South Florida, including Dade, Broward, Palm Beach and Martin County, Securities and Investment Broker/Dealer, Investment Advisor and Private Fraud, Mismanagement and Misrepresentation Arbitration and Litigation Attorney
What Constitutes a Security:
What initially comes to most people’s minds when the word security is mentioned is a stock or bond. Yet, from a legal standpoint, the word security has a much more expansive meaning. For example, in the State of Florida the word “security” is defined in Florida Statute 517.021(21). The word “security” includes a note, stock, treasury stock, a bond, a debenture, an evidence of indebtedness, a certificate of deposit, a certificate of deposit for a security, a certificate of interest or participation, a whiskey warehouse receipt or other commodity warehouse receipt, a certificate of interest in a profit-sharing agreement or the right to participate therein, a certificate of interest in an oil, gas, petroleum, mineral, or mining title or lease or the right to participate therein, a collateral trust certificate, a reorganization certificate, a preorganization subscription, any transferable share, an investment contract, a beneficial interest in title to property, profits, or earnings, an interest in or under a profit-sharing or participation agreement or scheme, any option contract which entitles the holder to purchase or sell a given amount of the underlying security at a fixed price within a specified period of time, any other instrument commonly known as a security, including an interim or temporary bond, debenture, note, or certificate, and receipt for a security, or for subscription to a security, or any right to subscribe to or purchase any security or a viatical settlement investment. Wow!
However, as with most things in life, the fact that something is specifically identified in Florida Statute 517.021(21) as a security does not mean that courts will automatically determine that a security is involved. Courts have held that the application of chapter 517 does not turn on the name by which a particular transaction is designated, but rather on the economic realities of the commercial enterprise in question. It is for this reason that consultation with an experienced securities lawyer is of critical importance.
While we have focused on the definition of security as contained in the Florida Statute 517.021(21) each state has its own “blue sky” laws, which need to be reviewed for actions brought in a specific state. Additionally, various provisions of the U.S. Code also define what a security is under Federal law.
Bringing a securities claim against a broker/dealer or its registered representative is fairly easy for all it takes is the filing of a submission agreement and statement of claim with the Financial Industry Regulatory Authority. However, where does an investor file his claim, if he invests in a private company or limited partnership independently of a broker/dealer? Who does the investor name as a party in the action? Where is the claim filed and what statute of limitations apply? These are questions that should be answered only by an experienced securities attorney.
Just by way of example, consider the following scenario. Four individuals create a company to take advantage of their experience in used car sales and financing. Each individual owns 25% of the stock in the company. Because the company is successful, the four owners what to bring in a financing company as a fifth stockholder. In order to do so, each of the four original stockholders must sell a percentage of their stock to the financing company. Among other potential claims contained within the purchase and sale agreement, this would constitute the sale of a security and be subject to the provisions of Florida Statute 517.
Another common example is that a client is dealing with a broker/dealer and its registered representative. The registered representative solicits his client to investment in an outside company which has not been disclosed to his broker/dealer. This is commonly called “selling away”. In exchange for the client’s investment, he or she receives shares of stock in the outside company. In this situation, the investor has two options, which are not mutually exclusive. He or she can institute an arbitration claim against the broker/dealer and its registered representative for the selling away activity and/or he or she can file a law suit against the outside company. When this type of factual pattern is presented, it is incumbent upon the client to consult with counsel so that the client can make an informed decision on where, how and when to proceed.
If you have any questions as to whether or not you have invested in what would be classifed as a security and what you legal rights are if you feel that you have been taken advantage, call the law office of Russell L. Forkey, P.A. to discuss the same at your initial free consultation.
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.
At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.