| | | 1. Under Section 509 violations of two or more sections can | | be proven, but the remedy is limited either to rescission or | | actual damages. Actual damages means compensatory damages. | | Punitive or "double" damages are not provided by this section | | which also is the standard under Section 28(a) of the Securities | | Exchange Act of 1934. See 9 Louis Loss & Joel Seligman, | | Securities Regulation 4408-4427 (3d ed. rev. 1992). |
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| | | 2. The Securities Litigation Uniform Standards Act of 1998 | | cited in Section 509(a) modifies the entire Section 509. |
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| | | 3. As with Section 12(a)(2) of the Securities Act of 1933, | | Section 509(b) contains a type of privity requirement in that the | | purchaser is required to bring an action against the seller. | | Section 509(b) is broader than Section 12(a)(2) in that it will | | reach all sales in violation of Section 301, not just sales "by | | means of a prospectus" as is the law under Section 12(a)(2). See | | Gustafson v. Alloyd Co., Inc., 513 U.S. 561 (1995). |
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| | | 4. Unlike the current standards on implied rights of action | | under Rule 10b-5, neither causation nor reliance has been held to | | be an element of a private cause of action under the precursor to | | Section 509(b). See Gerhard W. Gohler, IRA v. Wood, 919 P.2d 561 | | (Utah 1996); Ritch v. Robinson-Humprhey Co., 748 So. 2d 861 (Ala. | | 1999); Kaufman v. I-Stat Corp., 754 A.2d 1188 (N.J. 2000). |
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| | | 5. The measure of damages in Section 509(b)(3) is that | | contemplated by Section 12 of the Securities of 1933. See 9 Louis | | Loss and Joel Seligman, Securities Regulations 4242-4246 (3d ed. | | 1992). The measure of damages in Section 509(c)(3), however, is | | that contemplated by Rule 10b-5. Sec. 9 id. 4408-4427. In | | providing for damages as an alternative to rescission, Section | | 509(b)(3) follows the 1956 Act and is an improvement upon many | | earlier state provisions, which conditioned the plaintiff's right | | of recovery on his or her being in a position to make a good | | tender. A plaintiff is not given the right under this type of | | statutory formula to retain stock and also seek damages. |
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| | | 6. Sections 509(e) and (f) are based on a proposed NASAA | | amendment to the Uniform Securities Act adopted in order "to | | establish civil liability for individuals who willfully violate | | Section 102 dealing with fraudulent practices pertaining to | | advisory activities." Neither provision is intended to limit | | other state law claims for providing investment advice. |
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| | | 7. Broker-dealer employees, including research analysts, who | | receive no special compensation from third parties for investment | | advice would not be liable under Section 509(f). |
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