Corp - Securities and Related Topics

Question 1

What does Section 101 of the MA Uniform Securities Act prohibit?

Answer 1

Antifraud provision.

It prohibits the following in connection with the offer, sale, or purchase of any security:

(1) A device or scheme to defraud
(2) Material misstatements of fact
(3) Omission of fact necessary to make statements that were made not misleading; and
(4) Any act or practice that would operated as a fraud.

P must prove fraud. and must show that D knowingly engaged in fraudulent conduct.

Question 2

What does ch 93A of the Massachusetts Consumer Protection Act prohibit?

Answer 2

Prohibits the use of unfair or deceptive practices and unfair methods of competition in any business or trade. [Including the sale of securities.]

Does not apply to corporate governance issues.

Question 3

What are remedies for willful violation of Ch. 93A?

Answer 3

(1) Usually double or treble damages plus attorney’s fees

However for securities sale - actual damages + attorney’s fee.

Question 4

Before filing a 93A suit, what must P do?

Answer 4

(1) Must mail or deliver to D a demand letter - 30 days prior to suit.
(2) If D responds within 30 days with reasonable settlement offer than P can’t recover more than that amount.

Question 5

What is the statute of limitations under CH 93A and when does the claim accrue?

Answer 5

(1) Four Years

(2) Claim accrues when a R-person would have learned of the deceptive conduct.

Question 6

Does a controlling shareholder have a duty to other shareholders outside of a close corp situation?

Answer 6

Yes, in MA controlling shareholder is under a fiduciary limitation when selling control

Must make a reasonable investigation into the character and reputation of the buyer. [Liable to all SH for damages caused]

It is not OK to sell board seats.