Civil liabilities on account of false registration statement.
Section 12
SEC. 12. Civil liabilities on account of false registration statement.— (a) Any person acquiring a security, the registration statement of which or any part thereof contains on its effectivity an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make such statements not misleading, and who suffers damage, unless it is proved that at the time of such acquisition he knew of such untrue statement or omission, may sue in a court of competent jurisdiction: Every person who signed the registration statement; Every person who was a director of, or any other person performing similar functions, or a partner in, the issuer at the time of the filing of the registration statement or any part, supplement or amendment thereof with respect to which his liability is asserted; Every person who is named in the registration statement as being or about to become a director of, or a person performing similar functions, or a partner in, the issuer and whose written consent thereto is filed with the registration statement; Every person whose profession gives authority to a statement made by him, who, with his written consent, which shall be filed with the registration statement, has been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him. Every underwriter with respect to such security. (b) Notwithstanding the provisions of subsection (a) no person, other than the issuer, shall be liable as provided therein if he proves— That before the effective date of the part of the registration statement with respect to which his liability is asserted (A) he had resigned from or had taken such steps as are permitted by law to resign from, or ceased or refused to act in, every office, capacity, or relationship in which he was described in the registration statement as acting or agreeing to act, and (B) he had advised the Commission and the issuer in writing that he had taken such action and that he would not be responsible for such part of the registration statement; or That (A) as regards any part of the registration statement not purporting to be a copy of or extract from a report or valuation of an expert, and not purporting to be made on the authority of a public official document or statement, he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (B) as regards any part of the registration statement purporting to be made upon his authority as an expert or purporting to be a copy of or extract from a report or valuation of himself as an expert, (i) he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) such part of the registration statement did not fairly represent his statement as an expert or was not fair copy of or extract from his report or valuation as an expert; and (C) as regards any part of the registration statement purporting to be made on the authority of an expert (other than himself) or purporting to be a copy of or extract from a report or valuation of an expert (other than himself), he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement of the expert or was not a fair copy of or extract from the report or valuation of the expert; and (D) as regards any part of the registration statement purporting to be a statement made by a public official or purporting to be a copy of or extract from a public official document, he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue, or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement made by the public official or was not a fair copy of or extract from the public official document. (c) In determining, for the purpose of paragraph (2) of subsection (b) of this Section, what constitutes reasonable investigation and reasonable ground for belief, the standard of reasonableness shall be that required of a prudent man in the management of his own property. (d) The suit authorized under subsection (a) may be filed to recover such damages as shall represent double the difference between the amount paid and committed to be paid for the security, not exceeding the price at which the security was offered to the public, and (1) the value thereof as of the time such suit was brought, or in case the security has been disposed of, (2) the price at which such security shall have been disposed of in the market before the suit, or (3) the price at which such security shall have been disposed of after the filing of the suit but before judgment. No underwriter shall be liable in any suit or as a consequence of suits authorized under subsection (a) hereof for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public. In any suit under this or any other section of this Act, the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees. Costs may be allowed by the Court to the prevailing party litigant in accordance with Rule 142 of the Rules of Court. Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of this Act or the rules and regulations promulgated thereunder. (e) The persons specified in subsection (a) hereof shall be jointly and severally liable for the payment of damages, However, any person who becomes liable for the payment of such damages may recover contribution from any other person who, if sued separately, would have been liable to make the same payment, unless the former was guilty of fraudulent representation and the latter was not. (f) In no case shall the amount recoverable under this Section exceed double the price at which the security was offered to the public and such exemplary damages as may be awarded by the court. (g) Notwithstanding any provision of law to the contrary, all persons, including the issuer, held liable under this Section, shall contribute equally to the total liability adjudged herein. In no case shall the principal stockholders, directors and other officers of the issuer or persons occupying similar positions therein, recover their contribution to the liability from the issuer. However, the right of the issuer to recover from the guilty parties the amount it has contributed under this Section shall not be prejudiced. (n)