Liabilities for False Communications
Section 12 of the Securities Act lays out the consequences of misleading customers or potential customers with respect to offering and selling a security. Untrue statements of a material fact or the omission of a material fact in a written prospectus or oral communication whose result is to mislead a customer are subject to civil prosecution in a court of law. Anyone who offers or sells a security misleadingly bears the burden of proof that he did not know and could not have known of the untruth or the omission. Failing to provide a convincing argument, that person will be liable to anyone who purchased the security.
Section 12 also stipulates that any person who sells a security from a new issue before a registration statement is in effect or who offers to sell a securi