The most basic remedy is damages for out-of-pocket losses. The out-of-pocket lost is generally the amount of money invested minus the returns and the residual value of the investment. The out-of-pocket measure is also generally the smallest measure of damages, so it is important not to limit yourself to it.

In addition to out-of-pocket losses, an investor is often awarded damages based on the profits he would have made had the wrongful act not occurred. These lost profits are proved through the use of a computer program that performs an alternative investment analysis or interest calculation. In the event that there are difficulties establishing the residual value of the investment, the arbitrators or court can award rescission and require the investor to return or assign the improper investment to the broker in exchange for a return of the full purchase price and any ancillary damages.

Arbitrators and courts have the power to award punitive damages and will do so where the facts warrant them and they are satisfied that there is an adequate basis in law to do so. Since punitive damages are not available for a claim under Rule 10b-5, the availability of punitive damages is often determined by state law, which in California is generally Section 3294 of the Civil Code.

Arbitrators and courts may also award attorneys' fees in an appropriate case. The most common basis for an award of fees is an attorneys' fee provision in the investor's account agreement. In addition, certain states, such as Florida, have statutory provisions that allow attorneys fees to be awarded in certain securities cases. In addition, the federal Court of Appeals for the Ninth Circuit has specifically upheld an award by arbitrators of attorneys' fees where there was no fee agreement based on federal common law that allows the award of such fees for improper defense tactics.

Finally, in a proper case arbitrators or a court may impose constructive trusts, direct that specific property be turned over, or enjoin future misbehavior.

Of course, the fact that a particular kind of damages may be available does not necessarily mean that you will be able to convince the arbitrators, court, or jury to give it to you, but you should be sure to ask for all appropriate damages, without asking for damages that are clearly unavailable. An experienced investment lawyer will know what damages are worth pursuing in a specific case.

DISCLAIMER: Vincent DiCarlo, who authored and maintained this site, has entered government service and, as of September 1, 2008, is no longer engaged in the private practice of law.  Therefore, this site is no longer being maintained,  may not be accurate, and should not be relied upon.  It is not now and was not ever intended as legal advice.  It is being provided for historical purposes, and for the benefit of those lawyers who are capable of independently verifying the information and judging the opinions in it, and then reaching their own conclusions.  You are strongly advised to consult qualified legal counsel before adopting any of the ideas or suggestions in this material, which may or may not be applicable in your jurisdiction or to your specific situation, and may no longer be accurate or prudent in any case.  The opinions and statements at this site were solely those of the author.  They were not and are not those of, nor were they nor are they made on behalf of, any agency of government or anyone else.

Copyright © 1998-2008 Vincent DiCarlo