Practice Areas and Legal Definitions

Securities Law:
Securities law at the federal law consists of the various statutes and regulations that contain specific rules regarding truth and fair dealing in the issuance and sale of covered securities. Most states also have their own laws addressing some aspect of securities sales that allow the state's securities commissions to conduct investigations and bring securities fraud actions. Remedies for losses associated with securities also exist under various state and federal common law doctrines.

Stockbroker Fraud:
Stockbroker fraud, which is also known as investment fraud, occurs when an advisor, stockbroker or brokerage firm offers inaccurate, incomplete or biased information designed generally to enrich the advisor, stockbroker or brokerage firm. The fraud can include biased advice, intentionally misleading advice and conflict of interest. The Securities Exchange Commission has established guidelines for stockbrokers and advisors to follow to ensure that investment advice is being given fairly and consistently and that stockbrokers are not engaging in securities fraud.

Stockbroker Negligence:
All stockbrokers and other investment professionals have a legal duty to exercise due care in dealing with the investors they serve. The nature and extent of the duty is based upon state and federal securities laws, on the self-regulatory rules adopted by the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE), and upon the level of competence usually and customarily maintained by stockbrokers in general. When a broker harms an investor by failing to meet that standard of care, the investor may decide to make a claim against the broker and the brokerage firm employing him or her for professional negligence.

Stockbroker negligence covers a wide range of activities, including:

• Failure to study a stock sufficiently to be able to make competent recommendations to the customer concerning it.
• Failure to inform the customer of known risks associated with the purchase and sale of a particular security.
• Failure to disclose or the misrepresentation of any fact material to a particular transaction.
• Engaging in speculative trading on the customer’s account.
• Failing to properly diversify the customer’s account.
• Failing to subordinate their own financial interests to those of the customer.

Variable Annuities Issues:
A variable annuity is a tax-deferred investment which includes an insurance policy designed to protect the investor from a loss of capital. Although vastly popular, variable annuities are known in financial circles for high fees and for significantly higher taxes than other investments. Except for the tiny fraction of the population for whom variable annuities may actually be a suitable investment, there are other forms of investment that typically produce a high yield at a much lower cost. Many stock market observers, noting the significantly higher sales commission on variable annuities than on other investment vehicles, suggest that the unusual popularity of this form of investment is that unscrupulous brokers are aggressively marketing them, often to the detriment of their clients.

Unsuitable Investment Issues:
Stock brokers have a legal duty to make only those investment recommendations that are consistent with the customer's risk tolerance, needs and investment objectives. An investment may be unsuitable if:

• The client does not have the financial ability to incur the risk associated with a particular investment.
• The investment is not in line with the client's financial needs.
• The client does not know or understand the risks associated with a particular investment.
• When a stockbroker breaches these duties, both the individual stockbroker and the securities brokerage firm employing the stockbroker are responsible for stockbroker negligence.

NASD and NYSE Arbitrations:
Although most business in the securities industry is completed without problems, disputes and controversies occasionally arise. For more than 125 years, the NYSE has used arbitration to resolve disputes between investors and brokers and the NASD operates the largest conflict resolution forum in the securities industry to assist in the resolution of monetary and business disputes between and among investors, securities firms and individual registered representatives. As an alternative to court litigation, arbitration enables a dispute to be resolved quickly and fairly by impartial arbitrators, who are knowledgeable and trained in the art of resolving controversy. In the case of NYSE and NASD dispute resolution, the arbitrators are also well-versed in all aspects of the brokerage business. When a customer chooses arbitration to resolve the dispute, however, this involves a waiver of the right to pursue the matter in court. Arbitration is final and binding.

Mutual Fund Losses:
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments and/or other securities. Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses the ones which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers. The problem arises when a particular fund manager starts choosing investment securities for the fund not for reasons advantageous to the fund, but for reasons advantageous to the fund manager.

Investment Over-Concentration Issues:
One of the most important rules of investing is diversification. If a broker concentrates a customer’s portfolio in any individual investment or type of investment, then the risk of losses with that portfolio is dramatically increased. It's the old adage that it is unwise to place all of your "investment" eggs in one basket. A broker who does not diversify his client's portfolio is potentially liable should that investment decline in value.

Registered Investment Adviser Counseling:
A Registered Investment Adviser is an individual held out to the public as an investment adviser. Registration is required of anyone who gives advice, makes recommendations, issues reports or furnishes analysis on securities either directly or through publications. Counseling includes assistance with Form ADV preparation, coordination with the SEC's Investment Advisor Registration Depository ("IARD") as well as assistance in providing a comprehensive compliance manual which appoints a Chief Compliance Officer and includes a code of ethics together with written policies and procedures.

Ponzi Schemes:
A Ponzi scheme is a type of illegal pyramid scheme named for Charles Ponzi, who cheated investors in the 1920s. The Ponzi scheme continues to work on the "rob-Peter-to-pay-Paul" principle, as money from new investors is used to pay off earlier investors until the whole scheme inevitably collapses when new investors can no longer be found.

Business Contracts:
Business contracts are written agreements spanning a broad range of the business relationships that occur in the life of a typical company.  They can include non-compete agreements, non-piracy agreements, non-disclosure agreements, restrictive covenants, employment agreements, producer agreements, sales representative agreements, consulting agreements, management agreements, franchise agreements, licensing agreements, deferred compensation agreements and independent contractor agreements.

Contracts are the very stuff upon which the marketplace is founded, and they provide the basis for a large share of business litigation.  The remedies for breach of contract include money damages and injunctive relief expressly directing one of the parties to perform a contractual obligation.  This remedy involves a form of injunction called a “specific performance” decree.  The remedy of specific performance is often called an “extraordinary” equitable remedy, in that courts will not grant specific performance except in a sharply limited number of circumstances.  Punitive damages are not an available remedy in a contract lawsuit.

Business and Corporate Services:
Business and corporate services involves advising companies and investors in the purchase, sale and mergers of businesses.  The services provided include forming and funding start-up companies, buying and selling practices, assets, divisions and companies, engaging in private stock offerings and re-sales, structuring venture capital financing, forming off-shore sales and sourcing entities, structuring commercial and partnering transactions and syndicating real property acquisitions.

Bankruptcy Fraud:
Bankruptcy fraud is a business crime of filing for bankruptcy with criminal intent, that is with the intention of evading payment for goods even though the buyer has funds that could be used to pay for them, or accepting payment for goods or services but not supplying them. Common types of bankruptcy fraud include petition mills, false oath, concealment of assets, and fraudulent conveyance. Multiple filings are not per se fraudulent; as with all things in the law, it depends on the circumstances. Bankruptcy fraud should be distinguished from strategic bankruptcy, which is not a criminal act (but may prejudice a judge against the filer if there is evidence that bankruptcy is being used strategically).

Business Litigation:
Business litigation is the area of law that provides assistance in the preparation and presentation of a lawsuit or other resort to the courts to determine a legal question or matter in business situations.  Business can be any activity or enterprise entered into for profit, usually a company, a corporation, partnership or any such formal organization.  Business lawyers advise and represent businesses and financial institutions in such areas as business torts, class actions, complex contracts, financial forensics, government investigations, international dispute resolution, professional relations, real estate disputes, securities and antitrust, technology and intellectual property, professional malpractice, shareholder and corporate governance and telecommunications.  Business lawyers place an emphasis on achieving or defending against pre-judgment remedies, including pre-judgment orders for writs of possession, attachments, temporary restraining orders, and injunctions, as well as arbitration or mediation settlements and monetary compensation resulting from lawsuits.  Transactional business lawyers represent clients in matters relating to, but not limited to, organizational, operational and contractual documents for corporations, partnerships and limited liability companies, commercial transactions, mergers, real estate acquisitions, leasing and development and commercial financing.

Mergers and Acquisitions:
The phrase "Mergers and Acquisitions" refers to corporate finance strategy and management dealing with the merging and acquiring of different companies as well as other assets.  Usually mergers occur in a friendly setting where executives from the respective companies participate in a due diligence process to ensure a successful combination of all parts.  Corporate mergers are often aimed at reducing market competition.  On other occasions, acquisitions can occur through hostile takeover by a "corporate raider" purchasing the majority of outstanding shares of a company in the open market.  In the United States, business laws vary from state to state whereby some companies have limited protection against hostile takeovers.

Technically, what differentiates a merger from an acquisition is how it is financed.  Simply put, a merger is a combination of two companies into one larger company.  A "merger" or "merger of equals" is often financed by an all-stock deal (a stock swap).  An all-stock deal occurs when all of the owners of stocks of either company get the same amount of stock in the new combined company.  The term "demerger" is sometimes used to indicate the effective opposite of a merger, where one company splits into two, the second often being a separately listed stock company if the parent was a stock company.  An acquisition (a larger company buying out a smaller company) can involve a cash and debt combination, or just cash, or a combination of cash and stock of the purchasing entity, or just stock.  In addition, the acquisition can take the form of a purchase of the stock or other equity interests of the target entity, or the acquisition of all or substantially all of its assets.

Franchises and Other Types of Business Marketing:
A great many small businesses in the marketplace today are operated not as purely independent businesses, but as franchises, distributorships, or any of various types of licensing arrangements.  All of these businesses are created through written agreements containing express and implied warranties, and it is not uncommon for issues to arise resulting in litigation.

Government Regulation:
Businesses often find themselves at odds with one governmental agency or another, whether it be the local zoning commission, the federal Environmental Protection Agency, the Federal Trade Commission, or any one of several hundred other federal, state and local agencies.  Conflicts with governmental agencies are usually covered under state and federal statutes, and also under state and federal regulations and local ordinances.  As a general rule such conflicts are litigated before administrative tribunals under administrative law.  This usually imposes fewer formal requirements on the parties and produces a quicker result, but sometimes it does so at the expense of someone’s rights.  If you feel that your rights have been violated in an administrative hearing that has gone against you, the judicial system will consider an application for relief, based upon allegations that there was an abuse of discretion in the holding against you.

Defamation:
Defamation is the communication of a false and unprivileged statement that exposes another to hatred, contempt, or ridicule, or which causes him or her to be shunned or avoided, or which has a tendency to injure him or her in his or her trade or occupation.  The defamatory statement must be communicated to someone other than the person to whom it refers, and it must refer to a living person.  Defamation communicated verbally it is called Slander, but if it is communicated in writing, it is called Libel.  Most defamation litigation in the business arena concerns the employer’s “qualified privilege” to defame.  Under this concept, employers and former employers are often protected from liability for defaming employees or former employers.  By its very definition, however, the privilege is “qualified,” and not absolute.  It is generally limited to situations in which the employer or former employer is making a good faith communication of information to someone who has a legitimate interest in receiving it.

Breach of Fiduciary Duty:
The formation of a "fiduciary relationship" begins when someone places special confidence and trust in another who has substantially superior knowledge and training, and also relies on that person to act in his or her best interest.  If this trust is knowingly and voluntarily accepted, a “fiduciary” relationship is said to exist.  This places a legal duty on the stronger of the two to act diligently in the best interest of the weaker party and never, under any circumstances to secure any advantage at the weaker party’s expense.  There are a limited number of circumstances in business transactions where a fiduciary relationship comes into play.  Courts tend to rigorously enforce fiduciary duties, and in the event of a willful breach often award punitive damages as well as compensatory damages.  Some common examples of fiduciary relationships are a trustee-beneficiary relationship, a doctor-patient relationship, a lawyer-client relationship and a corporate officer-stockholder relationship.

Licensing and Commercial Contracts:
Business services attorneys counsel clients in a wide range of commercial and intellectual property (IP) transactions.  They provide assistance in structuring, drafting, reviewing and negotiating commercial and IP agreements related to the development, acquisition and commercialization of technology, IP, goods or services.  The types of agreements involved in these transactions include:

• Software license, maintenance and support, source code escrow, end user license, patent and other technology license agreements
• Development agreements
• Purchase and supply agreements
• Manufacturing agreements
• Distribution, reseller, value-added reseller (VAR) and original equipment manufacturer (OEM) agreements
• Referral, marketing agreements
• Employment, consulting, technical services and outsourcing agreements
• Joint venture, strategic partner, technology transfer agreements
• E-commerce and Internet-related agreements (including web-based hosting agreements, application service provider (ASP) agreements, web site development, privacy policies and website terms of use)
• Non-disclosure agreements

Sales Commission Disputes:
In avoiding sales commission litigation there is no substitute for an artfully drafted agreement spelling out precisely how and at what rate sales representatives are to receive commissions.  Common usage and custom are also taken into consideration by courts in determining the issues, even where there is a written agreement.

Trade Secrets:
A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.  Trade secret difficulties can be eliminated or, at least, minimized by effective legal language in employment and/or severance agreements, but situations will still arise from time to time where litigation presents the only viable solution.

Alternative Dispute Resolution:
Business disputes can be resolved traditionally, by way of litigation.  This involves the filing of a lawsuit in court that is then answered by the defendant.  Over a period of months and sometimes even years, a lawsuit makes its way through the system, ultimately to be decided by a judge sitting alone, or by a jury, presided over by a judge.  It is an expensive, tedious and time-consuming process.  The modern trend in the economic world is away from the courthouse in favor of one or the other of two less formal, less expensive, faster and more efficient methods of conflict resolution, called "mediation" and "arbitration".

Arbitration:
Arbitration is a method of Alternative Dispute Resolution. In this process, the parties jointly select a lawyer to act as arbitrator. The idea is to choose someone with an outstanding reputation for personal and professional integrity, with heavy litigation experience involving cases similar to the one in which the parties are currently involved. The parties may select either "binding" or "non-binding" arbitration. Some lawyers discourage their clients from participating in "non-binding" arbitration, seeing futility in the expense and inconvenience of a process that may prove a waste of time. Other attorneys discourage their clients from participating in "binding" arbitration, so that their options are preserved in the event of an unreasonable adverse ruling by the arbitrator.

Arbitration is more like a trial than is Mediation. For one thing, in binding arbitration the arbitrator's decision is virtually the same as a judgment. In both types, however, the arbitrator actually renders a decision, as opposed to simply making a recommendation. Each side submits an arbitration brief, containing a summary of relevant facts, a list of the legal issues thought relevant, and reference to the applicable law.  There is a hearing in the nature of a trial, but much less formal. It is usually held at the arbitrator's office. Sworn testimony may be offered, subject to cross-examination. The attorneys usually join in a stipulation agreeing that certain specified facts are not in dispute.

The rules of evidence are less rigorously applied in arbitration hearings than in trials. Sometimes the arbitrator announces a decision at the end of the hearing, but more often, the case is taken under submission by the arbitrator, the decision being communicated by letter to both sides within a week or two. The arbitration process takes a lot of pressure off the court system, and it has proven itself as an effective alternative method for the resolution of disputes.

If you or someone you know needs the assistance of an experienced St. Petersburg, Florida Business Lawyer, call Attorney Clifford J. Hunt today at 866-781-1608, or complete the contact form provided on this site to schedule your initial consultation.

Q. How do I raise capital to expand my small business?
A. In addition to obtaining financing from traditional commercial lending sources, capital can be raised by small businesses in private securities transactions involving equity and/or debt financing. In raising capital, business owners must be aware of and comply with state and federal securities laws. Typically there are one or more securities transactional exemptions that allow small business issuers to sell securities without registering the securities with the SEC or states’ securities administrators

Q. How do I prevent my employees from starting their own competing business by utilizing my confidential client/customer information and/or trade secrets?
A. Florida has trade secret laws that we incorporate into employee agreements to prohibit solicitation of clients and use of client information upon termination of their employment. We prepare agreements for execution by sales staff and clerical employees.

Q. What recourse do I have to recover losses I have sustained as a result of following my stock broker’s recommendations?
A. Under Florida law, a broker has a fiduciary duty to a client to exercise the utmost good faith and fair dealing when handling a client’s account. This fiduciary duty requires the broker to make recommendations that are suitable for the client in light of the client’s investment objectives, annual income, net worth, age and financial sophistication. If a broker makes an unsuitable recommendation, he/she has violated Florida law. Similarly, a broker and broker-dealer can be held liable for failing to state all material facts relevant to a securities purchase or sale transaction. We have asserted claims for these types of violations in many securities arbitration cases for our clients.

Q. What laws do I have to comply with if I sell a controlling interest in my corporation or consider entering into a merger with another company?
A. The sale of a controlling interest in a privately held (i.e., non-public) company involves a private securities transaction that must comply with both state and federal securities laws. It is important to note that the sale of a business via a securities transaction will typically allow the liabilities of the sold business to remain with the business. Many purchasers deem it more desirable to simply purchase the assets of the target business and reject assumption of liabilities. In any substantial asset sale and merger transaction, the parties must comply with applicable provisions of the Florida Business Corporations Act, Chapter 607, Florida Statutes.

If you or someone you know needs the assistance of an experienced St. Petersburg, Florida Business Lawyer, call Attorney Clifford J. Hunt today at 866-781-1608, or complete the contact form provided on this site to schedule your initial consultation.

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