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CALIFORNIA CORPORATE & SECURITIES LAW

Section 25401 – Does No One Know Its History?

A few years back, I criticized the amendment of California Corporations Code Section 25401 to conform to Rule 10b-5 under the Securities Exchange Act of 1934.  See California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?  At the time, I observed:  Apparently, the legislature didn’t recognize that Section 25501…

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Something Appears To Be Awry With California’s Insider Trading Statute

I trust that by now most quotidian readers of this blog should be familiar with Corporations Code Section 25402 which declares insider trading to be unlawful.  Although the statute has been on the books since the enactment of the Corporate Securities Law of 1968, it doesn’t make a great deal of sense.  Here’s the unabridged text of the statute: It is…

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Scienter In The News Again

In May, I wrote about Judge Gonzolo P. Curiel’s  decision to grant the defendants’ motion to dismiss federal and state securities law claims in Mueller v. San Diego Entm’t Partners, LLC, 2017 U.S. Dist. LEXIS 77643 (S.D. Cal. May 22, 2017).  I pointed out that Judge Curiel had ruled that scienter is required under Corporations Code Section 25401 but…

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Scienter Requirement May Be A Question Of Timing

On several occasions, I have written about whether scienter is required under Corporations Code Section 25401.  That question surfaced again last week in Judge Gonzolo P. Curiel’s ruling on the defendants’ motion to dismiss federal and state securities law claims in Mueller v. San Diego Entm’t Partners, LLC, 2017 U.S. Dist. LEXIS 77643 (S.D. Cal.…

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Court Rules Indirect Purchaser Claims Against Theranos May Proceed

Theranos’ anni horrorum began in October 2015 with the publication of a story by investigative reporter John Carreyrou at The Wall Street Journal.  Lawsuits and government investigations ensued.  Although the Theranos recently announced agreements with the Arizona Attorney General and the Centers for Medicare & Medicaid Services, U.S. District Court Magistrate Judge Nathanael M. Cousins last week dealt a setback to the…

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What Do You Know? Bill Proposes To Eliminate Scienter

Corporations Code Section 25401 is California’s basic securities antifraud statute: It is unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or…

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Is Rule 10b-5 The “Mother Of All Litotes”?

Yesterday’s post addressed the use of litotes in California’s broker-dealer suitability rule.  Litotes can be an effective rhetorical device, but as Judge Frank H. Easterbrook observed, it is also ambiguous.  Associated Randall Bank v. Griffin, Kubik, Stephens & Thompson, Inc. 3 F.3d 208 (7th Cir. 1993) (“‘Not unlike’ can mean almost anything; although the listener may cancel…

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Bill Aims To Negate Scienter

You can thank the Romans for science and the English for knowledge The etymon of “scienter” is sciens which is the present participle form of the Latin verb meaning to know (scire).  The English word “know” is derived from the Old English verb, cnāwan, the present participle of which is cnāwende.  The roots of cnāwan can be traced back to…

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California Reverts To Former Securities Anti-Fraud Statute

Readers of this blog will recall my chariness of a 2013 amendment to California’s basic securities anti-fraud statute.  See California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?”  Although I identified a host of issues, my fundamental concern was that by rewriting California Corporations Code Section 25401, the legislature…

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Court Finds No “Road of Imprudence” or “Chasm of Equity” In Section 25504

Faithful readers of this blog will be familiar with the structure of the California Corporate Securities Law.  Part 5 of the CSL (Cal. Corp. Code §§ 25400 – 25404) proscribes various conduct and Part 6 (Cal. Corp. Code §§ 25500 – 25510) establishes the remedies for violations of Part 5.  See Second Circuit Declines To Apply…

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