Civil Liabilities Arising in Connection withProspectuses and Communications
Section 12 of the Securities Act lays out the consequences of misleading customers or potential customers with respect to offering and selling a security. Untrue statements of a material fact or the omission of a material fact in a written prospectus or oral communication whose result is to mislead a customer are subject to civil prosecution in a court of law. Anyone who offers or sells a security misleadingly bears the burden of proof that he or she did not know and could not have known of the untruth or the omission. Failing to provide a convincing argument, that person will be liable to anyone who purchased the security.
In a later clarification by the SEC (Rule 159), any information provided to the purchaser after the point of sale, or after the signing of a contract of sale, does not rectify a prior untruth or omission in any oral or written communication with a buyer. Even if the person has not learned of the untruth or omis