Failure To Disclose Finder’s Fee Found Not To Be Actionable

This interesting, but atypical case, involves one of the many possible issues that can arise from the use of unlicensed finders to raise securities. Five years ago, Daniel Azouri met Marvin Lipschultz at the Cannes Film Festival.  Mr. Azouri suggested that Mr. Lipschultz invest in a movie venture.  Mr. Lipschultz invested a total of $220,000

CAFA Filings Spike in 2013

CAFA Filing Chart

  On February 18 2005, Congress enacted the Class Action Fairness Act (CAFA), P.L. No. 109-2 (28 U.S.C. §§ 1332(d), 1453, and 1711 – 1715). In enacting the CAFA, Congress sought to protect consumers and investors from settlements in which plaintiffs’ attorneys received significant fees but class members received little or even less. In one

Investors Claim Failure To Qualify Justifies Issuer’s Return Of Investment

The remedy for failure to qualify the sale of a security is either rescission or damages.  Cal. Corp. Code § 25503.  Thus, one typically expects to see investors alleging a failure to qualify as grounds for returning their investments.  In a recent case, however, investors argued that a failure to qualify justified not returning their investments

Section 25501.5 – I Ask Again What Do It Mean?

Corporations Code Section 25501.5 generally authorizes an action for rescission (or damages, if the security is no longer owned) by any person “who purchases a security from or sells a security to a broker-dealer that is required to be licensed and has not”.  A right of rescission makes sense when the unlicensed broker-dealer is acting

Applying Today’s Statute To Yesterday’s Offer And Sale

In September 2013, Governor Jerry Brown signed SB 538 (Hill) into law.  This bill fundamentally rewrote a key anti-fraud provision of the Corporate Securities Law of 1968 – Corporations Code Section 25401.  At the time, I cast a chary eye on the amendment and predicted that it would lead to judicial confusion.  See California Creates Complete

Ninth Circuit Requires Particularity In All Elements Of Securities Fraud Pleading

Sometimes, I find it useful to take a step back and review the legal standard applicable to securities fraud claims under Section 10(b) and Rule 10b-5.  To stay in court, and securities litigation all about surviving motions to dismiss, a plaintiff must allege all of the following: A material misrepresentation or omission; Scienter; A connection

Buyer’s “I Have A Plan” Statement Found To Be Immaterial Puffery

A recent California Court of Appeal decision is a helpful reminder that buyers can also be targets of securities fraud suits.  In Goldsholle v. Brisco, 2014 Cal. App. Unpub. LEXIS 7997 (Cal. App. 2d Dist. Nov. 6, 2014), the seller of a company claimed that the buyer’s assurances that it had a plan to increase website

When California Copied Rule 10b-5 Did It Shut The State Courthouse Door To Securities Fraud Suits?

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Section 27 of the Securities Exchange Act of 1934 provides: “The district courts of the United States . . . shall have exclusive jurisdiction of violations of [the Exchange Act] or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by [the

Court Of Appeal’s Long Opinion On Short Selling

In a lengthy opinion issued yesterday, Justice Kathleen M. Banke explains naked short selling, describes the mechanics of executing and clearing stock trades, provides a run down on the SEC’s Regulation SHO, and recounts the SEC’s enforcement of Regulation SHO.  Overstock.com v. Goldman Sachs & Co. (Cal. Ct. App. Case No. A135682, Nov. 13, 2014). Along the way she

Senator Blumenthal Urges SEC To Investigate Fee-Shifting Charter Provisions

Recently, Senator Richard Blumenthal wrote a letter to the Securities and Exchange Commission asking that the “Commission protect investors and America’s capital markets from a serious and imminent threat.”  According to the Senator, this isn’t an ordinary threat, this threat is “leaves shareholders unable to protect their interests; it undermines the integrity of our capital