any other false statement, in connection with the sale of a security or investment that is not true, (or which should have been known to be untrue), that person (and his or her employer or control person) may be liable for misrepresentation.
When a broker fails to disclose important information, such as risk, or even their motives, in connection with the sale of a security, that person (and his or her employer or control person) may be liable for an omission of material fact.
To state a claim for securities fraud under Section 10 (b) of the Securities Exchange Act of 1934, and Rule 10b-5, as promulgated thereunder by the SEC, 17 C.F.R. 240.10b-5, a private plaintiff or a claimant in a FINRA Securities Arbitration, must only show that the Respondents, i.e. the brokerage firm or its agents, knowingly or recklessly, made a false representation or omission of a material fact, and was relied upon, and was the proximate cause of damages.
In order to be actionable, these omissions must be material. "Omitted information is material if there is a substantial likelihood that a reasonable shareholder would consider it important" or whether the omitted information "might give a reasonable investor pause" and that the untruth was in some reasonably direct or proximate way responsible for the investor's loss.
If you believe that you may have been the victim of misstatement or omissions by your broker in connection with the sale of securities, contact us for a free evaluation of your claim.
Sources / Additional Reading:
Kline v. First Western Gov't. Securities, Inc., 24 F.3d 480, 487 (3rd Cir.), cert. denied, 506 U.S. 934 (1994);
Shapiro v. UJB Financial Corp., 964 F.2d 272, 280 (3rd Cir.), cert. denied, 506 U.S.934 (1992);
Peil v. Speiser, 806 F.2d 1154, 1160 (3rd Cir. 1986).
In re Craftmatic Securities Litigation, 890 F.2d at 641 (quoting, TSC Industries, Inc. v. Northway Computers, Inc., 426 U.S. 447, 458 (1975).
Kaplan v. Rose, 49 F.3d 1362, 1374 (9th Cir. 1994).
Marbury Management v. Kohn, 629 F.2d 705, 718 (2nd Cir. 1979);
Rolf v. Blythe Eastman Dillion, 570 F.2d 38, 49 (2nd Cir. 1978);
Bennet v. U.S. Trust Co. of New York, 770 F.2d 308, 314 (2nd Cir. 1985);
Huddleston v. Herman & MacClean, 640 F.2d 534, 5498 (5th Cir. 1981).
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