Section: 409.005.0509 Civil Liability. Rsmo 409.05-509


Published: 2015

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Missouri Revised Statutes













Chapter 409

Regulation of Securities

←409.05-508

Section 409.5-509.1

409.05-510→

August 28, 2015

Civil liability.

409.5-509. (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 section 409.3-301 or, by means of an untrue statement of a

material fact or an omission to state a material fact necessary in order to

make the statement made, in light of the circumstances under which it is made,

not misleading, the purchaser not knowing the untruth or omission 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. 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 rate of eight percent per year from the date of

the purchase, costs, and reasonable attorneys' fees determined by the court,

upon the tender of the security, or for actual damages as provided in

paragraph (3).



(2) The tender referred to in paragraph (1) 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 paragraph (3).



(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 rate of eight percent

per year from the date of the purchase, costs, and reasonable attorneys' fees

determined by the court.



(c) A person is liable to the seller if the person buys a security by

means of an untrue statement of a material fact or omission to state a

material fact necessary in order to make the statement made, in light of the

circumstances under which it is made, not misleading, the seller not knowing

of the untruth or omission, 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. 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 attorneys' fees

determined by the court, upon the tender of the purchase price, or for actual

damages as provided in paragraph (3).



(2) The tender referred to in paragraph (1) 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 paragraph (3).



(3) Actual damages in an action arising under this subsection is 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, and interest at the rate of eight

percent per year from the date of the sale of the security, costs, and

reasonable attorneys' fees determined by the court.



(d) A person acting as a broker-dealer or agent that sells or buys a

security in violation of section 409.4-401(a), 409.4-402(a), or 409.5-506 is

liable to the customer. The customer, if a purchaser, may maintain an action

for recovery of actual damages as specified in subsections (b)(1) to (3), or,

if a seller, for a remedy as specified in subsections (c)(1) to (3).



(e) A person acting as an investment adviser or investment adviser

representative that provides investment advice for compensation in violation

of section 409.4-403(a), 409.4-404(a), or 409.5-506 is liable to the client.

The client may maintain an action to recover the consideration paid for the

advice, interest at the rate of eight percent per year from the date of

payment, costs, and reasonable attorneys' 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 is liable to the other person. An action under

this subsection is governed by the following:



(1) The person defrauded 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 rate of eight percent per year

from the date of the fraudulent conduct, costs, and reasonable attorneys' 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) to (f):



(1) A person that directly or indirectly controls a person liable under

subsections (b) to (f), 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) to (f), 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) to (f) 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) to (f), 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) for violation of section 409.3-301, or under

subsection (d) or (e), unless the action is instituted within one year after

the violation occurred; or



(2) Under subsection (b), other than for violation of section 409.3-301,

or under subsection (c) or (f), 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 act or a rule adopted or order issued under

this act, 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 act, 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 act or a rule adopted or order issued under this act is void.



(m) The rights and remedies provided by this act are in addition to any

other rights or remedies that may exist, but this act does not create a cause

of action not specified in this section or section 409.4-411(e).



(L. 2003 H.B. 380)



Effective 9-01-03







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