Investing always involves risk, but it should never involve deception. California’s securities laws were written to protect investors from fraudulent or misleading practices. Two key sections California Corporations Code §25401 and §25501 give investors powerful tools to hold dishonest parties accountable. Understanding your rights under these statutes can make all the difference when your financial security is on the line.
What Is California Corp. Code §25401?
Section 25401 is part of the California Corporate Securities Law of 1968, which governs the sale of securities in the state. In simple terms, this law prohibits anyone from offering or selling a security through false statements or by omitting important information.
That means if a company, broker, or investment advisor misrepresents the facts or fails to disclose something material, such as financial instability, pending lawsuits, or hidden risks, they may be violating the law.
The goal is transparency. Investors must be given complete and truthful information to make informed decisions about where to put their money.
How §25501 Gives Investors the Right to Recover
While §25401 defines the illegal act, §25501 provides the remedy. It allows investors who were misled to take civil action and recover their losses.
If you purchased a security based on false or misleading information, §25501 gives you the right to sue for:
- The amount you paid for the investment, plus interest
- Reasonable attorney’s fees and court costs
- Potentially, rescission of the transaction (returning both parties to their pre-investment positions)
These remedies exist to make investors whole and deter future misconduct in the marketplace.
Common Examples of Securities Misrepresentation
Violations of §25401 can take many forms, including:
- Promising unrealistic returns without disclosing risks
- Concealing company debt or prior financial losses
- Misstating the use of investor funds
- Failing to register securities or brokers properly
Even if the deception wasn’t intentional, an omission of key facts that misleads investors can still qualify as a violation under California law.
When to Involve a Securities Attorney
If you suspect you were misled or pressured into a fraudulent investment, time is critical. California law includes strict filing deadlines for securities claims, and delay can limit your recovery options.
A qualified securities attorney can:
- Review your investment documents and communications
- Identify potential violations under §25401 and §25501
- Negotiate with responsible parties or file a civil lawsuit on your behalf
These cases can be complex, but the law is designed to protect you, not the wrongdoer.
Protect Your Investments and Enforce Your Rights
Investors deserve honesty and accountability. California’s securities laws provide strong remedies when those principles are violated. If you believe you’ve been the victim of a misleading investment, don’t wait to seek help. Consult with a securities lawyer at Alves Radcliffe LLP to safeguard your financial future.
