Banking and Finance Law

Federal and state laws protect consumers during interactions with financial institutions.

Investors have important rights during transactions involving stocks, bonds, and other securities.

Unsecured loans to promising new companies may result in huge rewards for risk-tolerant investors.

Borrowers often set up financing agreements that use an asset as collateral for a loan.

Frequently Asked Questions
  • How does a mortgage work?
    A mortgage allows a buyer to purchase property when they cannot pay the full purchase price from their own funds. The buyer offers the property as security for a loan from the bank, which is paid off in installments. If the buyer does not keep up with their payments, the bank can proceed with a foreclosure or repossession.
  • How does a company go public?
    A company goes public by making an initial public offering, which means that it offers shares of its stock to the public for the first time. A bank usually will underwrite the sale and help determine how much the shares should cost and how much of the company should be sold. It will buy those shares and sell them to investors.
  • Can an investor sue for a securities violation?
    Yes, an investor can sue for a securities violation under rules such as SEC Rule 10b-5. This federal rule allows a private party to bring a lawsuit against a person or entity that engaged in fraud, deception, misrepresentations, or other violations in connection with the purchase or sale of a security. State securities laws, sometimes known as Blue Sky laws, also may provide a private right of action for securities violations.
  • What are some common types of securities fraud?
    Common types of securities fraud include misrepresentations, account churning, and unauthorized trading. Misrepresentations often occur when a broker misleads a client about the risk of an investment. Account churning involves unnecessary trades that generate more commissions. Unauthorized trading occurs when a broker completes transactions without permission.
  • What are the risks and rewards of venture capital investments?
    Venture capital investments typically involve unsecured loans to startups that cannot raise funds through other means. If the startup fails, the venture capitalist will lose their investment. If the startup successfully goes public or gets acquired by an established company, however, the investor could receive substantial returns.
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Popular Topics
  • Bank Lending
    Lending laws prevent risky actions by banks that may destabilize the banking industry, while imposing disclosure and anti-discrimination requirements on financial institutions.
  • Banking Fraud
    Criminal charges can arise from money laundering, accounting fraud, credit card fraud, internet fraud, stolen checks, and other forms of tampering with bank accounts or funds.
  • Mortgage Lending and Securitization
    Mortgages or other loans may be pooled and sold as securities to independent investors, who receive payments on the debts from the individuals or businesses that took out the loans.
  • Securities Fraud
    Investment brokers and firms sometimes engage in deceptions, misrepresentations, or other misconduct that causes losses to their investor clients, who can sue for these violations.
  • Securities Arbitration
    Many disputes between investors and brokers go to arbitration rather than a formal court proceeding, but decisions by arbitration panels are usually still final and binding.
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