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NCJRS Abstract

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NCJ Number: 134298 Find in a Library
Title: Bank Liability for Securities Fraud
Journal: Banking Law Journal  Volume:107  Issue:2  Dated:(March-April 1990)  Pages:100-109
Author(s): J S Feldman
Date Published: 1990
Page Count: 10
Type: Legislation/Policy Analysis
Format: Article
Language: English
Country: United States of America
Annotation: Banks should establish policies and procedures to reduce the possibility that they will be named in defendants in securities fraud cases, because they face significant exposure for loan transactions that appear to have no relationship to securities yet actually do revolve around securities.
Abstract: These securities transactions include approximately $100 billion that banks financed during the last decade in limited partnership and private placement deals. As some of these transactions have encountered problems, the number of lawsuits seeking damages for alleged securities fraud is increasing. The lending bank is often included among the list of defendants as an alleged aider and abettor of the securities fraud. The complaints typically seek damages in the millions, and a plaintiff may seek the entire judgment against the bank that financed the transaction. Therefore, banks should implement several safeguards including suspicion of atypical loan transactions, care regarding long-term clients who are experiencing financial problems, caution about serving as the trustee bank on securities transactions, and awareness of irregularities at the closing. When defending against a securities fraud claim, the bank must immediately notify its liability carrier and hire an attorney who specializes in securities litigation. Footnotes
Main Term(s): Corporate criminal liability; Securities fraud
Index Term(s): Financial institutions; White collar crime
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