SECTIONS 25500-25510 - California Statutes

CORPORATIONS CODE

SECTION 25500-25510

25500. Any person who willfully participates in any act or
transaction in violation of Section 25400 shall be liable to any
other person who purchases or sells any security at a price which was
affected by such act or transaction for the damages sustained by the
latter as a result of such act or transaction. Such damages shall be
the difference between the price at which such other person
purchased or sold securities and the market value which such
securities would have had at the time of his purchase or sale in the
absence of such act or transaction, plus interest at the legal rate.

25501. Any person who violates Section 25401 shall be liable to the
person who purchases a security from him or sells a security to him,
who may sue either for rescission or for damages (if the plaintiff
or the defendant, as the case may be, no longer owns the security),
unless the defendant proves that the plaintiff knew the facts
concerning the untruth or omission or that the defendant exercised
reasonable care and did not know (or if he had exercised reasonable
care would not have known) of the untruth or omission. Upon
rescission, a purchaser may recover the consideration paid for the
security, plus interest at the legal rate, less the amount of any
income received on the security, upon tender of the security. Upon
rescission, a seller may recover the security, upon tender of the
consideration paid for the security plus interest at the legal rate,
less the amount of any income received by the defendant on the
security. Damages recoverable under this section by a purchaser shall
be an amount equal to the difference between (a) the price at which
the security was bought plus interest at the legal rate from the date
of purchase and (b) the value of the security at the time it was
disposed of by the plaintiff plus the amount of any income received
on the security by the plaintiff. Damages recoverable under this
section by a seller shall be an amount equal to the difference
between (1) the value of the security at the time of the filing of
the complaint plus the amount of any income received by the defendant
on the security and (2) the price at which the security was sold
plus interest at the legal rate from the date of sale. Any tender
specified in this section may be made at any time before entry of
judgment.

25501.5. (a) (1) A person who purchases a security from or sells a
security to a broker-dealer that is required to be licensed and has
not, at the time of the sale or purchase, applied for and secured
from the commissioner a certificate under Part 3 (commencing with
Section 25200), that is in effect at the time of the sale or purchase
authorizing that broker-dealer to act in that capacity, may bring an
action for rescission of the sale or purchase or, if the plaintiff
or the defendant no longer owns the security, for damages.
(2) Upon rescission and tender of the security, a purchaser may
recover the consideration paid for the security plus interest at the
legal rate, less the amount of any income received on the security.
(3) Upon rescission and tender of the consideration paid for the
security plus interest at the legal rate, a seller may recover the
security plus the amount of any income received by the defendant on
the security.
(4) Damages recoverable under this section by a purchaser shall be
an amount equal to the difference between the following:
(A) The price at which the security was bought plus interest at
the legal rate from the date of purchase.
(B) The value of the security at the time it was disposed of by
the plaintiff plus the amount of any income received on the security
by the plaintiff.
(5) Damages recoverable under this section by a seller shall be an
amount equal to the difference between the following:
(A) The value of the security at the time of the filing of the
complaint plus the amount of any income received by the defendant on
the security.
(B) The price at which the security was sold plus interest at the
legal rate from the date of sale.
(6) A tender of a security or of consideration paid for a security
plus interest pursuant to this section may be made at any time
before entry of judgment.
(b) The court, in its discretion, may award reasonable attorney's
fees and costs to a prevailing plaintiff under this section.

25502. Any person who violates Section 25402 shall be liable to the
person who purchases a security from him or sells a security to him,
for damages equal to the difference between the price at which such
security was purchased or sold and the market value which such
security would have had at the time of the purchase or sale if the
information known to the defendant had been publicly disseminated
prior to that time and a reasonable time had elapsed for the market
to absorb the information, plus interest at the legal rate, unless
the defendant proves that the plaintiff knew the information or that
the plaintiff would have purchased or sold at the same price even if
the information had been revealed to him.

25502.5. (a) Any person other than the issuer who violates Section
25402 shall be liable to the issuer of the security purchased or sold
in violation of Section 25402 for damages in an amount up to three
times the difference between the price at which the security was
purchased or sold and the market value which the security would have
had at the time of the purchase or sale if the information known to
the defendant had been publicly disseminated prior to that time and a
reasonable time had elapsed for the market to absorb the information
and shall be liable to the issuer of the security or to a person who
institutes an action under this section in the right of the issuer
of the security for reasonable costs and attorney's fees.
(b) The amounts recoverable under this section by the issuer shall
be reduced by any amount paid by the defendant in a proceeding
brought by the Securities and Exchange Commission with respect to the
same transaction or transactions under the federal Insider Trading
Sanctions Act of 1984 (15 U.S.C. Secs. 78a, 78c, 78o, 78t, 78u, and
78ff) or any other act regardless of whether the amount was paid
pursuant to a judgment or settlement or paid before or after the
filing of an action by the plaintiff against the defendant. If a
proceeding has been commenced by the Securities and Exchange
Commission but has not been finally resolved, the court shall delay
entering a judgment for the plaintiff under this section until that
proceeding is resolved.
(c) If any shareholder of an issuer alleges to the board that
there has been a violation of this section, the board shall be
required to consider the allegation in good faith, and if the
allegation involves misconduct by any director, that director shall
not be entitled to vote on any matter involving the allegation.
However, that director may be counted in determining the presence of
a quorum at a meeting of the board or a committee of the board.
(d) This section shall only apply to issuers who have total assets
in excess of one million dollars ($1,000,000) and have a class of
equity security held of record by 500 or more persons.

25503. Any person who violates Section 25110, 25130 or 25133, or a
condition of qualification under Chapter 2 (commencing with Section
25110) of this part, imposed pursuant to Section 25141, or an order
suspending trading issued pursuant to Section 25219, shall be liable
to any person acquiring from him the security sold in violation of
such section, who may sue to recover the consideration he paid for
such security with interest thereon at the legal rate, less the
amount of any income received therefrom, upon the tender of such
security, or for damages, if he no longer owns the security, or if
the consideration given for the security is not capable of being
returned. Damages, if the plaintiff no longer owns the security,
shall be equal to the difference between (a) his purchase price plus
interest at the legal rate from the date of purchase and (b) the
value of the security at the time it was disposed of by the plaintiff
plus the amount of any income received therefrom by the plaintiff.
Damages, if the consideration given for the security is not
capable of being returned, shall be equal to the value of that
consideration plus interest at the legal rate from the date of
purchase, provided the security is tendered; and if the plaintiff no
longer owns the security, damages in such case shall be equal to the
difference between (a) the value of the consideration given for the
security plus interest at the legal rate from the date of purchase
and (b) the value of the security at the time it was disposed of by
the plaintiff plus the amount of any income received therefrom by the
plaintiff. Any person who violates Section 25120 or a condition of
qualification under Chapter 3 (commencing with Section 25120) of this
part imposed pursuant to Section 25141, shall be liable to any
person acquiring from him the security sold in violation of such
section who may sue to recover the difference between (a) the value
of the consideration received by the seller and (b) the value of the
security at the time it was received by the buyer, with interest
thereon at the legal rate from the date of purchase. Any person on
whose behalf an offering is made and any underwriter of the offering,
whether on a best efforts or a firm commitment basis, shall be
jointly and severally liable under this section, but in no event
shall any underwriter (unless such underwriter shall have knowingly
received from the issuer for acting as an underwriter some benefit,
directly or indirectly, in which all other underwriters similarly
situated did not share in proportion to their respective interest in
the underwriting) be liable in any suit or suits authorized under
this section 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. Any tender specified in this section may be
made at any time before entry of judgment. No person shall be liable
under this section for violation of Section 25110, 25120 or 25130 if
the sale of the security is qualified prior to the payment or receipt
of any part of the consideration for the security sold, even though
an offer to sell or a contract of sale may have been made or entered
into without qualification.

25504. Every person who directly or indirectly controls a person
liable under Section 25501 or 25503, every partner in a firm so
liable, every principal executive officer or director of a
corporation so liable, every person occupying a similar status or
performing similar functions, every employee of a person so liable
who materially aids in the act or transaction constituting the
violation, and every broker-dealer or agent who materially aids in
the act or transaction constituting the violation, are also liable
jointly and severally with and to the same extent as such person,
unless the other person who is so liable had no knowledge of or
reasonable grounds to believe in the existence of the facts by reason
of which the liability is alleged to exist.

25504.1. Any person who materially assists in any violation of
Section 25110, 25120, 25130, 25133, or 25401, or a condition of
qualification under Chapter 2 (commencing with Section 25110) of Part
2 of this division imposed pursuant to Section 25141, or a condition
of qualification under Chapter 3 (commencing with Section 25120) of
Part 2 of this division imposed pursuant to Section 25141, or an
order suspending trading issued pursuant to Section 25219, with
intent to deceive or defraud, is jointly and severally liable with
any other person liable under this chapter for such violation.

25504.2. (a) Any accountant, engineer, appraiser, or other person
whose profession gives authority to a statement made by such person,
who pursuant to rule of the commissioner has given written consent to
be and has been named in any prospectus or offering circular
distributed in connection with the offer or sale of securities as
having prepared or certified in such capacity either any part of such
document or any written report or valuation which is distributed
with or referred to in any such document is jointly and severally
liable with any other person liable under Section 25501 if:
(1) The part of such document so prepared or certified or the
report or valuation so distributed or referred to includes an untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and
(2) The person asserting such liability acquired a security
described in such document in reliance on such untrue statement or in
reliance on such part of the document or on such report or valuation
without notice of such omission.
(b) Notwithstanding the provisions of subdivision (a), no such
accountant, engineer, appraiser, or other person shall be liable as
provided therein if such person sustains the burden of proof that:
(1) Such person had, after reasonable investigation, reasonable
ground to believe and did believe, at the time such person consented
to such use of such person's name, that the statements so included in
such part of such document or in such report or valuation were true
and that there was no 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
(2) Such part of such document did not fairly represent such
person's statement as an expert or was not a fair copy of or extract
from such person's report or valuation as an expert; or
(3) Prior to the acquisition of the security by the person
asserting the liability, such accountant, engineer, appraiser, or
other person advised the issuer and the commissioner in writing that
such person would not be responsible for such part of the document or
the report or valuation.
(c) A person who participates in the preparation of a document
described in subdivision (a) of this section shall be deemed to have
prepared or certified only those portions thereof which are expressly
stated with such person's written consent to have been made on such
person's authority.

25505. A corporation which is liable under this chapter shall have
a right of indemnification against any of its principal executive
officers, directors, and controlling persons whose willful violation
of any provision of this law gave rise to such liability. All persons
liable under this chapter shall have a right of contribution against
all other persons similarly liable, based upon each person's
proportionate share of the total liability, except that no person
whose willful violation of any provision of this law has given rise
to any liability shall have any right of contribution against any
other person guilty merely of a negligent violation, and except that
no principal executive officer, director, or controlling person whose
willful violation has given rise to any liability shall have any
right of contribution against the corporation to which he sustains
that relationship.

25506. (a) For proceedings commencing before January 1, 2005, no
action shall be maintained to enforce any liability created under
Section 25500, 25501, or 25502 (or Section 25504 or Section 25504.1
insofar as they related to those sections) unless brought before the
expiration of four years after the act or transaction constituting
the violation or the expiration of one year after the discovery by
the plaintiff of the facts constituting the violation, whichever
shall first expire.
(b) For proceedings commencing on or after January 1, 2005, no
action shall be maintained to enforce any liability created under
Section 25500, 25501, or 25502 (or Section 25504 or Section 25504.1
insofar as they related to those sections) unless brought before the
expiration of five years after the act or transaction constituting
the violation or the expiration of two years after the discovery by
the plaintiff of the facts constituting the violation, whichever
shall first expire.

25506.1. No action shall be maintained to enforce any liability
created under Section 25504.2 unless brought within one year after
the discovery of the facts constituting the violation, or after such
discovery should have been made by the exercise of reasonable
diligence. In no event shall any such action be brought more than
three years after the act or transaction constituting the violation.

25507. (a) No action shall be maintained to enforce any liability
created under Section 25503 (or Section 25504 or Section 25504.1
insofar as they relate to that section) unless brought before the
expiration of two years after the violation upon which it is based or
the expiration of one year after the discovery by the plaintiff of
the facts constituting such violation, whichever shall first expire.
(b) No buyer may commence an action under Section 25503 (or
Section 25504 or Section 25504.1 insofar as they relate to that
section) if, before suit is commenced, such buyer shall have received
a written offer approved as to form by the commissioner (1) stating
the respect in which liability under such section may have arisen,
(2) offering to repurchase the security for a cash price payable upon
delivery of the security or offering to pay the buyer an amount in
cash equal in either case to the amount recoverable by the buyer in
accordance with Section 25503, or, offering to rescind the
transaction by putting the parties back in the same position as
before the transaction, (3) providing that such offer may be accepted
by the buyer at any time within a specified period of not less than
30 days after the date of receipt thereof unless rejected earlier
during such period by the buyer, (4) setting forth the provisions of
this subdivision (b), and (5) containing such other information as
the commissioner may require by rule or order, and such buyer shall
have failed to accept such offer in writing within the specified
period after receipt thereof.
(c) The commissioner may by rule or order impose as a condition to
approval of an offer under subdivision (b) of this section, if the
commissioner finds such action is necessary and appropriate for the
protection of investors, conditions requiring:
(1) That equivalent and concurrent offers be made to all investors
as to whom liability may have arisen and still exists under Section
25503 (or Section 25504 or Section 25504.1 insofar as they relate to
that section) in connection with the distribution or transaction;
(2) That the offer be made subject to a condition voiding such
offer if the issuer, by reason of acceptances, is disabled from
commencing or continuing business;
(3) That the offer be made within a specified period after
approval thereof by the commissioner;
(4) If the consideration paid by the offeree was other than
monetary or if the offer is of rescission, and if the offer is
rejected by the offeree on the ground that it does not accord him the
damages payable under Section 25503 or that the rescission offered
does not place the parties back in the same position as before the
transaction, that an offer so rejected shall not bar the commencement
of an action by the offeree under Section 25503 (or Section 25504 or
Section 25504.1 insofar as they relate to that section); or
(5) That the offeror file a report or reports with the
commissioner containing such information as he may require concerning
the making of the offer, its acceptance or rejection, and compliance
with its terms and conditions or with conditions imposed under this
subdivision.
(d) Each person who files a repurchase offer with the commissioner
pursuant to subdivision (b) shall file with the commissioner, in
such form as the commissioner by rule prescribes, an irrevocable
consent appointing the commissioner or the commissioner's successor
in office to be such person's attorney to receive service of any
lawful process in any noncriminal suit, action or proceeding against
such person or such person's successor, executor or administrator,
which arises under this law or any rule or order hereunder after the
consent has been filed, with the same force and validity as if served
personally on the person filing the consent. A person who has filed
such a consent in connection with a qualification under this law (or
application for a permit under any prior law if the application under
this law states that such consent is still effective) need not file
another. Service may be made by leaving a copy of the process in the
office of the commissioner but it is not effective unless (1) the
plaintiff, who may be the commissioner in a suit, action or
proceeding instituted by him, forthwith sends notice of the service
and a copy of the process by registered or certified mail to the
defendant or respondent at such person's last address on file with
the commissioner, and (2) the plaintiff's affidavit of compliance
with this section is filed in the case on or before the return day of
the process, if any, or within such further time as the court
allows.

25508. No action shall be maintained to enforce any right of
indemnification or contribution created by Section 25505 unless
brought before the expiration of one year after final judgment based
upon the liability for which the right of indemnification or
contribution exists.

25508.5. In addition to any other rights provided for under this
division, including, but not limited to, Sections 25501 and 25506, or
otherwise, a person who purchases a viatical or life settlement
contract or a fractionalized or pooled interest therein may rescind
or cancel the purchase for any reason. The person may rescind or
cancel the purchase at any time before seven calendar days after the
date the person remits the required consideration to the issuer or
the issuer's agent by giving written notice of rescission or
cancellation to the issuer or the issuer's agent. No specific form is
required for the rescission or cancellation. The notice is effective
when personally delivered, deposited in the United States mail, or
deposited with a commercial courier or delivery service. The issuer
shall refund all the person's money within seven calendar days after
receiving the notice of rescission or cancellation.

25509. Every cause of action under this chapter survives the death
of any person who might have been a plaintiff or defendant.

25510. Except as explicitly provided in this chapter, no civil
liability in favor of any private party shall arise against any
person by implication from or as a result of the violation of any
provision of this law or any rule or order hereunder. Nothing in this
chapter shall limit any liability which may exist by virture of any
other statute or under common law if this law were not in effect.