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Page Perry

The subprime and credit crises have resulted in a surge of fraudulent misrepresentation and omission cases against Wall Street firms. A rising stock market concealed many such abuses because values were rising, making fraudulent misrepresentations and omissions hard to identify. Recently, however, many of these misrepresentations and omissions have become apparent. For example, many risk-averse investors with conservative objectives have recently discovered that they have sustained huge losses on investments that were misrepresented to them as being very safe and conservative.

Perhaps even more critical than what was affirmatively misrepresented to investors in these cases is what the firms and their brokers omitted to disclose to investors about these securities. The bedrock principle of the securities laws is the duty of complete and truthful disclosure. Once a broker undertakes to disclose any information about a security to an investor or potential investor, the disclosure must be complete and truthful in all material respects. This is an absolute requirement. It applies to every broker (whether discount or full service), every security, and every person who receives any information about a security (rich or poor, financially sophisticated or not, whether or not that person has an account with the broker). If a broker fails to provide complete and truthful disclosure, and the undisclosed information would have been important in deciding whether or not to invest, the investor has a legal right of action against the broker and the firm to recover resulting losses and damages.