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CALIFORNIA CORPORATE & SECURITIES LAW

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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Court Of Appeal Holds Section 25504 And Section 15 Claims Are Bis In Idem

Section 15 of the Securities Act of 1933 imposes liability on control persons for violations of Sections 11 and 12 of that act.  Section 25504 of the California Corporations Code imposes liability on persons who control persons liable under either Section 25501 (liability for violation of Section 25401 (false statements or omissions) or Section 25503 (liability for…

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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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Crowdfunding – There Will Be Investor Losses

With preternatural sagacity, Yogi Berra once observed that “prediction is very hard, especially about the future”.  Although I whole heartedly concur with Mr. Berra’s assessment of the difficulties that inhere in prognistication, I’ve nonetheless decided to make a prediction.  My prediction is that after President Obama signs the Jumpstart Our Business Startups Act, there will be investor losses.  I feel very safe…

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Second DCA Takes Issue With Fourth DCA Over Privity

Privity is one those requirements that isn’t intrinsically interesting and yet it is extremely important.  Over the last year, I’ve written several posts discussing the privity requirement (or lack thereof) under the Corporate Securities Law of 1968, including these posts: Court Rejects Control Requirement For Director Liability (discussing Hellum v. Breyer, 194 Cal.App.4th 1300 (2011)); Is…

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Is Privity Required Or Not Required Under Section 25500?

California Corporations Code Section 25400 lists a variety of acts that are considered to manipulate the price of securities.  Section 25400 was modeled on Section 9(a) – (e) of the Securities Exchange Act of 1934.  Although Section 25400 declares these acts to be “unlawful”, the statute does not technically impose liability.  The legislature left that duty to…

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Court Rejects Control Requirement For Director Liability

Outside directors and their counsel should take note of yesterday’s decision by the First District Court of Appeal in Hellum v. Breyer.  The case analyzes what a plaintiff must plead in attempting to assert liability against directors of an issuer that has allegedly violated the registration requirements of the Securities Act of 1933 and the…

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No Rescission Without Privity

California Corporations Code Section 25401 declares unlawful the sale or purchase of a security by means of a written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were…

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