The Uniform Securities Act: Securities Attorney Primer

Each U.S. state has its own security laws that are commonly referred to as “blue sky laws.”  The Uniform Securities Act is a set of model laws pertaining to securities law[1] and issues that was created as a starting point for the drafting of uniform state-level securities regulation when promulgating securities law.  The Uniform Securities Act is a model statute created by the National Conference of Commissioners on Uniform State Laws. The original Uniform Securities Act was circulated back in 1930 but was only enacted by five jurisdictions. Eventually, the Act was revised in 1956, which was adopted by 37 jurisdictions. The Act was then amended back in 1985, and eventually in 2002, which is the latest version of the Act.

What is the Purpose of the Uniform Securities Act?

Generally, the purpose of the Uniform Securities Act is to assist with the creation of state-level securities fraud laws. The purpose of the Uniform Securities Act is to serve as a guide or template for adopting states in drafting their own state-level securities law framework.  Moreover, the Uniform Securities Act aims to aid the Securities and Exchange Commission (SEC) in enforcing and regulating securities.

Why Do States Regulate Securities at the State Level?

As not all investments are covered by federal securities laws, the SEC cannot protect investors from all securities violations.  Hence the need for state-level securities statutes and regulations.  The Uniform Securities Act provides a guideline on how the adopting state can deal with securities fraud at the state level.  It provides more structure and consistency with federal law regarding securities fraud.  It also outlines the specific authority of both federal and state regulators, so as to avoid the potential for duplication at different levels.  Thus, state-level securities laws can aid the Securities and Exchange Commission (SEC) in enforcing and regulating securities.

Which States Have Adopted the Uniform Securities Act?

According to the Uniform Law Commission[2], 20 states plus the US Virgin Islands have adopted the 2002 version of the Uniform Securities Act. Other states may have adopted earlier versions of the act and you should consult with a securities attorney to advise you on the law in your particular state.

Does New York State Adopt the Uniform Securities Act?

No. While New York State does have Blue Sky Laws that serve as a safeguard for investors against security fraud, New York has opted not to adopt the Uniform Securities Act.  New York security laws have some notable differences from the Uniform Securities Act.  One key difference is that New York does not recognize a private right of action.  By its definition, a private right of action allows a private plaintiff to bring an action based directly on a legal statute, constitution, or federal common law.  New York does not create a right of action for individuals under its Blue Sky Law.

How are Damages Computed under the Uniform Securities Act?

Under the current Uniform Securities Act, a purchaser may maintain an action to recover the consideration paid for the security, minus the amount of the following:

• any income received on the security
• the interest per year from the date of the purchase
• costs, and reasonable attorney fees as determined by the court, upon the tender of the securities
• or for actual damages incurred by the purchaser.

The interest rate available to investors will vary based on state law. Also, many states authorize an award of attorneys fees to investors if they prevail. In some cases the award is mandatory and in others it is permissive. Again, this depends on the laws of the individual state.

Next Steps if you Suspect Securities Fraud

Navigating through the Uniform Securities Act, specifically in calculating damages, is a complex matter that renders the assistance of an experienced securities lawyer. Having the legal representation of a dedicated securities lawyer can provide you valuable information, strategies, and the laws to apply in your specific situation.

If you believe that you have a case that deals with securities fraud or any other issues about the Securities Law, please call us at (800) 767-8040 for a free consultation. Our experienced securities attorneys can assist you in assessing your claim and the legal options available to you.