§5509. Civil liability


Published: 2015

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The Vermont Statutes Online



Title

09

:
Commerce and Trade






Chapter

150

:
SECURITIES ACT






Subchapter

005
:
FRAUD AND LIABILITIES










 

§

5509. Civil liability

(a) Enforcement

of civil liability under this section is subject to the Securities Litigation

Uniform Standards Act of 1998.

(b) A person is

liable to the purchaser if the person sells a security in violation of sections

5301, 5501, or 5502 of this chapter, the purchaser not knowing the untruth or

omission or deceptive nature of the conduct and the seller not sustaining the

burden of proof that the seller did not know and, in the exercise of reasonable

care, could not have known of the untruth or omission or deceptive nature of

the conduct. An action under this subsection is governed by the following:

(1) The

purchaser may maintain an action to recover the consideration paid for the

security, less the amount of any income received on the security, and interest

at the legal rate of interest from the date of the purchase, costs, and

reasonable attorney's fees determined by the court, upon the tender of the

security, or for actual damages as provided in subdivision (3) of this subsection.

(2) The tender

referred to in subdivision (1) of this subsection may be made any time before

entry of judgment. Tender requires only notice in a record of ownership of the

security and willingness to exchange the security for the amount specified. A

purchaser that no longer owns the security may recover actual damages as

provided in subdivision (3) of this subsection.

(3) Actual

damages in an action arising under this subsection are the amount that would be

recoverable upon a tender less the value of the security when the purchaser

disposed of it, and interest at the legal rate of interest from the date of the

purchase, costs, and reasonable attorney's fees determined by the court.

(c) A person is

liable to the seller if the person buys a security in violation of section 5501

or 5502 of this chapter, the seller not knowing of the untruth or omission or

deceptive nature of the conduct, and the purchaser not sustaining the burden of

proof that the purchaser did not know, and in the exercise of reasonable care

could not have known, of the untruth or omission or deceptive nature of the

conduct. An action under this subsection is governed by the following:

(1) The seller

may maintain an action to recover the security, and any income received on the

security, costs, and reasonable attorney's fees determined by the court, upon

the tender of the purchase price, or for actual damages as provided in

subdivision (3) of this subsection.

(2) The tender

referred to in subdivision (1) of this subsection may be made any time before

entry of judgment. Tender requires only notice in a record of the present

ability to pay the amount tendered and willingness to take delivery of the

security for the amount specified. If the purchaser no longer owns the

security, the seller may recover actual damages as provided in subdivision (3)

of this subsection.

(3) Actual

damages in an action arising under this subsection are the difference between

the price at which the security was sold and the value the security would have

had at the time of the sale in the absence of the purchaser's conduct causing

liability, the interest at the legal rate of interest from the date of the sale

of the security, the costs, and the reasonable attorney's fees determined by

the court.

(d) A person

acting as a broker-dealer or agent that sells or buys a security in violation

of subsection 5401(a) or 5402(a) or section 5506 of this chapter is liable to

the customer. The customer, if a purchaser, may maintain an action for recovery

of actual damages as specified in subdivisions (b)(1) through (3) of this

section, or, if a seller, for a remedy as specified in subdivisions (c)(1)

through (3) of this section.

(e) A person

acting as an investment adviser or investment adviser representative that

provides investment advice for compensation in violation of subsection 5403(a)

or 5404(a) or section 5506 of this chapter is liable to the client. The client

may maintain an action to recover the consideration paid for the advice,

interest at the legal rate of interest from the date of payment, costs, and

reasonable attorney's fees determined by the court.

(f) A person

that receives directly or indirectly any consideration for providing investment

advice to another person and that employs a device, scheme, or artifice to defraud

the other person or engages in an act, practice, or course of business that

operates or would operate as a fraud or deceit on the other person or otherwise

violates section 5502 of this chapter is liable to the other person. An action

under this subsection is governed by the following:

(1) The person

wronged may maintain an action to recover the consideration paid for the advice

and the amount of any actual damages caused by the fraudulent conduct, interest

at the legal rate of interest from the date of the fraudulent conduct, costs,

and reasonable attorney's fees determined by the court, less the amount of any

income received as a result of the fraudulent conduct.

(2) This

subsection does not apply to a broker-dealer or its agents if the investment advice

provided is solely incidental to transacting business as a broker-dealer, and

no special compensation is received for the investment advice.

(g) The

following persons are liable jointly and severally with and to the same extent

as persons liable under subsections (b) through (f) of this section:

(1) a person

that directly or indirectly controls a person liable under subsections (b)

through (f) of this section, unless the controlling person sustains the burden

of proof that the person did not know, and in the exercise of reasonable care

could not have known, of the existence of conduct by reason of which the

liability is alleged to exist;

(2) an

individual who is a managing partner, executive officer, or director of a

person liable under subsections (b) through (f) of this section, including an

individual having a similar status or performing similar functions, unless the

individual sustains the burden of proof that the individual did not know and,

in the exercise of reasonable care could not have known, of the existence of

conduct by reason of which the liability is alleged to exist;

(3) an

individual who is an employee of or associated with a person liable under

subsections (b) through (f) of this section and who materially aids the conduct

giving rise to the liability, unless the individual sustains the burden of

proof that the individual did not know and, in the exercise of reasonable care

could not have known, of the existence of conduct by reason of which the

liability is alleged to exist; and

(4) a person

that is a broker-dealer, agent, investment adviser, or investment adviser

representative that materially aids the conduct giving rise to the liability

under subsections (b) through (f) of this section, unless the person sustains

the burden of proof that the person did not know and, in the exercise of

reasonable care could not have known, of the existence of conduct by reason of

which liability is alleged to exist.

(h) A person

liable under this section has a right of contribution as in cases of contract

against any other person liable under this section for the same conduct.

(i) A cause of

action under this section survives the death of an individual who might have

been a plaintiff or defendant.

(j) A person may

not obtain relief:

(1) under

subsection (b) of this section for violation of section 5301 of this chapter,

or under subsection (d) or (e) of this section, unless the action is instituted

within one year after the violation occurred; or

(2) under

subsection (b) of this section, other than for violation of section 5301 of

this chapter, or under subsection (c) or (f) of this section, unless the action

is instituted within the earlier of two years after discovery of the facts

constituting the violation or five years after the violation.

(k) A person

that has made, or has engaged in the performance of, a contract in violation of

this chapter or a rule adopted or order issued under this chapter, or that has

acquired a purported right under the contract with knowledge of conduct by

reason of which its making or performance was in violation of this chapter, may

not base an action on the contract.

( l ) A

condition, stipulation, or provision binding a person purchasing or selling a

security or receiving investment advice to waive compliance with this chapter

or a rule adopted or order issued under this chapter is void.

(m) The rights

and remedies provided by this chapter are in addition to any other rights or

remedies that may exist, but this chapter does not create a cause of action not

specified in this section or subsection 5411(e) of this chapter. (Added 2005,

No. 11, § 1, eff. July 1, 2006.)

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