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The History of the Nevada Securities Laws
A Brief History of the Nevada Securities Laws
by David Liebrader
From the time that Nevada became a state in 1864 speculators and stock promoters have been drawn to Nevada for its rich natural resources and wide open country. In Nevada one could get rich quick by staking a mining claim, or by purchasing shares in a mining company, hoping the company would strike it rich.
Naturally the Wild West was rife with fraud, and by the turn of the century the legislators in Nevada recognized they had a problem on their hands. Their solution was to draft the progenitor of what would become the Nevada Securities Laws. These pioneer legislators recognized that in order to generate interest in Nevada mining companies, they had to provide the public with some assurance that the companies were legitimate. The early law required basic disclosures on the mining claims being worked, their locations, and the amount of money paid to the corporations’ officers. While by no means comprehensive, this early 1900s law laid the foundation for what would become the Nevada Securities Laws of today.
Two years after passage of the 1909 law requiring public disclosures by corporations, in 1911 Nevada became one of the first states to attach criminal penalties to the fraudulent sale of stock. The 1911 law criminalized any sale of stock made for the purpose of defrauding a purchaser. The legislature also provided criminal penalties for the filing of false financial statements. Both crimes carried ten year prison sentences and a $5,000 fine. These groundbreaking laws survived more or less intact until the early 1960s, when Nevada began to consider adopting the Uniform Securities Act.
The drafting of the Uniform Securities Act was an attempt to craft a model statute to assist states in drafting and implementing their own state securities laws. The law was finally put together by the National Conference of Commissioners (NCC) on Uniform State Laws in 1956, after earlier efforts in the 1930s and 1940s met with limited success. Back then, there were few Nevada securities attorneys practicing in the still growing state, and the uniform law proved the perfect template to use in drafting the new law.
The NCC drafted the Uniform Securities Act for use by the states, who were free to adopt it in whole or in part, or not at all. Frequently referred to as the “blue sky law” it is the sources of unique protections for investors, including longer statutes of limitations periods than under federal law, as well as attorney’s fees provisions. The term “blue sky” is thought to have come from a judicial opinion whereby the frustrated judge excoriated the defendants for selling little more than a piece of blue sky to investors.
The Nevada legislature agreed to a partial adoption of the law in 1963, and amended the Nevada securities law after the NCC adopted the revised uniform securities law of 1985. One of the more significant developments came after Nevada adopted the revised USA in 1987 with the creation of a securities division inside the office of the Nevada Secretary of State.
The Nevada Securities Laws are contained in Chapter 90 of the Nevada Revised Statutes. Broadly speaking Chapter 90 deals with the registration of securities in Nevada, licensing of salespersons and liability and penalties for breaches. The administrative code provides for some context and interpretation of the laws, and is a good resource for Nevada securities attorneys
Protections for investors under the Nevada securities laws are found in NRS §90.570 which makes it illegal to 1. Employ any device, scheme or artifice to defraud; or 2. Make an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made not misleading in the light of the circumstances under which they are made; or 3. Engage in an act, practice or course of business which operates or would operate as a fraud or deceit upon a person.
In addition, NRS §90.460 provides a registration requirement for the sales of securities, and makes it unlawful for a person to offer to sell or sell any security in Nevada unless the security is registered or the security or transaction is exempt.
Penalties for violations of NRS §90.570 and NRS §90.460 are rescission, or if the security has been sold, the difference between the purchase and sales prices, less distributions, plus interest at the legal rate and reasonable attorney’s fees.
The Law Office of David Liebrader has been fighting on behalf of victimized investors for over twenty years. We have been successful in resolving well over 1000 investment fraud cases nationwide, with recoveries topping $50,000,000. Many claims have involved violations of the Nevada Securities Laws, which allows the court to award interest and attorney’s fees to prevailing parties. Typical claims brought for violations of the Nevada Securities Laws are those for misrepresentations and omissions, selling unregistered securities or selling securities without a proper license.
In addition to claims for violations of the Nevada Securities Laws, we have been successful in resolving hundreds of claims in the FINRA Dispute resolution forum (formerly known as NASD.) In the FINRA forum we have brought claims for suitability, excessive trading or churning, overconcentration, misrepresentations, claims based on material omissions of fact, unauthorized trading, ponzi scheme investments, promissory note investments, penny stock fraud, pump and dump schemes, failure to supervise, and more recently, for claims involving illiquid private placements, like REITS, equipment leasing programs and oil and gas drilling and exploration programs. Licensed investment professionals have an obligation to be truthful with their clients, and to make investment recommendations consistent with their client’s investment objectives and risk tolerances.
Investors can bring claims for violations of the Nevada securities laws in Nevada District Court, or if the salesperson is registered, before an arbitration panel appointed by the Financial Industry Regulatory Authority or “FINRA.”
FINRA regulates broker dealers that sell investments, hosts “broker check” an app that allows investors to check out whether their financial advisor has been the subject of any customer complaints, and also administers an arbitration forum where, since the 1980s, most broker-customer investment disputes have been resolved. Investors can pursue claims against their brokerage firm in the FINRA arbitration forum, where common claims are those for suitability, violations of FINRA’s own conduct rules, breaches of fiduciary duty, misrepresentations, negligence, violations of state and federal securities laws, claims for financial elder abuse, breach of contract (oral and written) and failure to supervise. Depending on the claim, the recovery process takes approximately anywhere from ten to fourteen months.
FINRA convenes arbitration panels in Las Vegas and Reno, and no other Nevada attorney has more experience in front of FINRA panels than David Liebrader
FINRA’s rules of conduct require that investment recommendations made by licensed financial advisors be suitable in light of a customer’s stated needs, objectives and risk tolerance. In addition, brokerage firms have an affirmative obligation to supervise all registered representatives through regular, periodic inspections and reviews conducted by qualified supervisors (including surprise inspections when warranted.) These investigations must be overseen by properly licensed, trained professionals, who are required to “vigorously investigate” any signs that a licensed broker is engaging in conduct detrimental to a client, or the firm.
If you have suffered investment losses in Nevada, call the experienced Nevada securities attorneys at The Law Office of David Liebrader at (702) 380-3131 for a free, confidential consultation. We have handled claims from Winnemucca to Laughlin and from Elko to Reno. If you are looking for an experienced Nevada securities attorney to provide you with a free consultation on your Nevada investment loss claim, call us today.
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