Chapter 14 - § 14.1 • INTRODUCTION

• Jurisdiction: Colorado

§ 14.1 • INTRODUCTION

The federal securities laws are statutory in nature, and any attempt to frame a claim for relief under the federal securities laws must begin with an analysis of the applicable statute. The 1933 Act is designed to provide disclosure to investors of material facts concerning securities offered for sale by the use of the mail or other instrumentalities of interstate commerce. The 1934 Act provides for the registration and regulation of transactions in securities, broker-dealers, and securities exchanges. The 1934 Act establishes financial and other reporting requirements for issuers of securities registered under the 1934 Act and regulation of proxy solicitations. For directors, officers, and principal security holders of such issuers, the 1934 Act establishes reporting requirements and imposes restrictions on trading in the securities of their companies.

Many remedies exist under state securities laws and common law, as well. A plaintiff who is able to frame a claim under the 1933 Act or the 1934 Act and bring an action in federal court is able to benefit from several procedural advantages:

• The plaintiff is not subject to state security-for-expenses requirements that are frequently applicable to derivative actions (when characterized as such).¹
• Section 27 of the 1934 Act provides for nationwide service of process, which also gives the plaintiff the ability to bring the action anywhere any part of the "act or transaction" occurred, which is generally a much broader provision for jurisdiction and venue than under state law.
• The federal rules relating to class actions may be more permissive than state law in the case of non-derivative actions. See, e.g., F.R.C.P. 23.
• A plaintiff may only demand a jury trial in derivative actions if the corporation, suing in its own right, would have been entitled to a jury trial.²
• There is extensive case law that has developed under the federal acts, leading to greater certainty in interpretation than under many state laws.

Many decisions have noted, however, that the federal securities laws are not a panacea for all wrongs, but only...