| | | This Section follows the 1956 Act and RUSA, as well as state | | securities statutes generally, in providing that a | | misrepresentation concerning registration or an exemption is | | unlawful. |
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| | | §16507.__Qualified immunity |
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| | | A broker-dealer, agent, investment adviser, federal covered | | investment adviser or investment adviser representative is not | | liable to another broker-dealer, agent, investment adviser, | | federal covered investment adviser or investment adviser | | representative for defamation relating to a statement that is | | contained in a record required by the administrator or designee | | of the administrator, the Securities and Exchange Commission or a | | self-regulatory organization, unless the person knew, or should | | have known at the time that the statement was made, that it was | | false in a material respect or the person acted in reckless | | disregard of the statement's truth or falsity. |
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| | | Source of Law: National Association of Securities Dealers, | | Inc. Proposal Relating to Qualified Immunity in Arbitration | | Proceedings for Statements Made in Forms U-4 and U-5. |
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| | | 1. In 1994 The Securities and Exchange Commission Division of | | Market Regulation published The Large Firm Project: A Review of | | Hiring, Retention, and Supervisory Practices (1994), which found | | that a small number of "rogue brokers" were responsible for a | | significant proportion of customer disciplinary complaints. These | | brokers in some instances moved from one broker-dealer firm to | | another, it was explained, without full and complete disclosure | | of disciplinary problems by the broker-dealer, because of broker- | | dealer firms' fear of state law defamation claims. See also GAO, | | Actions Needed to Better Protect Investors against Unscrupulous | | Brokers 3 (1994); Testimony of SEC Chairman Arthur Levitt | | Concerning the Large Firm Project, Subcomm. on Telecommunications | | & Fin., House Comm. on Energy & Commerce (Sept. 14, 1994), | | reprinted in 1994-1995 Fed. Sec. L. Rep. (CCH) ¶85,433 (1994). |
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| | | 2. In 1998, the National Association of Securities Dealers | | proposed qualified immunity for statements made in Forms U-4 and | | U-5 to address this problem. This proposal was reprinted in | | Securities Exchange Act Release 39,892, 66 SEC Dock. 2473 (1998). | | This proposal was limited to arbitration proceedings. It was not | | acted on by the Securities and Exchange Commission. |
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