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Flashcards in Federal Securities: 1933 Act Deck (2)
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1

Federal Securities:
1933 Act

- 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.

2

Federal Securities:
1933 Act
Section 11

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***

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