Representing Investors Harmed by Corporate Misconduct
Grabar Law Office represents shareholders, institutional investors, and other market participants in securities fraud and shareholder litigation arising from corporate misconduct and misleading disclosures.
Public investors rely on accurate disclosures from publicly traded companies when making investment decisions. When corporate officers or directors mislead the market through false statements, omissions of material information, or other misconduct, investors can suffer substantial financial losses.
Our firm investigates potential violations of the federal securities laws and pursues recovery on behalf of investors harmed by unlawful practices in the securities markets.
Securities Fraud and Misleading Corporate Disclosures
Federal securities laws require publicly traded companies to provide investors with truthful and complete information regarding their financial condition, operations, and business prospects.
When companies misrepresent key facts or fail to disclose material risks, the market price of their securities may become artificially inflated. When the truth later emerges, the stock price may decline sharply, resulting in losses to investors who purchased shares at inflated prices.
Securities litigation provides a mechanism for investors to recover those losses and to promote transparency and accountability in the financial markets.
Types of Securities Litigation
Grabar Law Office focuses on representing investors in several forms of securities and shareholder litigation, including:
Securities Fraud Class Actions
Cases brought on behalf of investors who purchased securities during a period in which the market was allegedly misled by false or misleading statements.
Shareholder Derivative Corporate Governance Actions
Lawsuits brought by shareholders on behalf of the corporation against directors or officers whose misconduct harmed the company. These actions seek corporate reforms or remedies when boards fail to properly oversee company operations or compliance obligations.
Each type of case plays an important role in enforcing accountability in the securities markets.
Institutional Investors and Lead Plaintiff Representation
Institutional investors frequently play an important role in securities class actions by serving as lead plaintiffs or class representatives.
Pension funds, investment funds, universities, and other institutional investors often have significant financial stakes and are well positioned to represent the interests of other shareholders.
Grabar Law Office works with both individual and institutional investors to evaluate potential claims and, when appropriate, to pursue recovery on behalf of shareholders who were harmed by corporate misconduct.
Investigating Potential Securities Claims
Potential securities fraud claims are often identified through:
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sudden stock price declines following corrective disclosures
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restatements of financial results
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regulatory investigations or enforcement actions
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previously undisclosed business risks or operational failures
Our firm monitors developments in public markets and reviews potential claims that may affect investors.
When appropriate, we work with financial analysts and other experts to evaluate the circumstances surrounding significant declines in stock price and other indicators of potential misconduct.
Protecting Shareholder Rights
Securities litigation plays an important role in protecting investors and promoting integrity in the financial markets.
By holding companies and corporate insiders accountable for misleading disclosures and other misconduct, these cases help ensure that investors receive the information they need to make informed decisions.
Learn More About Securities Litigation at Grabar Law Office
For additional information about securities and shareholder litigation, please explore the sections below:
• Shareholder Class Actions
• Shareholder Derivative Actions
• Documents and Resources
Contact Grabar Law Office
If you believe that corporate misconduct or misleading disclosures may have affected the value of your investment, you may have legal rights under the federal securities laws.
Grabar Law Office welcomes inquiries from individual investors and institutional investors seeking to evaluate potential securities claims.
Contact our office for a confidential consultation regarding a potential matter.
To learn more about our securities litigation practice, contact us today!
What Is Securities Law
What Laws Protect Individual and Institutional Investors Against Fraud by Company Management?
Securities laws are designed to ensure that investors receive accurate and complete information about publicly traded companies.
Federal statutes such as the Securities Act of 1933 and the Securities Exchange Act of 1934 prohibit fraud and require companies to disclose material information to investors.
These laws help promote transparency in financial markets and protect investors from misleading statements or deceptive practices.
When companies, and their officers and directors, violate these obligations, investors may pursue claims through private securities litigation.
What is a Securities Class Action?
A securities class action is a case brought pursuant to Federal Rule of Civil Procedure 23 on behalf of a group of persons who purchased the securities of a particular company during a specified period of time (the class period). The complaint generally contains allegations that the company and/or certain of its officers and directors violated one or more of the federal or state securities laws. A suit is filed as a class action because the members of the class are so numerous that joinder of all members is impracticable. For a case to proceed as a class action, there should be a well-defined commonality of interest in the questions of law and fact involved in the case. Further, the plaintiffs must establish that a class action is superior to other available methods for the fair and efficient adjudication of the controversy and that the prosecution of separate actions by individual class members would create a risk of inconsistent and varying adjudications.
What Is a Shareholder Derivative Action?
Unlike a class action, brought on behalf of investors, a shareholder derivative action is a lawsuit brought by a shareholder of a public company on behalf of and for the benefit of the company itself against the directors and/or officers of that company. In a derivative action, shareholders “step into the shoes” of the directors and officers of a company and bring litigation that the board would be unwilling to pursue on its own. Such unwillingness typically relates to the fact that the board members themselves are alleged to have participated in the misconduct and thus would be unlikely to “sue themselves.”
Shareholder derivative litigation can recover money damages back to the company for financial or reputational harm caused by the conduct of its insiders and can also be used to improve the governance of public companies in order to guard against such harms in the future. The objectives of these actions are primarily: (i) to recover monetary damages from responsible corporate actors and their director and officer liability policies for the benefit of company; and (ii) to force the company to implement corporate governance improvements and reforms. Should these objectives be met, the company and its shareholders both benefit: the company benefits via return of funds to its coffers and/or better corporate governance; the shareholders benefit because of the company’s improved corporate governance, which can result in corporate goodwill and in an increase in share price.
Any shareholder of a company can serve as a plaintiff in a shareholder derivative action provided that the shareholder has held stock in the company continuously at least from the period in which the wrongful conduct began and through the present, generally provided that they continue to hold at least one share through the conclusion of the litigation. While courts frequently give deference to shareholders with larger holdings when selecting a Lead Plaintiff in shareholder derivative actions, courts will consider other factors as well, including which plaintiff was the first to file a complaint, the quality of the pleadings filed, and the experience of plaintiff ’s counsel.
To Learn More About The Firm’s Securities Litigation Practice, Contact Us Today!
Shareholder Class Actions
A securities class action allows a group of investors who purchased shares during a specific time period, in which it is alleged fraud occurred on the market for a stock, to pursue claims together when they were affected by the same alleged misconduct.
These cases commonly arise when companies make materially misleading statements or fail to disclose important information that affects the market price of their stock.
When corrective information later becomes public, the company’s stock price may decline, resulting in losses to investors who purchased shares during the period when the market was misled.
Class actions provide an efficient mechanism for investors to pursue recovery for those losses.
Securities Class Actions are brought under Section 10(b) of the Exchange Act which prohibits acts or practices that constitute a “manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” Per the SEC’s Rule 10b-5, “it shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, (a) to employ any device, scheme, or artifice to defraud; (b) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.”
In the private class action context, courts require plaintiffs to plead the following six elements in order to state a claim under Section 10(b) and Rule 10b-5:
- A material misrepresentation (or omission) — A statement or omission of fact is material “if a reasonable investor would consider it important in determining whether to buy or sell stock.”
- Scienter — Plaintiffs must allege that defendants acted with a wrongful state of mind. This is more than mere negligence or poor business decisions.
- In connection with the purchase or sale of a security —A plaintiff must have engaged in some type of transaction involving a security during the class period. Allegations of being induced to hold onto a security due to fraudulent statements are not actionable. In order to meet the “in connection with” element, a plaintiff must have purchased or sold a security in reliance upon a misleading statement or material omission.
- Reliance — Generally, in an open and efficient market reliance is presumed. And plaintiffs are not required to plead that they read and relied on defendants’ material misrepresentations. The market’s incorporation of publicly available information into the price of a security will satisfy the reliance element.
- Economic loss — Plaintiffs must allege that they sustained a loss from their investments.
- Loss causation — Plaintiffs are required to plead a causal connection between the material misrepresentation and the loss.
Violations of the Securities Act and/or the Exchange Act can be enforced by the federal
government or by investors through private litigation.
Specifically, the Securities Act provides investors an expressed private right of action allowing any person acquiring a security based on materially false offering documents to file suit under the Act.
To learn more about our shareholder class action litigation practice, contact us today!
Shareholder Derivative Actions
A shareholder derivative action is a lawsuit brought by a shareholder on behalf of the company itself against directors, officers, or other insiders who are alleged to have breached their fiduciary duties.
These cases often involve allegations that corporate leadership engaged in misconduct or failed to properly oversee the company’s operations.
Derivative litigation can seek to recover damages for the company and may also result in corporate governance reforms designed to prevent similar misconduct in the future.
Because these cases are brought on behalf of the company, financial recovery typically benefits the corporation. Individual shareholders can benefit not only as the company benefits, but from court approved incentive or service awards.
What Laws Provide Shareholder Derivative Standing?
Shareholder derivative actions generally arise out of violations of state corporation laws, and as such, they are traditionally brought in state courts. However, shareholder derivative actions can be brought in federal court under certain circumstances. Under Delaware state law, which governs a majority of U.S. companies that are incorporated there, and also serves as a model for other state laws, directors and officers of publicly traded companies owe fiduciary duties to the companies that they serve. These duties include the duties of:
- Loyalty, which requires directors and officers to not use their positions of trust and confidence to further their private interests;
- Care, which requires that directors use that amount of care which ordinarily careful and prudent people would use in similar circumstances; and
- Good Faith, which requires corporate fiduciaries to act with a genuine attempt to advance corporate welfare — to not act in a manner unrelated to a pursuit of the corporation’s best interests. Breaches of the three (3) duties form the foundation of the claims underlying shareholder derivative actions.
What Harm Is Required to Bring a Shareholder Derivative Action
The harm alleged by the plaintiff must be to the company itself, and not to the shareholder personally. Moreover, because company officers and directors are traditionally charged with preserving the interests of the company, a shareholder in a derivative action must be able to demonstrate that a litigation demand on the board to pursue the action was either wrongfully refused, or that making a litigation demand prior to filing suit would have been futile due to the self-interest of the members of the board.
Unlike a class action, brought on behalf of investors, a shareholder derivative action is a lawsuit brought by a shareholder of a public company on behalf of and for the benefit of the company itself against the directors and/or officers of that company. In a derivative action, shareholders “step into the shoes” of the directors and officers of a company and bring litigation that the board would be unwilling to pursue on its own. Such unwillingness typically relates to the fact that the board members themselves are alleged to have participated in the misconduct and thus would be unlikely to “sue themselves.” Shareholder derivative litigation can recover damages back to the company for financial or reputational harm caused by the conduct of its insiders and also can be used to improve the governance of public companies in order to guard against such harms in the future.
Any shareholder of a company can serve as a plaintiff in a shareholder derivative action provided that the shareholder has held stock in the company continuously at least from the period in which the wrongful conduct began and through the present, generally provided that they continue to hold at least one share through the conclusion of the litigation.
To learn more about our shareholder derivative litigation practice, contact us today!
Documents and Resources
Documents and Resources
To review an antitrust and securities litigation primer, see this link: Antitrust-Securities Class Action Primer
To review a standard form securities litigation monitoring agreement, see this link: Example- Pension Monitoring Agreement
To review a standard form antitrust litigation monitoring agreement, see this link: Example- Claim Filing Agreement