Associates’ Corner: Investment Fraud in South Florida: A Review of Potential Causes of Action for Florida Securities Investors
By Kluger, Kaplan, Silverman, Katzen & Levine, P.L. October 18, 2012
By Josh M. Rubens
The Southeastern Regional Investor Fraud Summit was held last week at Miami-Dade College. The summit was organized by the U.S. Department of Justice, the Securities and Exchange Commission, and other agencies in an effort to educate the South Florida public regarding investment fraud. Given the prominence of investment fraud in South Florida since 2008 (i.e., Bernard Madoff, Arthur Nadel, Scott Rothstein, etc.), it is not surprising that South Florida has the second highest number of securities and investment fraud investigations and prosecutions in the U.S.
The Florida Securities Investor Protection Act (the “FSIPA”), Fla. Stat. §§ 517.011 et seq., is the first line of defense for Florida investors in civil actions relating to misstatements, omissions, and/or other improper conduct made “in connection with the offer, sale or purchase of any investment or security.” Fla. Stat. § 517.301(1)(a). The remedies available to a securities investor for a violation of Section 517.301(a)(1) is rescission or monetary damages, and the recovery of attorneys’ fees. See Fla. Stat. § 517.211(2), (6).
Investors should also consider asserting various common law claims. Depending on the facts and circumstances of the case, these claims include fraud (both fraudulent inducement and fraudulent misrepresentation), negligent misrepresentation, breach of fiduciary duty, conversion, breach of contract, unjust enrichment, and civil conspiracy. In certain circumstances, it may also be appropriate to include a claim under the Civil Remedy for Theft or Exploitation, Fla. Stat. § 772.11(1). Section 772.11(1) provides a civil claim for such criminal violations as Theft, Fla. Stat. § 812.014, and Exploitation of An Elderly Person, Fla. Stat. § 825.103. Section 772.11(1) is a particularly important claim to consider because investors may recover treble damages (three times the amount of compensatory damages) as well as attorneys’ fees.
As highlighted in the Miami Herald article, South Florida investors are being targeted in various investment schemes. Some of these schemes may even be conducted by brokerage firms governed by the Financial Industry Regulatory Authority (“FINRA”). Disputes arising out of brokerage agreements are nearly always required to be submitted to binding arbitration conducted by FINRA. However, investors may assert the statutory and common law claims described above in any FINRA arbitration proceedings.
In light of the high rate of investment fraud in South Florida, securities investors must be aware of the claims available to them.