Liability for Defective Securities - Transcript

When investors suffer losses due to defective securities, liability often falls on multiple parties, including the company that issued the product and the broker who sold it. At Malecki Law, we help investors pursue claims against those responsible, ensuring they are held accountable for their failures in due diligence and oversight. Our securities lawyers have extensive experience investigating, preparing, and litigating these cases, and knows what it takes to ensure your rights are protected.

In cases involving defective securities, the company that created and issued the product may bear the highest degree of liability. This is because the company (or issuer) is responsible for ensuring that its products are properly packaged and ready to be sold to the public.

Defective securities are defined by their inherently flawed nature for any investor due to structural issues, false marketing, or unrealistic promises. Companies that issue these products are expected to conduct thorough due diligence before offering them to brokers or the public. This includes:

• Ensuring that marketing materials accurately represent the risks.
• Confirming the product would be in the interest of any investor.

When a company fails in these responsibilities, it exposes investors to unnecessary risks and losses. At Malecki Law, we work to hold companies accountable for their negligence and ensure that investors receive the compensation they deserve.

Brokers who sell defective securities can also share in the liability, particularly if they failed to identify or disclose the product’s flaws. While brokers may rely on the information provided by the issuing company, they still have a duty to:

• Evaluate whether the product is in the best interestof their clients under Regulation Best Interest.
• Disclose all relevant risks and conflicts of interests to the investor client.
• Avoid recommending products that are fundamentally defective or not in the interest of any investor.

If a broker could have known about the defect through reasonable investigation or industry warnings, they may be held partially liable for the resulting losses. For example, if a broker sells a structured note without understanding its inherent flaws or fails to explain its risks to a client, they may be liable for their role in the recommendation of the investment.

At Malecki Law, we help investors evaluate whether their broker acted negligently or misrepresented the investment, building strong cases for recovery.

Determining liability in defective securities cases requires a detailed investigation into the actions of both the company and the broker. Key factors include:

• Knowledge of the Defect: Did the company or broker know, or should they have known, about the product’s flaws?
• Due Diligence: Did the company perform adequate testing and provide accurate information about the product? Did the broker review the product and ensure it was in the best interest of their client?
• Disclosure of Risks: Were the risks clearly communicated to the investor? Did the investor understand these risks?
• Regulatory Compliance: Did the company and broker adhere to industry standards and regulations?

Through careful analysis of these factors, Malecki Law identifies the parties responsible and builds a case to recover losses for our clients.

If you’ve experienced significant financial losses because of defective securities, you have the right to hold the responsible parties accountable. Malecki Law has over 20 years of experience representing investors in securities disputes, helping clients recover their losses and achieve justice. Call us today at 212-943-1233 to speak with a New York securities law attorney. You can also complete our confidential online contact form and we will promptly get back to you. We represent investors in New York, throughout the United States, and across the globe.

Yes um both the individual and the company can be held liable and I think the company has the highest degree of liability because they should have done due diligence as the broker should have done on this product to ensure that it was suitable to be sold to anyone that it was in the best interest of any customer so a defective Security Finance definition was not appropriate to be sold to anyone and so when we’re talking about who’s liable the primary liability is on the firm and secondarily on the broker if the broker could have known of the defect.