18.10 Securities-Controlling Person Liability is a legal concept that holds individuals responsible for the actions of another. It is based on the principle that those in positions of control over certain activities should be held accountable for any misconduct or negligence in the performance of those activities. This type of liability applies to controlling persons in the securities' industry, such as corporate officers, directors, and other high-level executives. The controlling persons must ensure that the company they control is in compliance with all applicable securities laws, regulations, and industry standards. If a controlling person is found to have breached their duty of care, they can be held personally liable for any resulting damages. Types of 18.10 Securities-Controlling Person Liability include primary liability, secondary liability, and aiding and abetting liability. Primary liability is based on a controlling person's direct involvement in any fraudulent or negligent activity. Secondary liability is based on a controlling person's failure to prevent fraudulent or negligent activity. Aiding and abetting liability is based on a controlling person's assistance in the commission of a securities' violation.
18.10 Securities-Controlling Person Liability
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FAQ
To establish liability under Section 10(b), a plaintiff must show that: The defendant made a material misstatement or omission; The misstatement or omission was made with an intent to deceive, manipulate or defraud (that is, with scienter);
Rule 10b-5 declares that it is unlawful for any person, in connection with the sale of any security, to use interstate commerce directly or indirectly (a) to ?employ any device, scheme, or artifice to defraud,? (b) to ?make any untrue statement of a material fact or to omit to state a material fact,? or (c) to ?engage
Control person liability provides for liability against those who control, directly or indirectly, an entity or individual that violates the securities laws.
The SEC primarily enforced this anti-fraud provision under Rule 10b-5, which prohibits the use of any "device, scheme, or artifice to defraud." Rule 10b-5 also imposes liability for any misstatement or omission of a material fact, or one that investors would think was important to their decision to buy or sell a
The SEC can prosecute issuers and sellers of unregistered securities. Under Section 20(b)can seek injunctions against the sale or issue of securities if the Securities Act has been violated, or if a violation is imminent.
SEC Rule 10b-5, states that it is illegal for any person to defraud or deceive someone, including through the misrepresentation of material information, with respect to the sale or purchase of a security.