Securities Law


Federal and State Securities Law

There is a vast body of law that applies specifically to securities. The starting place for researching applicable federal law is the Securities Act of 1933 and the Securities Exchange Act of 1934. Each state has their own state securities laws. In California, most of the applicable laws can be found in the Corporations Code.

Breach of Contract

Upon opening your stockbrokerage account you enter into contracts with a brokerage firm, whereby they agree to act as your agent and conduct itself and act in accordance with the rules, regulations, customs, and usages of the stock exchanges, self regulatory organizations, and the securities industry, and in accordance with all federal and state laws and regulations. In addition, the brokerage firm impliedly agrees to act in good faith and deal fairly with you. If a brokerage firm breaches any of these contractual obligations and the result is that you’ve lost money, you may be entitled to recover your losses.


Negligence can be thought of as doing the wrong thing due to carelessness. Failure to follow a client’s instructions, failing to recommend suitable securities, failing to supervise the activity in an account, and failing to adhere to industry standards are prime examples of negligence. If you’ve lost money as a result of your broker’s or brokerage firm’s negligence you may be entitled to recover your losses.


If negligence is carelessness, fraud is doing the wrong thing on purpose, to the detriment of the client, and for the benefit of someone else, (the broker). Did your broker purposely recommend you invest in unsuitable securities that paid a higher commission? Did they execute excessive trades in your account to generate extra commissions? A finding of fraud can be accompanied by an award of punitive damages.

Breach of Fiduciary Duty

In California, brokers owe a fiduciary duty to their clients. This means that brokers must put their client’s interests first. Brokers owe their client the highest legal duty imposed by law. Failure to adhere to this duty exposes brokers to liability for resulting losses.

Failure to Supervise

Brokerage firms are responsible for developing and implementing a system of supervision designed to ensure that client accounts are managed properly. If you’ve lost money as a result of a brokerage firm’s failure to adequately monitor your account, you may be entitled to recover money from that firm.

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