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Misrepresentation and Omission Claims

Misrepresentations and omissions in connection with the sale of securities is by far the most common and frequently litigated area of securities law. While the legal issues in these cases can sometimes become very complex, there are two basic issues in every case. Was the investor given important information about the investment that was not true or was important information omitted from the details given to the investor.

In general, investors have a statutory basis to bring claims related to misrepresentations or omissions. This means that a law, or statute, gives them the right to pursue these claims. There are two concurrent sets of laws regulating securities in the United States – state level laws and federal laws. We refer to these laws on the state level as “blue sky laws”. On the federal level, there are three distinct laws – the Securities and Exchange Act of 1933,  the Securities and Exchange Act of 1934 and the Investment Adviser Act of 1940. Taken together, these laws all act in concert to prohibit the material misrepresentations and omissions of material facts in connection with the sale of securities.

Certainly, there are sophisticated nuisances, but the basic questions a retail investor should ask are, “was I lied to?” or “was important information omitted?” If the answer is “yes” to either of those questions, then you may have a claim. Conduct our office for a free and confidential consultation and we can evaluate your case.

Does the misrepresentation or omission need to be in writing?

No. The misrepresentation or omission could be oral and may be proven through an investor’s sworn testimony.

Does a financial adviser have a duty to investigate the claims made by investment sponsors?

Absolutely. Financial advisers must, as a matter of law, conduct due diligence on all investments that they sell. They cannot simply rely on what others say. This is known as reasonable basis suitability.

What is a “material” fact?

A material fact is one that is considered determinatively important. In the context of a security, that means that the investor would not have purchased the investment, but for this fact. Misrepresentations and omissions are only actionable if they are material.

What is the “discovery rule”?

The discovery rule is a legal doctrine concerning the tolling, or suspension, of a statute of limitations until such time as an investor knows, or reasonably should know, that they were mislead into investing.