What Should I Do if I Purchased an Unregistered Security in Florida?

Navigating the securities markets can be a daunting task for both inexperienced and experienced investors alike. There are countless rules and regulations governing every facet of the sale and purchase of a security designed to protect investors from opportunistic brokers.

Clients who are sold unregistered securities and suffer losses may be able to file a legal claim.

One way that state and federal securities regulators regulate the securities markets is by requiring that every security sold to the public be registered with the appropriate regulatory authorities. The purpose of this requirement is to allow investors the opportunity to research and review a particular security and ensure that it fits their investment objectives.

Clients who are sold unregistered securities by their broker and suffer financial losses may be eligible to file a legal claim. If you have questions about a potentially unregistered security that you purchased, please contact the Business Trial Group.

Florida’s Registration Requirement

At the federal level, the Securities Act of 1933 requires that all offers and sales of securities be registered, unless they are specifically exempted. Much like its federal counterpart, Florida has enacted its own set of securities laws, often referred to as “blue sky laws,” that govern the offer and sale of securities within the State of Florida.

All securities sold within Florida must be registered with the state.

Known as the Florida Securities and Investor Protection Act (FSIPA), these laws can be found in Chapter 517 of the Florida Statutes. The sale of securities in Florida is regulated by the Florida Office of Financial Regulation, Division of Securities.

FSIPA requires that all securities offered or sold within Florida be registered with the State of Florida. This act is set forth in Florida Statute § 517.07. According to the statute, it is unlawful for any broker to offer or sell an unregistered security unless it is exempt, sold in an exempt transaction, or is a federal covered security.

Filing a Claim Against a Broker for Offering or Selling an Unregistered Security

The basic elements needed to prove that a broker is selling unregistered securities are:

• Sale or offer to sell a security;
• The sale or offer to sell a security occurred in Florida;
• The security offered or sold was not registered under applicable law; and
• The security offered or sold was not exempt from registration or a federal covered security.

Although these four elements can seem straightforward on their face, they contain certain intricacies which need to be understood in order to pursue a successful claim. Here is a simplified breakdown of each of these elements:

Element 1: Sale or offer to sell a security

Florida Statute §§ 517.021(16), (21), and (22), respectively, provide the definitions for a “sale,” “offer to sell,” and a “security.”

Investors should understand that products other than stocks and bonds are considered securities. For example, a “security” may include:

• A note
• A treasury stock
• A debenture
• A certificate of deposit
• A certificate of interest in a profit-sharing agreement or the right to participate therein
• A certificate of interest in an oil, gas, petroleum, mineral, or mining title or lease or the right to participate therein
• Any transferable share
• An investment contract
• A beneficial interest in title to property, profits, or earnings
• Any option contract which entitles the holder to purchase or sell a given amount of the underlying security at a fixed price within a specified period of time

For a full list of securities definitions, see Florida Statute § 517.021. And for specific questions about a possible unregistered securities transaction, please contact the Business Trial Group.

Element 2: The sale or offer to sell a security occurred in Florida 

FSIPA and all claims brought thereunder must involve the offer or sale of a security within the State of Florida.

Element 3: The security offered or sold was not registered under applicable law

Absent an exemption, every security sold within the State of Florida must be registered with the Florida Office of Financial Regulation.

Element 4: The security offered or sold was not exempt from registration or a federal covered security

Exempt securities are defined in Florida Statute § 517.051. Importantly, any broker who claims entitlement to any of the exemptions provided in this statute bears the burden of proving such entitlement.

Florida Statute § 517.021(10) defines a “federal covered security” as any security that is a covered security under Section 18(b) of the Securities Act of 1933.

Unsure whether your securities purchase meets these elements? We can help.

What You Can Recover

If you are successful in proving that your broker sold you an unregistered security, you may be entitled to the following remedies:

Rescission: Florida law allows an investor to return the unregistered security to the broker for a full refund. You may also be entitled to any interest that accrued on your investment. If you received any income from the security, however, that amount may be deducted from the total refund you will receive.

Attorney’s Fees: If you successfully prove that your broker sold you an unregistered security, Florida law entitles you to an award for your attorney’s fees.

Free Securities Purchase Case Review

If you have questions about a potentially unregistered security that you purchased, the lawyers of the Business Trial Group may be able to help. Back by the largest contingency-fee law firm in the country, our clients pay no upfront fees or retainers, and we only receive a fee if we successfully recover compensation on your behalf.

For a no cost and no obligation review of your investment losses, please call us at (877) 599 3102 or fill out our case review form.