Business lawsuits are types of legal disputes which may be filed in civil courts. Business lawsuits can arise when businesses violate the law or engage in disagreements regarding business-related matters with other parties.
A business lawsuit may cover a wide variety of legal issues, which may range from breach of contract violations to debt collection disputes. In addition, a business lawsuit may involve multiple parties.
For example, businesses may sue or be sued by:
- Consumers;
- Clients;
- Employees;
- Government agencies;
- Shareholders; or
- Other businesses.
Almost every aspect of businesses pose a certain amount of risk, which makes a business particularly susceptible to legal liabilities. Because of this, it is extremely important for a business owner to hire an attorney to review legal documents, including:
- Business contracts;
- Internal company policies; and
- Certain business transactions, including selling a company.
Additionally, an individual can increase their odds of avoiding business lawsuits by hiring a business attorney as well as other specialized professionals to oversee their business operations. In contrast, if an individual has a business that needs to file a business lawsuit against another party or entity, a business lawyer will be able to assist in the process.
What are Some Ways to Protect Against a Business Lawsuit?
Although there are no foolproof methods that are available to protect against a business lawsuit, there are some general practices that a business can engage in which may decrease its chances of being sued. In general, the longer an organization is in business, the greater the risk it has of facing some type of legal challenge.
There are several steps that businesses can take to help protect against business lawsuits may include:
- Purchasing insurance;
- Implementing compliance programs;
- Creating solid company policies; and
- Performing due diligence.
Purchasing insurance is an important part of protecting a business from legal claims. There are numerous types of insurance which a business may purchase.
Businesses should purchase the type of insurance which is best suited to their company or industry needs. For example, if a business is often sued for product liability issues, that business should purchase an insurance policy which covers consumer injuries.
In that type of a situation, the insurance company would be required to provide financial support in the event that the business is sued. Insurance may also prevent a business from going bankrupt as a result of a lawsuit.
A business can also implement compliance programs which are intended to keep the business in compliance with federal and state laws. In many cases, these programs may be used as evidence to show that businesses are actively complying with current laws. In addition, business compliance programs may provide protections from criminal liability, such as corporate compliance programs.
It is important for a business to create solid company policies. Similar to a compliance program, a company policy should be drafted in accordance with applicable laws. Company policies may be tailored to fit the needs of the business as well as to avoid being held liable for the actions of employees. It is important for a business to have an attorney review company policies to ensure they are in compliance with the law and to mitigate the risk of future legal disputes.
Businesses must also perform due diligence. A business should exercise caution when they enter into a contract with another business, a consumer, or an employee. A business can avoid a lawsuit by performing a due diligence check, such as making sure that another business has a good reputation and it pays its bills.
This also applies to a business that is acquiring or merging with another business. A business should also run a background check on any prospective employee.
A business should also consult with a business attorney prior to drafting any of the documents discussed above. This can help a business avoid costly errors as well as prevent a legal dispute from arising in the future.
What are Compliance Programs?
A compliance program is the rules and procedures which investment companies and investment advisors have laid out in order to ensure that their business practices follow the rules which are established by securities laws. In other words, the business or advisor must examine how they conduct business and compare these to their fiduciary obligations to their customers.
If there are any risks that the business may not meet those obligations which stem from the way in which business is conducted, the business or advisor should make modifications to their business practices in order to reduce or eliminate those risks.
What Are Some of the Factors that Need to be Addressed in the Investment Advisor’s Compliance Program?
There are certain aspects of the business practices of an advisor which are required to be addressed in the advisor’s compliance program, including:
- Trading practices;
- Accuracy of disclosures;
- Portfolio management;
- Privacy protection;
- Protecting client assets from inappropriate use;
- Creating and maintaining required records;
- Business continuity plans;
- The advisor’s proprietary trading as well as the personal trading activities of its employees; and
- Marketing advisory services.
What Are Some of the Factors that Need to be Addressed in the Investment Company’s Compliance Program?
The requirements for an investment company’s compliance program involve developing procedures for monitoring and regulating the investment company’s business practices as well as to develop policies which monitor compliance programs of any third party service providers, such as:
- Investment advisors;
- Principal underwriters;
- Administrators; and
- Transfer agents.
Areas of business operations which must be covered by a company’s compliance program include:
- Pricing of portfolio securities and the investment company’s shares;
- Processing of an investment company’s shares;
- Identification of affiliated persons, in order to prevent insider trading;
- Protection of nonpublic information;
- Compliance with fund governance requirements; and
- Market timing compared to shareholder trades in and out of the company.
Investment companies are required to review the adequacy of their compliance programs at least once a year. Companies are also required to review the adequacy of the compliance programs of their third party providers at least once a year.
What Should I Do if My Investment Company or Investment Advisor is Violating Securities Laws to My Financial Detriment?
The first thing an individual should do if their investment company or investment advisor is violating securities laws to an individual’s detriment is to file a complaint with the United States Securities and Exchange Commission (SEC). An attorney will be able to advise an individual of their rights and inform them if they are entitled to any monetary damages in a lawsuit against either the investment advisor or the investment company.
Do I Need an Attorney?
It is essential to have the assistance of a securities lawyer for any issues, questions, or concerns you may have related to compliance programs. Your attorney can advise you regarding the laws which apply to your business and assist you with ensuring and your businesses’ compliance programs meet all of the requirements.
If you have been accused of violating a United States securities law or regulation, it is essential to have the assistance of a criminal defense attorney. You may be facing severe punishment for these types of offenses and your attorney will protect your rights and represent you in court.
