Securities Law

We have extensive experience with the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, FINRA regulations and the various state securities laws. We have worked closely with our broker-dealer clients advising on current industry practices and procedures. We routinely assist our clients in responding to regulatory audits and inquiries, customer complaints and internal investigations.

When a regulatory investigation becomes an enforcement matter, our clients turn to us for representation in civil, administrative and regulatory matters before FINRA, the SEC, the Commodity Futures Trading Commission (CFTC), and the Ohio Division of Securities. We also provide representation in FINRA arbitrations involving brokerage customer claims.

We provide the following services on behalf of our broker-dealer clients:

• Business formation
• Broker-dealer registration
• Registered representative licensing
• Commission sharing agreements
• Retiring broker agreements
• Compliance policies and procedures
• Employment contracts and covenants not to compete
• Compliance issues and customer complaints
• Regulatory investigations
• Enforcement actions

Sources of financing include friends and relatives, individual investors, public and private pension funds, institutional investors (such as insurance companies and investment companies), venture capital firms and the public markets. Raising capital from these sources, however, brings into play complex state and federal securities laws.

Federal securities laws apply to every sale of securities in any state, including Ohio, regardless of the type of business entity or the sale price of the securities. Likewise, the Ohio Securities Act applies to every sale of securities in Ohio, and other states have similar statutes. Both state and federal laws require registration with a regulatory body unless an exemption from registration is available.

The securities laws were enacted to protect investors. These laws focus on disclosure to investors, providing them with all information that is material to the investment decision. The securities laws and regulations specify the types of information which must be disclosed to investors. Our attorneys can help with providing an effective guide through these provisions.

In a private placement of securities, we would perform the following tasks:

• Evaluate and help structure the form of entity to permit the offering to proceed as planned
• Prepare a Private Offering Memorandum, Subscription Agreement, Investor Questionnaire and various authorizing resolutions
• Take steps necessary to “Blue Sky” the securities in the state of Ohio and to take steps to qualify the securities in other states if necessary

In addition to preparing the documents and making the filings described above, our attorneys oversee necessary filings with applicable regulatory agencies.

Among the handful of firms across the nation that have practices devoted to these kinds of claims, our attorneys are uniquely experienced to handle your case. Our attorneys are asked to assist with training many of the arbitrators who hear FINRA claims in Ohio and the Midwest. We authored the standard Ohio jury instructions for statutory securities claims that were subsequently adopted by the Ohio Judicial Conference. Our attorneys have spoken at national and regional conferences of securities attorneys and write for national and local publications. Collectively, we have tried hundreds of these claims before FINRA, and its predecessors, the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE).

Broker-dealers, banks and insurance companies facing these claims select our firm because we understand their business. Securities claims have ramifications that are not present in other types of general litigation. The public reporting of claims and settlements affects registered representatives for years to come. Some claims can generate regulatory attention if not handled carefully. The securities industry faces unique records production and retention issues. We know your business and are always sensitive to these issues.

We have seen and successfully defended claims arising from numerous investment products and strategies, both common and unusual. Among these claims, we have represented our clients in cases involving:

• Investment suitability
• Variable annuities
• Variable life insurance
• Option and commodity transactions
• Selling away
• Promissory notes
• Private placements
• Fraud and misrepresentation
• Unauthorized trading
• Trust and beneficiary disputes
• Enforcement of arbitration agreements
• Clearing brokers
• Failure to supervise
• Central Registration Depository (CRD) Expungement
• Recruiting and employment
• Raiding in the financial services industry

We represent broker-dealers, registered representatives and investment advisors in matters involving non-solicitation agreements, trade secrets and breach of loyalty or fiduciary duty. We represent both firms seeking to enforce these claims and representatives seeking to defend them. Over the years, our attorneys have handled hundreds of these cases across the country, on behalf of both brokerage firms and registered representatives.

Firms that recruit registered representatives from their competitors are often held accountable for the actions of their recruits. Carlile Patchen & Murphy LLP routinely provides pre-employment counseling to identify legal risks and avoid costly litigation. We have experience with numerous forms of agreements and have dealt with nearly every brokerage firm in this business. We can provide a strategy that will best protect your firm and your recruit from the risk and expense of litigation.

Actions enforcing or defending non-solicitation and confidentiality claims move very quickly. Typically, the firm losing the employee will go to court with very little notice and seek temporary or preliminary injunctive relief prohibiting a former employee from contacting, soliciting or even serving its former customers. If the employee is a FINRA-registered broker, the matter must then be sent to FINRA arbitration where special rules were created to deal with these kinds of cases. Our firm responds immediately in these kinds of cases and can often defuse a newly filed action at a limited cost to our clients. 

We also have significant experience with raiding cases – claims in which one firm is accused of systematically hiring the employees or representatives of the other firm, often devastating the former branch. From cases involving small firms and individual brokers to complex raiding cases involving hundreds of representatives, we offer practical and efficient solutions for our clients.

We represent clients who are asserting or defending recruiting, covenant and trade secret claims in state or federal court, FINRA and the AAA, including those involving:

• Breach of an employment agreement
• Trade secrets and confidentiality
• Non-compete and non-solicitation agreements
• Unfair competition
• Breach of fiduciary duty
• Duty of loyalty
• Raiding
• Promissory note disputes
• U-5 defamation claims

All the traditional Human Resources issues that arise out of the employee/employer relationship also occur in the context of the securities industry and are often the subject of FINRA arbitrations. Our lawyers have successfully handled race, gender and age-based claims, wage and hour claims, and unlawful termination claims before FINRA panels.

Read more about how our Employment Law Practice Group can help you.