Federal Securities: 1933 Act

Question 1

Federal Securities:

1933 Act

Answer 1

• focuses on initial sale of securities
• liability due to audited financials contained in the registration statement
  Primary Causes:
  1. Section 11: remedies misleading statements and omissions contained in registration statement
  2. Section 12(a)(1)
  
  • offering a security before registration
  • offering before registration is effective
  • selling a security without providing a prospectus
  • providing a prospectus that does not comply with Section 10
    ** accountants are deemed experts with special responsibility & only sellers are liable under 12(a)(1)&(2)***
    3. Section 12(a)(2)
• remedies misstatements and omissions in initial sale of securities outside of registration statement.

Question 2

Federal Securities:
1933 Act
Section 11

Answer 2

Elements:
- False statement or omission
- Material
- Plaintiff bought the securities under defective registration statement
- Damages
Defenses:
- Due Diligence: reasonable investigation, reasonable basis, good faith
- Special burden of “experts” must prove not negligent
- Issuing company itself has no due diligence, strictly liable
- Lack of Reliance
- Alternative Causation
- Statute of Limitations
- sue within one year of discovery
- within 3 years after sold to public
Damages
- When sold: “Amount paid” - Sale Price
- Still held: “Amount paid” - Value at “time of suit”
Punitive damages are not allowed