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CALIFORNIA CORPORATE & SECURITIES LAW

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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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 Rescission Ever Legal?

Yesterday’s post concerned when a corporation’s rescission of the issuance of shares does not constitute a “distribution to its shareholders” as defined in Section 166 of the California Corporations Code.  I noted that one of the three conditions is that “it is reasonably likely that the holder or holders of the shares in question could…

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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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A Criminal Waste Of Space Foments Securities Law Problem

California Court of Appeal Justice William W. Bedsworth writes the popular syndicated column “A Criminal Waste of Space”.  In this month’s column, Justice Bedsworth expounds on the highly improbable case of a man who purchased a Pick-9 ticket at the track and somehow managed to pick all nine winners.  Szadolci v. Hollywood Park Operating Company,…

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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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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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Tender Of Inflated Price Under Right Of First Refusal Does, And Doesn’t, Confer Standing

In a short ruling, U.S. District Court Judge Jeffrey S. White recently tackled a claim by a former employer that its departed employee had committed securities fraud when he allegedly failed to disclose that the price offered by his new employer for his shares of the former employer were “inflated and fraudulent”.  The price mattered to…

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Die Verwandlung: How The Legislature Likely Raised The Bar On Securities Fraud Actions

With the availability of a private cause of action under SEC Rule 10b-5, is there any reason to include a cause of action under California Corporations Code Sections 25401 and 25501?  Until the most recent legislative session, there were significant differences between the federal rule and the California’s securities laws. California’s scheme has not required…

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Federal Court Finds There Can Be No Control Person Liability Without Primary Violator Privity

Yesterday, I covered Judge Lewis A. Kaplan’s holding in In re Lehman Bros. Securities & Erisa Litigation, 2012 U.S. Dist. LEXIS 148177 (Oct. 15, 2012) that there is no liability under Corporations Code Section 25400 when the plaintiff and defendant dealt in different securities.  Judge Kaplan also considered the parameters of liability under Corporations Code Section 25504.  That statute imposes liability on,…

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