The SEC (Securities and Exchange Commission)

Written by: Avvo Staff

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The United States Securities and Exchange Commission, or SEC, regulates all U.S. stock exchanges, securities brokers and dealers, investment advisors, and mutual funds. Companies that trade stock on a public U.S. exchange (for example, the New York Stock Exchange—NYSE), or that are seeking to trade publicly, must disclose information about their finances and operations to the SEC. These filings are available to the public as well (for free). When investors have been defrauded, the SEC may pursue legal action against the company, advisor, or mutual fund involved.

Investors who have been defrauded

If you have invested in stock, or in mutual funds that may contain many stocks, you may find yourself a victim of fraud. This could mean a company has provided false information, or that a mutual fund or broker has not followed your wishes in investing your money. However, just because your investment loses value does not mean you have been defrauded. Stock market investments involve risk and there is no guarantee your investment will increase in value.

If you believe you have been defrauded

It's important to take the following steps if you think you have been defrauded:

Contact your fund manager or broker to express your concerns.
If your initial contact is unresponsive, complain to the compliance department of the brokerage, agent, or mutual fund.
If a stock trade was made that you did not authorize, or you lost money because your investment was mishandled, or a company withheld facts about its situation, complain in writing and keep copies of your letters.

When to file an SEC complaint

If these efforts are unsuccessful, you can file a complaint with the SEC or your state securities regulator. Be sure to complain promptly if you suspect fraud. State laws vary, but you may have 2 years or less in which to complain before your rights expire. The SEC may choose to sue the offending party in federal court to recover investors' money.

When you file, tell the SEC or the regulator that you believe you are a victim of investment fraud that involved a public company, broker-dealer, investment advisor, mutual fund, or transfer agent.

If your situation involves a stock broker or dealer, you can file a complaint with the SEC or the Financial Industry Regulatory Authority. FINRA helps investors settle or mediate such disputes and refers appropriate cases to the SEC for further action. Note that there's no guarantee that filing a complaint with either the SEC or FINRA will result in any money being returned to you.

Filing an investor lawsuit

In some cases, your investor complaint may be one that can't be resolved by the SEC or FINRA. You may need to sue the offending party on your own, or as part of a group of wronged investors.

If you decide to sue, contact a lawyer specializing in securities law. This is a highly specialized and complex legal area, and it's important to get an attorney with appropriate experience.