Series 24: 4.1.12.2. Liabilities For False Communications

4.1.12.2.  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