15 U.S.C. § 77k : US Code - Section 77K: Civil liabilities on account of false registration statement

Search 15 U.S.C. § 77k : US Code - Section 77K: Civil liabilities on account of false registration statement

(a) Persons possessing cause of action; persons liable
In case any part of the registration statement, when such part
became effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, any
person acquiring such security (unless it is proved that at the
time of such acquisition he knew of such untruth or omission) may,
either at law or in equity, in any court of competent jurisdiction,
sue -
(1) every person who signed the registration statement;
(2) every person who was a director of (or person performing
similar functions) or partner in the issuer at the time of the
filing of the part of the registration statement with respect to
which his liability is asserted;
(3) every person who, with his consent, is named in the
registration statement as being or about to become a director,
person performing similar functions, or partner;
(4) every accountant, engineer, or appraiser, or any person
whose profession gives authority to a statement made by him, who
has with his consent been named as having prepared or certified
any part of the registration statement, or as having prepared or
certified any report or valuation which is used in connection
with the registration statement, with respect to the statement in
such registration statement, report, or valuation, which purports
to have been prepared or certified by him;
(5) every underwriter with respect to such security.
If such person acquired the security after the issuer has made
generally available to its security holders an earning statement
covering a period of at least twelve months beginning after the
effective date of the registration statement, then the right of
recovery under this subsection shall be conditioned on proof that
such person acquired the security relying upon such untrue
statement in the registration statement or relying upon the
registration statement and not knowing of such omission, but such
reliance may be established without proof of the reading of the
registration statement by such person.
(b) Persons exempt from liability upon proof of issues
Notwithstanding the provisions of subsection (a) of this section
no person, other than the issuer, shall be liable as provided
therein who shall sustain the burden of proof -
(1) that before the effective date of the part of the
registration statement with respect to which his liability is
asserted (A) he had resigned from or had taken such steps as are
permitted by law to resign from, or ceased or refused to act in,
every office, capacity, or relationship in which he was described
in the registration statement as acting or agreeing to act, and
(B) he had advised the Commission and the issuer in writing that
he had taken such action and that he would not be responsible for
such part of the registration statement; or
(2) that if such part of the registration statement became
effective without his knowledge, upon becoming aware of such fact
he forthwith acted and advised the Commission, in accordance with
paragraph (1) of this subsection, and, in addition, gave
reasonable public notice that such part of the registration
statement had become effective without his knowledge; or
(3) that (A) as regards any part of the registration statement
not purporting to be made on the authority of an expert, and not
purporting to be a copy of or extract from a report or valuation
of an expert, and not purporting to be made on the authority of a
public official document or statement, he had, after reasonable
investigation, reasonable ground to believe and did believe, at
the time such part of the registration statement became
effective, that the statements therein were true and that there
was no omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading; and (B) as regards any part of the registration
statement purporting to be made upon his authority as an expert
or purporting to be a copy of or extract from a report or
valuation of himself as an expert, (i) he had, after reasonable
investigation, reasonable ground to believe and did believe, at
the time such part of the registration statement became
effective, that the statements therein were true and that there
was no omission to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or (ii) such part of the registration statement did
not fairly represent his statement as an expert or was not a fair
copy of or extract from his report or valuation as an expert; and
(C) as regards any part of the registration statement purporting
to be made on the authority of an expert (other than himself) or
purporting to be a copy of or extract from a report or valuation
of an expert (other than himself), he had no reasonable ground to
believe and did not believe, at the time such part of the
registration statement became effective, that the statements
therein were untrue or that there was an omission to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or that such part of the
registration statement did not fairly represent the statement of
the expert or was not a fair copy of or extract from the report
or valuation of the expert; and (D) as regards any part of the
registration statement purporting to be a statement made by an
official person or purporting to be a copy of or extract from a
public official document, he had no reasonable ground to believe
and did not believe, at the time such part of the registration
statement became effective, that the statements therein were
untrue, or that there was an omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that such part of the registration
statement did not fairly represent the statement made by the
official person or was not a fair copy of or extract from the
public official document.
(c) Standard of reasonableness
In determining, for the purpose of paragraph (3) of subsection
(b) of this section, what constitutes reasonable investigation and
reasonable ground for belief, the standard of reasonableness shall
be that required of a prudent man in the management of his own
property.
(d) Effective date of registration statement with regard to
underwriters
If any person becomes an underwriter with respect to the security
after the part of the registration statement with respect to which
his liability is asserted has become effective, then for the
purposes of paragraph (3) of subsection (b) of this section such
part of the registration statement shall be considered as having
become effective with respect to such person as of the time when he
became an underwriter.
(e) Measure of damages; undertaking for payment of costs
The suit authorized under subsection (a) of this section may be
to recover such damages as shall represent the difference between
the amount paid for the security (not exceeding the price at which
the security was offered to the public) and (1) the value thereof
as of the time such suit was brought, or (2) the price at which
such security shall have been disposed of in the market before
suit, or (3) the price at which such security shall have been
disposed of after suit but before judgment if such damages shall be
less than the damages representing the difference between the
amount paid for the security (not exceeding the price at which the
security was offered to the public) and the value thereof as of the
time such suit was brought: Provided, That if the defendant proves
that any portion or all of such damages represents other than the
depreciation in value of such security resulting from such part of
the registration statement, with respect to which his liability is
asserted, not being true or omitting to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, such portion of or all such damages shall
not be recoverable. In no event shall any underwriter (unless such
underwriter shall have knowingly received from the issuer for
acting as an underwriter some benefit, directly or indirectly, in
which all other underwriters similarly situated did not share in
proportion to their respective interests in the underwriting) be
liable in any suit or as a consequence of suits authorized under
subsection (a) of this section for damages in excess of the total
price at which the securities underwritten by him and distributed
to the public were offered to the public. In any suit under this or
any other section of this subchapter the court may, in its
discretion, require an undertaking for the payment of the costs of
such suit, including reasonable attorney's fees, and if judgment
shall be rendered against a party litigant, upon the motion of the
other party litigant, such costs may be assessed in favor of such
party litigant (whether or not such undertaking has been required)
if the court believes the suit or the defense to have been without
merit, in an amount sufficient to reimburse him for the reasonable
expenses incurred by him, in connection with such suit, such costs
to be taxed in the manner usually provided for taxing of costs in
the court in which the suit was heard.
(f) Joint and several liability; liability of outside director
(1) Except as provided in paragraph (2), all or any one or more
of the persons specified in subsection (a) of this section shall be
jointly and severally liable, and every person who becomes liable
to make any payment under this section may recover contribution as
in cases of contract from any person who, if sued separately, would
have been liable to make the same payment, unless the person who
has become liable was, and the other was not, guilty of fraudulent
misrepresentation.
(2)(A) The liability of an outside director under subsection (e)
of this section shall be determined in accordance with section 78u-
4(f) of this title.
(B) For purposes of this paragraph, the term "outside director"
shall have the meaning given such term by rule or regulation of the
Commission.
(g) Offering price to public as maximum amount recoverable
In no case shall the amount recoverable under this section exceed
the price at which the security was offered to the public.