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Victims of securities and investment fraud can sue for a variety of civil damages. The Securities Exchange Act of 1934 gives the SEC a broad scope and authority over securities violations, including eliminating securities fraud. This rule also provides private citizens a cause of action against entities for related securities fraud violations. Moreover, claims under this rule give the private citizen a way to recover and collect damages for SEC Rule 10b-5 violations.

 What is SEC Rule 10b-5?

The SEC Rule 10b-5 otherwise referred to as Employment of manipulative and deceptive devices, is codified in the CFR § 240.10b-5.

Under this rule, it is unlawful for any person to directly or indirectly to:

What Type of Violations Does the SEC Rule 10b-5 Cover?

Generally, private citizens have a cause of action against companies, entities, and individuals under SEC 10b-5 for the following violations:

 What Are the Damages Available Under SEC Rule 10b-5?

As with any legal claim, there are remedies available for SEC Rule 10b-5 claims. Generally, there are three main remedies available for these types of claims, which includes:

Compensatory Damages

The aim of compensatory damages lies in compensating the plaintiff for the loss they had incurred due to the defendant’s wrongful act. This type of damage would typically cover the actual damages that the plaintiff has suffered from the purchase or sale of the security.

The following are included in the compensatory damages:

Some of the measures for damages under compensatory damages include:

Punitive Damages

The aim of punitive damages, or exemplary damages, is to punish the defendant for their wrongdoing and deter others from engaging in similar wrongful conduct.

This type of damage may include:

The court typically applies this type of damages to cases where the defendant has engaged or acted outrageously or maliciously. Thus, in theory, this damage would set an example for others not to follow.

 Rescission

The rescission remedy aims for the court to attempt to return the defendant and the plaintiff to the status that they were in before the contract was made.

However, the application of this type of damage may vary. The rescission applies by either:

For this type of remedy to apply, the plaintiff must file their claim for rescission soon after discovering the fraud.

If you or someone you know believes you were a victim of securities fraud and you would like to know more about the legal damages you may be entitled to recovery, please call us at 212-203-9300 for a free and confidential consultation.

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