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States grant owners of equity securities certain rights and protections as set forth in corporate, partnership and limited liability company statutes. The primary protections for equity holders are the fiduciary duties imposed on the officers and directors of corporations. The fiduciary duties are broadly categorized as the duty of care and the duty of loyalty. The duty of care states that officers and directors must conduct the affairs of the corporation with the prudence and care that an ordinary person would take in managing his own affairs. The duty of loyalty states that officers and directors must not take actions that benefit themselves over the company.

Owners of debt securities, on the other hand, generally are not protected by corporate, partnership and limited liability statutes and are not owed fiduciary duties and are protected only by the provisions of contract law.

In addition to state corporate laws, the issuance of debt and equity securities is regulated by the Securities Exchange Commission.


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