Civil Liability & Rescission

An investor sold in violation of the Act can recover the purchase price.

Uniform Securities Act & Registration Series 65 · Section 4

What is Civil Liability & Rescission?

A buyer can sue to recover the consideration paid, plus interest (6% a year under the 1956 Act), costs, and reasonable attorneys' fees, minus any income received - or damages if the security has already been sold. Suit must be brought within 2 years of discovering the violation or 3 years of the sale, whichever comes first. A seller can cut off liability with a rescission offer; a buyer who does not accept within 30 days loses the right to sue. Clients of an adviser can recover the fees paid and losses caused by violative advice.

Civil Liability & Rescission: a worked example

An investor discovers a misrepresentation 18 months after purchase; they have until 3 years after the sale at the latest.

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More terms in Uniform Securities Act & Registration

Uniform Securities Act (USA) The model state securities law most states' 'blue sky' statutes are based on. State Securities Administrator The official or agency that enforces a state's securities act. Person (USA Definition) Anyone who can be held legally responsible - individuals and organizations. Investment Adviser (USA Definition) Advises on securities, as a business, for compensation. Excluded from the Investment Adviser Definition Banks, incidental professionals, broker-dealers, and publishers are not advisers at all. Exemptions from State Adviser Registration An adviser with no office in the state and only institutional or very few clients there. De Minimis Exemption No place of business in the state and fewer than 6 clients there in 12 months. Federal Covered Adviser An adviser registered with the SEC rather than the states.

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