Legal Question in Securities Law in Illinois

Question regarding Illinois Securities law

My firm is a small Delaware broker dealer licensed to do fund raising in Illinois for private equity.

One private equity company, that we were raising money exclusively for, went bankrupt in the 2008 period due to financial crisis not being conducive to do fund raising from individuals.

One of the investors (in this private equity company) from Illinois organized a group of related or known investors from Illinois, and has now sued my firm for securities fraud saying misrepresentions were made., and therefore they should be entitled to triple damages.

This Plaintiff investor during deposition testimony admitted to contacting his prospective investors, did unauthorized copying of the Issuer's investor documents (exec summary, PowerPoint prevention, Private Placement Memorandum, etc,) and sent them to his prospective investors, and admitted under deposition testimony that he received commissions/fees from these investors. All of this without knowledge of my broker dealer firm.

This investor is not a licensed broker dealer.

I have been told that there is an Illinois securities law that would result in treating this "illegal broker-dealer" Plaintiff investor as he he were a Broker Dealer Defendant to his own Plaintiff lawsuit.

Can you identify such Illinois law and help me determine if this investor Defendant qualifies to be covered by this law?


Asked on 5/07/14, 10:30 am

1 Answer from Attorneys
Adam S. Tracy Securities Compliance Group Ltd

Thank you for your question. My firm deals quite frequently with matters of this type. You can find us here: IBankAttorneys.com

The short answer to your question is, yes, the Plaintiff would, in fact, bear liability as an unlicensed investment advisor. The Illinois Securities Act as well as the Securities Act of 1933 among others would provide for punitivie damages against this Plaintiff. The argument effectively states that this Plaintiff defrauded your firm in "aggregating" unsuitable and perhaps undisclosed investors. Thus, you would be able to cross-claim him for damages.

Would be more than happy to answer any further questions you may have at(at)ibankattorneys(dot)com

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Answered on 5/07/14, 10:55 am


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