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73d CONGRESS. [CHAPTER 38.] May 27, 1033. [H.R. 5480.] [Public, No. 22.] Securities Aet of 933. Post p. 1026. SESS. I. CH. 38. MAY 27, 1933. AN ACT To provide full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, TITLE I SHORT TITLE Title cited. SECTION 1. This title may be cited as the " Securities Acf of 1933 ". DEFINITIONS Definitions. "security. iPost P. 905. "Person." "Trust." "SaIl," etc. SEC. 2. When used in this title, unless the context otherwise requires(1) The term "security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of interest in property, tangible or intangible, or, in general, any instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing. (2) The term " person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or political subdivision thereof. As used in this paragraph the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (3) The term " sale ", "sell ", "offer to sell ", or offer for sale shall include every contract of sale or disposition of, attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest reliminaries not in- in a security, for value; except that such terms shall not include preliminary negotiations or agreements between an issuer and any Seemity given with purchase considered underwriter. part of subject. Issue of security with right to convert. When conversion right exersed Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing, shall be conclusively presumed to constitute a part of the subject of such purchase and to have been sold for value. The issue or transfer of a right or privilege, when originally issued or transferred with a security, giving the holder of such security the right to convert such security into another security of the same issuer or of another person, or giving a right to subscribe to another security of the same issuer or of another person, which right cannot be exercised until some future date, shall not be deemed to be a sale of such other security; but the issue or transfer of such other security upon the exercise of such right of conversion or subscription shall be deemed a sale of such other security. "Isser." (4) The term " issuer " means every person who issues or proposes to issue any security or who guarantees a security either as to principal or income; except that with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates, or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors (or persons performing similar functions) or of the fixed, restricted management, or unit type, the 73d CONGRESS. SESS. I. CH. 38. 75 MAY 27, 1933. term " issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which such s.quipment-trust securities are issued; and except that with respect to equipment-trust certificates or like securities, the term " issuer " means the person by whom the equipment or property is or is to be used. (5) The term " Commission means the Federal Trade Colmmis- sion. (6) The term " Territory " means Alaska, Hawaii, Puerto Rico. the Philippine Islands, Canal Zone, the Virgin Islands, and the insular possessions of the United States. (7) The term "interstate commerce" "''onmisiou." "Territory." means trade or commerce m"Interestate com in securities or any transportation or communication relating thereto among the several States or between the District of Columbia or any Territory of the United States and any State or other Territory, or between any foreign country and any State, Territory, or the District of Columbia, or within the District of Columbia. (8) The term " registration statement " means the statement pro- nRegistration stat. vided for in section 6, and includes any amendment thereto and any Post, p- 78 report, document, or memorandum accompanying such statement or incorporated therein by reference. (9) The term "write " or " written " shall include printed, litho- terite" graphed, or any means of graphic communication. (10) The term " prospectus" means any prospectus, notice, circu- or "writ- "Prospectus." lar, advertisement, letter, or communication, written or by radio, which offers any security for sale; except that (a) a communication Exceptions. shall not be deemed a prospectus if it is proved that prior to such communication a written prospectus meeting the requirements of PP 81' 95. section 10 was received, by the person to whom the communication was made, from the person making such communication or his principal, and (b) a notice, circular, advertisement, letter, or comlnunication in respect of a security shall not be deemed to be a prospectus if it states from whom a written prospectus meeting the requiremlenlts of section 10 may be obtained and, in addition, does no more than identify the security, state the price thereof, and state by whoml orders will be executed. (11) Thle term "underwriter" means any person who has purchased froim an issuer with a view to, or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwrit- ing of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. As used in this paragraph the term "issuer'' shall include, in addition to an issuer, any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer. (12) The term " dealer " means any person who engages either for nde'"rriter" Personnotincluded. "issuer." "Deal." all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person. EXEMPTEID SECURITIES SEc. 3. (a) Except as hereinafter expressly provided, the provi- tiem od sions of this title shall not apply to any of the following classes of securities: se u i. 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933. (1) Any security which, prior to or within sixty days after the enactment of this title, has been sold. or disposed of by the issuer or ofl ering e- bona fide offered to the public, but this exemption shall not apply to any new offering of any such security by an issuer or underwriter Prior sale. New subsequent to such sixty days; (2) Any security issued or guaranteed by the United States or any Territory thereof, or by the District of Columbia, or by any State of the United States, or by any political subdivision of a State or bSec itiestarteed State, or political sub division, etc. ost, p. 908. Territory, or by any public instrumentality of one or more States or Government rations. corpo- National, etc., banks. Federalreservebank obligations. Territories exercising an essential governmental function, or by any corporation created and controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States, or by any national bank, or by any banking institution organized under the laws of any State or Territory, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official; or any security issued by or representing an interest in or a direct obligation of a Federal reserve Current transactions. bank; (3) Any note, draft, bill of exchange, or banker's acceptance which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of Religious, etc., organ- which is likewise limited; Short-termpaper. (4) Any security issued by a corporation organized and operated exclusively for religious, educational, benevolent, fraternal, chari- izations. assiatiinse le associations, etc,adwhere business substntially table, or reformatory purposes and not for pecuniary profit, and no part of the net earnings of which inures to the benefit of any person, private stockholder, or individual; (5) Any security issued by a building and loan association, home- stead association, savings and loan association, or similar institution, substantially all the business of which is confined to the making of loans to members (but the foregoing exemption shall not apply with respect to any such security where the issuer takes from the total amount paid or deposited by the purchaser, by way of any fee, cash value or other device whatsoever, either upon termination of the investment at maturity or before maturity, an aggregate amount in tives.armers' cooera- excess of 3 per centum of the face value of such security), or any Exception. Vol.47pp,rp.w3,1 security issued by a farmers' cooperative association as defined in paragraphs (12), (13), and (14) of section 103 of the Revenue Act of 1932; cmoncarier. (6) Any security issued by a common carrier which is subject to .s.o., p.1lro. CertEiates in etcAty Peos, the provisions of section 20a of the Interstate Commerce Act, as amended; baik- contrac p. Om. () Certificates issued by a receiver or by a trustee in bankruptcy, rwith prods the approval of the court; , (8) Any insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions of any State or Addittionl es Territory of the United States or the District of Columbia. (b) The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of securities to the securities exempted as pro- vided in this section, if it finds that the enforcement of this title with respect to such securities is not necessary in the public interest and for the protection of investors by reason of the small amount 73d CONGRESS. SESS. I. CH. 38. 77 MAY 27, 1933. involved or the limited character of the public offering; but no issue Restriction. of securities shall be exempted under this subsection where the aggregate amount at which such issue is offered to the public exceeds $100,000. EXEMPTED TRAN'SACTIONS SEC. 4. The provisions of section 5 shall not apply to any of the following transactions: (1) Transactions by any person other than an issuer, underwriter, or dealer; transactions by an issuer not with or through an underwriter and not involving any public offering; or transactions by a dealer (including an underwriter no longer acting as an underwriter in respect of the security involved in such transaction), except transactions within one year after the last date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter (excluding in the computation of such year any time during which a stop order issued under section 8 is in effect as to the security), and except transactions as to securities constituting the whole or a part of an unsold allotment to or subscription by such dealer as a participant in the distribution of such securities by the issuer or by or through an underwriter. (2) Brokers' transactions, executed upon customers' orders on any exchange or in the open or counter market, but not the solicitation of such orders. (3) The issuance of a security of a person exchanged by it with its existing security holders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with such exchange; or the issuance of securities to the existing security holders or other existing creditors of a corporation in the process of a bona fide reorganization of such corporation under the supervision of any court, either in exchange for the securities of such security holders or claims of such creditors or partly for cash and partly in exchange for the securities or claims of such security holders or creditors. transac- Exempted tions. By individuals. Post, p. 906. Post, p. 79. Brokers' tions. transac- Issuance of securities to existing security holders, creditors, etc. PROHIIITIONS RELATING TO INTERSTATE COMMERCE AND TIIE MAILS SEC. 5. (a) Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails Prohibition relating and the mails. bro Transmissin ouf ker's ropectus, etc. to sell or offer to buy such security through the use or medium of any prospectus or otherwise; or (2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transporta- suc Transporting for sale or delivery after sale. security tion, any such security for the purpose of sale or for delivery after sale. U lawful (b) It shall be unlawful for any person, directly or indirectly- (1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to carry or transmit any prospectus relating to any security registered under this title, unless such prospectus meets the requirements of section 10; or (2) to carry or to cause to be carried through the mails or in tn torasrelating eitered security. Prospectus to p #, ecrity. interstate commerce any such security for the purpose of sale or for delivery after sale, unless accompanied or preceded by a prospectus that meets the requirements of section 10. (c) The provisions of this section relating to the use of the mails , w,.p.a shall not apply to the sale of any security where the issue of which 78 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933. it is a part is sold only to persons resident within a single State or Territory, where the issuer of such securities is a person resident and doing business within, or, if a corporation, incorporated by and doing business within, such State or Territory. REGISTRATION OF ,SECURITIES Registration ofsecur- ities and signing of registation stateent. AND SIGNING OF REGISTRATION STATEMENT SE. 6. (a) Any security may be registered with the Commission under the terms and conditions hereinafter provided, by filing a regis- tration statement in triplicate, at least one of which shall be signed by each issuer, its principal executive officer or officers, its principal financial officer, its comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or persons performing similar functions, by the majority of the persons or board having the Territn power of management of the issuer), and in case the issuer is a riagO ers foreign or Territorial person by its duly authorized representative in the United States; except that when such registration statement Security of foreign relates to a security issued by a foreign government, or political subsignatures. division thereof, it need be signed only by the underwriter of such security. Signatures of all such persons when written on the said registration statements shall be presumed to have been so written by authority of the person whose signature is so affixed and the burden of proof, in the event such authority shall be denied, shall be upon Unauthorized sign- the party denying the same. The affixing of any signature without the authority of the purported signer shall constitute a violation of this title. A registration statement shall be deemed effective only as iling ee to the securities specified therein as proposed to be offered. ling (b) At the time of filing a registration statement the applicant shall pay to the Commission a fee of one one-hundredth of 1 per centum of the maximum aggregate price at which such securities are proposed to be offered, but in no case shall such fee be less than $25. Registretion stats (C) The filing with the Commission of a registration statement, or etc. of an amendment to a registration statement, shall be deemed to have taken place upon the receipt thereof, but the filing of a registration statement shall not be deemed to have taken place unless it is accompanied by a United States postal money order or a certified bank check or cash for the amount of the fee required under subsection (b). ing. ratoiln bfityatoleis- (d) The information contained in or filed with any registration statement shall be made available to the public under such regulations as the Commission may prescribe, and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such reasonable dysto rtive charge as the Commission may prescribe. (e) No registration statenient may be filed within the first forty days following the enactment of this Act. INFORMIATION REQUIRED IN quirScheduleo t .8. REGISTIATION STATEMENT SEC. 7. The registration statement, when relating to a security other than a security issued by a foreign government, or political subdivision thereof, shall contain the information, and be accomoreign governmet panied by the documents, specified in Schedule A, and when relating Pes,. a to a security issued by a foreign government, or political subdivision thereof, shall contain the infornation, and be accompanied by the in certain documents, specified in Schedule B; except that the Commission may by rules or regulations provide that any such information or document need not be included in respect of any class of issuers or securities if it finds that the requirement of such information or document is inapplicable to such class and that disclosure fully adequate for the protection of investors is otherwise required to be 73d CONGRESS. SESS. I. CH. 38. included within the registration statement. MAY 27, 1933. If any accountant. 79 Professional stateInents. engineer, or appraiser, or any person whose profession gives authority to a statement made by him, is named as having prepared or certified any part of the registration statement, or is named as having prepared or certified a report or valuation for use in connection with the registration statement, the written consent of such person shall be filed with the registration statement. If any such Written consent person is named as having prepared or certified a report or valuation sereqre (other than a public official document or statement) which is used in connection with the registration statement, but is not named as having prepared or certified such report or valuation for use il connection with the registration statement, the written consent of such person shall be filed with the registration statement unless the Commission dispenses with such filing as impracticable or as involving undue hardship on the person filing the registration statement. Any such registration statement shall contain such other infor- to Additional informa tion, etc. mation, and be accompanied by such other documents, as the Commission may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors. TAKING EFFECT OF REGISTRATION STATEMENTS AND AMENDMENTS THERETO SEC. 8. (a) The effective date of a registration statement shall be the twentieth day after the filing thereof, except as hereinafter provided, and except that in case of securities of any foreign public authority, which has continued the full service of its obligations in the United States, the proceeds of which are to be devoted to the refunding of obligations payable in the United States, the registration statement shall become effective seven days after the filing thereof. If any amendment to any such statement is filed prior to the effective date of such statement, the registration statement shall be deemed to have been filed when such amendment was filed; except that an amendment filed with the consent of the Commission, prior to the effective date of the registration statement, or filed pursuant to an order of the Commission, shall be treated as a part of the registration statement. (b) If it appears to the Commission that a registration statement is on its face incomplete or inaccurate in any material respect, the Registration statements and amendments thereto. Effective date. Foreign securities. Incomplete or inaec euratesttemet Commission may, after notice by personal service or the sending of Opdportunity to confirmed telegraphic notice not later than ten days after the filingmen of the registration statement, and opportunity for hearing (at a time fixed by the Commission) within ten days after such notice by personal service or the sending of such telegraphic notice, issue an order prior to the effective date of registration refusing to permit such statement to become effective until it has been amended in accordance with such order. When such statement has been Eftie Ef dea t e of amended in accordance with such order the Commission shall so declare and the registration shall become effective at the time provided in subsection (a) or upon the date of such declaration, whichever date is the later. (c) An amendment filed after the effective date of the registration statement, if such amendment, upon its face, appears to the Commission not to be incomplete or inaccurate in any material respect, shall become effective on such date as the Commission may deter- mine, having due regard to the public interest and the protection of investors. (d) If it appears to the Commission at any time that the registra- tion statement includes any untrue statement of a material fact or Amendment f I e d after effetive date. Determination of date to ifnot deetive. order pro 73d CONGRESS. Notice. SESS. I. CH. 38. MAY 27, 1933. omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may, after notice by personal service or the sending of confirmed telegraphic notice, and after opportunity for hearing (at a time fixed by the Commission) within fifteen days after such notice by personal service or the sending of such telegraphic notice, issue a stop order suspending the effectiveness of the registration statement. When such statement has been amended in accordance with such stop order the Commission shall so declare and thereupon the stop order shall cease to be effective. Invetigations authorLed. Powers of Commis- sion. (e) The Commission is hereby empowered to make an examination in any case in order to determine whether a stop order should issue under subsection (d). In making such examination the Commission or any officer or officers designated by it shall have access to and may demand the production of any books and papers of, and may administer oaths and affirmations to and examine, the issuer, underwriter, or any other person, in respect of any matter relevant to the examination, and may, in its discretion, require the production of a balance sheet exhibiting the assets and liabilities of the issuer, or its income statement, or both, to be certified to by a public or Grotopsforissuanc certified accountant approved by the Commission. Serice of notice. If the issuer or underwriter shall fail to cooperate, or shall obstruct or refuse to permit the making of an examination, such conduct shall be proper ground for the issuance of a stop order. (f) Any notice required under this section shall be sent to or served on the issuer, or, in case of a foreign government or political subdivision thereof, to or on the underwriter, or, in the case of a foreign or Territorial person, to or on its duly authorized representative in the United States named in the registration statement, properly directed in each case of telegraphic notice to the address given in such statement. Court review of Commission's orders. COURT REVIEW OF ORDERS appropriate circuit court of appeals, etc. Sec. 9. (a) Any person aggrieved by an order of the Commission may obtain a review of such order in the Circuit Court of Appeals (Copsytereofnto Co Proceedings and evdernc. d of the United States, within any circuit wherein such person resides or has his principal place of business, or in the Court of Appeals of the District of Columbia, by filing in such court, within sixty days after the entry of such order, a written petition praying that the order of the Conunission be modified or be set aside in whole or in part. A copy of such petition shall be forthwith served upon the Commission, and thereupon the Commission shall certify and file in the court a transcript of the record upon which the order complained of was entered. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission. The finding of the Commission as to the facts, if supported by evidence, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the hearing before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by evidence, shall be conclu- 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933. 81 sive, and its recommendation, if any, for the modification or setting aside of the original order. The jurisdiction of the court shall be Jurisdiction ofcourt. exclusive and its judgment and decree, affirming, modifying, or setting aside, in whole or in part, any order of the Commission, shall be final, subject to review by the Supreme Court of the United premiCourt. States upon certiorari or certification as provided in sections 239 and 240 of the Judicial Code, as amended (U.S.C., title 28, secs. 346 . s.c.. and 347). Su- 90 (b) The commencement of proceedings under subsection (a) shall notsta"d.on order not, unless specifically ordered by the court, operate as a stay of the Commission's order. INFORMIATION REQUIRED IN PROSPECTUS SEC. 10. (a) A prospectus(1) when relating to a security other than a security issued by a foreign government or political subdivision thereof, shall contain the same statements made in the registration statement, but it need not include the documents referred to in paragraphs (28) to (32), inclusive, of Schedule A; (2) when relating to a security issued by a foreign government or political subdivision thereof shall contain the same statements made in the registration statement, but it need not include the documents referred to in paragraphs (13) and (14) of Schedule B. (b) Notwithstanding the provisions of subsection (a)(1) when a prospectus is used more than thirteen months after the effective date of the registration statement, the information in the statements contained therein shall be as of a date not more than twelve months prior to such use. (2) there may be omitted from any prospectus any of the statements required under such subsection (a) which the Commission may by rules or regulations designate as not being necessary or appropriate in the public interest or for the protection of investors. (3) any prospectus shall contain such other information as the Commission may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors. (4) in the exercise of its powers under paragraphs (2) and (3) of this subsection, the Commission shall have authority to classify prospectuses according to the nature and circumstances of their use, and, by rules and regulations and subject to such terms and conditions as it shall specify therein, to prescribe as to each class the form and contents which it may find appropriate to such use and consistent with the public interest and the protection of investors. (c) The statements or information required to be included in a prospectus by or under authority of subsection (a) or (b), when written, shall be placed in a conspicuous part of the prospectus in type as large as that used generally in the body of the prospectus. (d) In any case where a prospectus consists of a radio broadcast, copies thereof shall be filed with the Commission under such rules and regulations as it shall prescribe. The Commission may by rules and regulations require the filing with it of forms of prospectuses used in connection with the sale of securities registered under this title. 8637T-843--_ Information required in prospectus. Domestic securities. Post, p. 91. Foreign government, etc., securities. Post, p. 92. Statement in prospectus used more than 13 months. Post, p. 906. Statements that may be omitted. Additional informantion required. Classification of prospectuses. Regulations governing form, etc., of classes Printing requirement. Radio broadcasts. Copies to be flied. 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933 CIVIL LIABILITIES ON ACCOUNT OF FALSE REGISTRATION STATEMENT Ci;il liabilities for false registration statement. Post p 907. SEC. 11. (a) In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue- every person who signed the registration statement; (2) every person who was a director of (or person performing similar functions) or partner in, the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted; (3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner; Responsibility ofsig- (1) Director, partner, etc. Prospective director, partner. etc. A'countants, etc., (4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, statements. n snderwriter to s ch Exetmtion, if bur- den ofproofsustained. oresignation, tc.,before effective date of statement. who has with his consent 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; (5) 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 who shall sustain the burden of proof(1) that before the effective date of the part of the registra- Notiitontcn,taccordingly. fVistdtcommission ttiblal notieo, adii^ tlief in probitpy of stetements, sot expert, etc. o m d tte. strement a fat made tion 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 (9) that if such part of the registration statement became effective without his knowledge, upon becoming aware of such Paet he forthwith acted and advised the Commission, in accordaneewith paragraph (1), andl, in addition, gave reasonable public notice that such part of the registration statement had become effective without his knowledge; or (3) that (A) as regards any part of the registration statement not purporting to be made on the authority of an expert, and 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 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933. 83 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 No omitted nor mleading statements. represent his statement as an expert or was not a fair copy egistration stateent at variance, etc of or extract from his report or valuation as an expert; and (C) as regards any part of the registration statement purport- Statement of expert ing to be made on the authority of an expert (other than him- (othoerthan him"). self) or purporting to be a copy of or extract from a report or valuation of an expert (other than himself), he had 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 that such part of the registration statement fairly represented the statement of the expert or was a fair copy of or extract from the report or valuation of the expert; and (D) as regards any part of Public officials the registration statement purporting to be a statement made doetUt9 07 . by an official person or purporting to be a copy of or extract from a public official document, he had 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 that such part of the registration statement fairly represented the statement made by the official person or was a fair copy of or extract from the public official document. Renonahle (c) In determining, for the purpose of paragraph (3) of sub- gation or section (b) of this section, what constitutes reasonable investiga- "'il, tion and reasonable ground for belief, the standard of reasonableness shall be that required of a person occupying a fiduciary relationship. . or invatifor gr,,win l,,7). Boi i,ider- (d) If any person becomes an underwriter with respect to the writer after lia''lity security after the part of the registration statement with respect to "tt"ch's. which his liability is asserted has become effective, then for the purposes of paragraph (3) of subsection (b) of this section such part of the registration statement shall be considered as having become effective with respect to such person as of the time when he became an underwriter. (e) The suit authorized under subsection (a) may be either (1) Suits authorized heein. yment to recover the consideration paid for such security with interest Po .p.. thereon, less the amount of any income received thereon, upon the tender of such security, or (2) for damages if the person suing no Damaes. longer owns the security. (f) All or any one or more of the persons specified in subsection seLablity. jont and (a) shall be jointly and severally liable, and every person who beontribution comes liable to make any payment under this section may recover contribution as in cases of contract from any person who, if sued separately, would have been liable to make the same payment, unless the person who has become liable was, and the other was not, guilty E"ptio. of fraudulent misrepresentation. limit tion (g) In no case shall the amount recoverable under this section Rco exceed the price at which the security was offered to the public. 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933. Civil liabilities con- CIVIL LIABILITIES ARISING IN CONNECTION WITH PROSPECTUSES nected with prospecCOMMUNICIATION S tuses and communications. Sales through interSEC. 12. Any person whostate commerce and (1) sells a security in violation of section 5, or mails. Ante, p. 77. Through false prospectuses, etc. Ante, p. 75. Recovery chaser. by pur- AND (2) sells a security (whether or not exempted by the provisions of section 3, other than paragraph (2) of subsection (a) thereof), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. IMITATION OF ACTIONS Limitation of actions. Post, p. 908. SEC. 13. No action shall be maintained to enforce any liability created under section 11 or section 12 (2) unless brought within two years after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 12 (1), unless brought within two years after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 11 or section 12 (1) more than ten years after the security was bona fide offered to the public. CONTRARY Contrary stipulations void. STIPULATIONS VOID SEG.14 Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this title or of the rules and regulations of the Commission shall be void. mABIImTY OF CONTROLLING PERSONS iity pesons Post, p. 90O tr" SEC. 15. Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under section 11 or 12, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable. ADDITIONAL REMEDIES Reition to existing rights, et. SEC1. 16The rights and remedies provided by this title shall be in addition to any and all other rights and remedies that may exist at law or in equity. FREAU tertatudlet RENT INTERSTATE TRANSACTIONS sin-ai SEC. 17. (a) It shall be unlawful for any person in the sale of any securities by the use of any means or instruments of transportation 73d CONGRESS. SESS. I. CH. 38. MAY 27, 1933. or communication in interstate commerce or by the use of the mails, directly or indirectly(1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. 85 Unlawful practices, transactions, etc., in (b) It shall be unlawful for any person, by the use of any means Unlawful advertiseor instruments of transportation or communication in interstate mentof securities. commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount Receipt of consider- to bedisclosedmnt thereof. (c) The exemptions provided in section 3 shall not apply to the provisions of this section. STATE CONTROL OF SECURITIES SEC. 18. Nothing in this title shall affect the jurisdiction of the Exempted securities State control of securities. Jurisdiction of corn. ml securities commission (or any agency or office performing like. ssio functions) of any State or Territory of the United States, or the District of Columbia, over any security or any person. SPECIAL POWERS OF COMMISSION SEC. 19. (a) The Commission shall have authority flrom time to time to make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this title, including rules and regulations governing registration statements and prospectuses . 7 Ante, s Special powers Commission. prescribe ; to . , of regull- p Itegis.tration sntaer