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CALIFORNIA CORPORATE & SECURITIES LAW

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…

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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…

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

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…

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Has California Lost Its Jurisdictional Anchor For Securities Fraud Actions?

Does California’s securities fraud statute apply to offers and sales of securities that are made in other states, in Europe, or on the moon?  Actually, there is no way to know.  Formerly, California Corporations Code Section 25401 began “It is unlawful for any person to offer or sell a security in this state or offer to buy…

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This Ruling Appears To “Unravel The Very Fabric Of The Space-time Continuum”

In prior posts, I’ve cast a jaundiced eye on last year’s amendment of California’s general securities fraud statute, Corporations Code Section 25401.  See Die Verwandlung: How The Legislature Likely Raised The Bar On Securities Fraud Actions and California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?”.  The amendment took effect on…

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Court Declines To Apply Rule 9(b) To Section 25401 Claim

A complaint alleging securities fraud under Rule 10b-5 must meet the stringent pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure as well as the requirements of the Private Securities Litigation Reform Act.  In re Verifone Holdings Securities Litig., 704 F. 3d 694, 701 (9th Cir. 2012).  These are the twin rocks on…

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The Securities Fraud Device That The Legislature Devised To Omit

Last year, Senator Jerry Hill authored a bill, SB 538, which rewrote Corporations Code Section 25401.  As I posted, the underlying premise was fanciful at best – that California’s statute “has failed to keep up with similar language in federal anti-fraud statutes”.   By metamorphosing Section 25401 from a statute based on Section 12(a)(2) of…

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Failure To Name Primary Violator Doesn’t Doom Class Action Against Secondary Actors

One might expect plaintiffs to always name the primary violator in a securities fraud suit.  However, what if suing the primary violator is not an option because the primary violator is in bankruptcy or the subject of a court ordered stay?  Can there be a finding of secondary liability when there is no finding of…

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Why Can’t Government Play By The Same Rules As Hoi Polloi?

The State of California doesn’t like persons who commit securities fraud.  Persons who mislead others by means of a written or oral misstatement of a material fact or omission of a material fact can be held liable for rescission or damages.  Cal. Corp. Code § 25501.  They can be enjoined.  Cal. Corp. Code § 25530. …

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Are Misstatements In A Form 10-K Actionable By The California Attorney General?

Last week, the California Attorney General Kamala D. Harris announced that she had filed a complaint for civil penalties, permanent injunction and other equitable relief against Corinthian Colleges and three of its school subsidiaries.  Broadly speaking, the Attorney General is alleging that Corinthian Colleges has violated California consumer protection and securities laws.  Among other things, the complaint points…

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