Living well doesn’t necessarily mean living beyond your means. For people to enjoy life before and during retirement, they begin to save and invest early in their careers, as living costs will rise over time. Saving money can be made simple—set aside money for use at a later time. However, investing may include incorporating a mix of financial products such as stocks, bonds, and other securities, which can be more complex. For this reason, people who want to invest in securities may seek the help of professionals with knowledge about and expertise in securities.
Securities laws are essential for protecting people when they invest. These laws are also aimed at facilitating capital formation and ensuring that the markets in which securities are sold (or capital markets) operate in a fair and orderly manner. Therefore, the practice of securities law involves the laws and regulations that govern what is (and is not) a security, the registration and sale of securities, the disclosures that must accompany securities, and the litigation of securities disputes.
Securities laws include several federal statutes, which began with Congress’s adoption of the Securities Act of 1933 and the Securities Exchange Act of 1934. Shortly thereafter, Congress established the US Securities and Exchange Commission (SEC), a federal agency responsible for enforcing the federal securities law and regulations adopted thereunder. These laws even recognize that certain powers are reserved to the states, allowing each state to adopt its own securities laws and regulations. A lawyer specializing in securities law can focus on several niche areas, some of which are discussed below.
People need money for a variety of reasons—buying a new home, paying for college, paying monthly bills, and a multitude of other reasons. Corporations also need money for similar reasons—like buying new buildings, paying lenders, or developing new products. When these needs arise for corporations, they may raise money by selling ownership interests in their corporation (i.e., stocks), borrowing money from others with a promise to repay with interest (i.e., bonds), or offering other types of securities. Securities offerings involve the following parties:
Lawyers have a critical role in securities offerings—they identify and help mitigate any legal risks associated with the offering. In addition, they draft and review documents to help ensure that information shared with investors is accurate and compliant with securities laws and regulations, and they guide the issuer and underwriters through the offering process. This practice area allows lawyers to gain valuable insight into various business sectors - from food & beverage to technology and energy. The work is collaborative. Working closely with teams across the aisle promotes a deeper understanding of capital markets.
Securities regulation occurs at the federal and state levels. Federal and state securities regulators are responsible for enforcing the laws passed in their respective jurisdictions. A lawyer who works as a securities regulator encounters a myriad of tasks—drafting rules, examining for compliance, finding rule violations, and interpreting rules. Lawyers can be part of many teams in a regulatory practice, such as enforcement (investigating misconduct), market regulation (evaluating compliance and operations), and rulemaking (drafting and interpreting rules). The overarching goal of securities regulators is to protect the investing public.
At the other end of the table are experienced lawyers who work tirelessly to ensure that their clients—professionals who offer, sell, or provide advice on securities—comply with securities laws and rules. Their primary goal is to ensure that their clients meet their organizational goals while complying with the securities laws. These roles can happen in-house as an employee of the client or as external counsel as part of a law firm. In-house lawyers must be well-versed in general corporate matters, as well as the specific business in which the client engages. External lawyers may provide support to in-house lawyers in the form of subject matter expertise and staffing. When regulatory issues turn into disputes, external lawyers may also provide dispute resolution and litigation support, as discussed in the following section.
The SEC may choose to bring administrative or judicial actions for misconduct or alleged violations of federal securities laws. In administrative proceedings, the administrative law judges are lawyers who serve as independent and neutral factfinders; the SEC is represented by lawyers responsible for enforcing federal securities laws, and respondents may be represented by lawyers responsible for protecting their interests. Lawyers who preside over, bring, or defend against administrative actions must be well-versed in federal securities laws, legal defenses, the SEC’s Rules of Practice, and other procedural rules. An administrative law judge’s initial decision can have serious consequences for a respondent—the decision may result in cease-and-desist orders, suspensions or bars from participating in the securities industry, disgorgement of ill-gotten gains, and suspension or revocation of a respondent’s registered securities. Therefore, it is imperative that a defense lawyer appreciates these consequences.
The SEC may refer misconduct that may amount to a violation of criminal law to the US Department of Justice to bring charges against a respondent. Judges who preside over such cases may not have a solid understanding of securities law. Therefore, it is even more important that the prosecution and defense have the necessary securities law knowledge when bringing or defending against such actions.
Moreover, disputes will inevitably arise between investors and the persons offering, selling, or providing advice on securities. Though civil litigation can resolve these disputes, they may be required to bring claims in an arbitration forum. Civil litigation can be costly and time-consuming for both parties and for these reasons, parties may prefer to mediate or arbitrate the claims that arise between them. Mediation involves parties having informal discussions with a neutral party to determine whether they can resolve their dispute without arbitration or litigation. Arbitration can be more cost-efficient than litigation, and arbitration cases are typically resolved in a shorter timeframe. In either arbitration or litigation, both parties benefit from having lawyers present who are well-versed in securities laws and procedural practice.
You may be wondering if you have what it takes to unlock the world of securities law. Here are three tips for launching your career:
Study the federal laws that are at the core of securities regulation. If you have time to go a step further, develop a basic understanding of corporate finance to give yourself a head start, especially if you are interested in specializing in capital market formation. If you are interested in federal regulation of securities, the ABA has a committee dedicated to covering a wide range of securities law topics.
Securities law can be a complex topic, especially for those who are unfamiliar with it. You will be discussing not only legal arguments but corporate data and information. Understanding the audience (e.g., other lawyers, CEOs, compliance officers, and accountants) and planning how best to communicate ideas is essential to ensuring the message is impactful. Being comfortable with terms of art and being able to present it clearly and concisely can help prevent misinformation and misrepresentation.
Many securities lawyers work in teams comprised of other lawyers, CEOs, compliance professionals, accounting professionals, and capital markets professionals. Being a team player and fostering collaboration with other professionals mitigates legal, financial, and operational risks.
Securities law offers a range of practice areas to explore, providing the opportunity to develop legal and communication skills and business acumen. In practicing securities law, lawyers play an essential role in helping businesses raise capital and safeguard investors’ hard-earned money from unethical practices. For young lawyers interested in both business and law, this essential practice area will allow you to make a meaningful impact in the legal field and society.
The views and opinions expressed herein are solely the authors' views and do not necessarily reflect the views of FINRA or FINRA staff.
