Also known as: s. 11 · sec. 11 · s.11
Written by attorneys · grounded in primary & secondary sources — see below
A statutory cause of action under the Securities Act of 1933 that permits purchasers of securities to recover damages from the issuer and other specified defendants for material misstatements or omissions in a registration statement.
Sterling Manufacturing's board approves a merger plan with Synergy Systems and submits it to shareholders for approval. The board recommends approval in the proxy materials. Shareholders vote in favor, satisfying the statutory requirement that the plan receive shareholder approval after board adoption.
Sydney Santos purchases shares in a registered offering. She later discovers that the registration statement contained a material error that an accountant failed to catch through ordinary diligence. Santos sues the accountant under section 11. The claim proceeds without any showing that the accountant acted with intent to deceive.
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Sean Steele, a Virginia resident, sues a New York corporation in federal court in New York over alleged misstatements in a registration statement. The corporation moves to dismiss on forum non conveniens grounds because the events occurred in Virginia. The court weighs private and public interest factors to decide whether to retain the case.
Stella Shapiro receives a prospectus but does not purchase the offered securities. After the offering, she claims the prospectus contained material omissions and sues under section 11. The court dismisses the action because Shapiro lacks standing as a non-purchaser.
Spencer Silver, a printer, learns material nonpublic information about a target company while working on merger documents. He buys shares without disclosing the information. The government charges him with securities fraud. The court holds that Silver had no duty to disclose because he was not an insider or fiduciary.
Sebastian Santos buys shares after reading an opinion in the registration statement that the issuer believed its reserves were adequate. The reserves later prove insufficient. Santos sues under section 11. The court examines whether the opinion was misleading because it omitted material facts about the basis for the belief.
The issuer, its principal executive, financial, and accounting officers, a majority of the directors, each underwriter, and any accountant who prepared or certified part of the registration statement may be held jointly and severally liable.
No. Section 11 imposes liability for material misstatements or omissions without requiring proof that the defendant acted with intent to deceive or recklessness.
Non-issuer defendants may avoid liability by proving a due diligence defense, showing that after reasonable investigation they had reasonable ground to believe and did believe that the registration statement contained no material misstatement or omission.
…a tender offeror to purchase 5% of the target company's stock prior to disclosure of its plan for acquisition. [^maj-16]: Section 11 of the 1934 Act generally forbids a member of a national securities exchange from effecting any transaction on the exchange for its own account. 15 U. S. C. § 78k (a) (1). But Congress has…