section (a) no person, part of the registraliability is asserted ch steps as are peror refused to act in, Ich he was described agreeing to act, and he issuer in writing e would not be reatement; or statement became ming aware of such mission, in accordve reasonable pubstatement had be registration state- erein were true ment, he had no reasonable ground to believe ar lieve, at the time such part of the registration came effective, that the statements therein we that there was an ommission to state a material to be stated therein or necessary to make the stat in not misleading, or that such part of the regis ment did not fairly represent the statement mad cial person or was not a fair copy of or extract fr official document. (c) In determining, for the purpose of paragrapl section (b) of this section, what constitutes reasonable and reasonable ground for belief, the standard of re shall be that required of a prudent man in the manag own property. (d) If any person becomes an underwriter with re security after the part of the registration statement wi which his liability is asserted has become effective, purposes of paragraph (3) of subsection (b) of this secti of the registration statement shall be considered as ha effective with respect to such person as of the time came an underwriter. (e) The suit authorized under subsection (a) may b such damages as shall represent the difference b amount paid for the security (not exceeding the price a security was offered to the public) and (1) the value t the time such suit was brought, or (2) the price at whic rity shall have been disposed of in the market before the price at which such security shall have been dispo suit but before judgment if such damages shall be le damages representing the difference between the amo the security (not exceeding the price at which the secu fered to the public) and the value thereof as of the tin was brought: Provided, That if the defendant proves th tion or all of such damages represents other than the in value of such security resulting from such part of t tion statement, with respect to which his liability is a being true or omitting to state a material fact required therein or necessary to make the statements there leading, such portion of or all such damages shall not able. In no event shall any underwriter (unless such shall have knowingly received from the issuer for actin derwriter some benefit, directly or indirectly, in which a derwriters similarly situated did not share in proport respective interests in the underwriting) be liable in an a consequence of suits authorized under subsection (a) in excess of the total price at which the securities unde him and distributed to the public were offered to the pu suit under this or any other section of this title the co its discretion, require an undertaking for the payment of such suit, including reasonable attorney's fees, and shall be rendered against a party litigant, upon the m other party litigant, such costs may be assessed in fa party litigant (whether or not such undertaking has be if the court believes the suit or the defense to have b merit, in an amount sufficient to reimburse him for the expenses incurred by him, in connection with such suit, such costs be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard. 1. Except as provided in paragraph (2), all or any one or more of the persons specified in subsection (a) shall be jointly and severally liable, and every person who becomes 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 of fraudulent misrepresentation. (2)(A) The liability of an outside director under subsection (e) shall be determined in accordance with section 21D(f) of the Securities Exchange Act of 1934. (B) For purposes of this paragraph, the term "outside director" shall have the meaning given such term by rule or regulation of the Commission. (g) In no case shall the amount recoverable under this section exceed the price at which the security was offered to the public. CIVIL LIABILITIES ARISING IN CONNECTION WITH PROSPECTUSES AND COMMUNICATIONS SEC. 12. [771] (a) IN GENERAL.-Any person who (1) offers or sells a security in violation of section 5, or (2) offers or sells a security (whether or not exempted by the provisions of section 3, other than paragraphs (2) and (14) 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, subject to subsection (b), 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. (b) Loss CAUSATION.-In an action described in subsection (a)(2), if the person who offered or sold such security proves that any portion or all of the amount recoverable under subsection (a)(2) represents other than the depreciation in value of the subject security resulting from such part of the prospectus or oral communication, with respect to which the liability of that person is asserted, not being true or omitting to state a material fact required to be stated therein or necessary to make the statement not misleading, then such portion or amount, as the case may be, shall not be recoverable. à suit, such costs axing of costs in ll or any one or all be jointly and able to make any ion as in cases of would have been rson who has beof fraudulent misder subsection (e) D(f) of the Securi "outside director" le or regulation of under this section d to the public. PROSPECTUSES AND who of section 5, or or not exempted by agraphs (2) and (14) ny means or instrun in interstate comectus or oral commuent of a material fact in order to make the ces under which they not knowing of such sustain the burden of xercise of reasonable h or omission, he person purchasing at law or in equity in ver the consideration ess the amount of any f such security, or for scribed in subsection h security proves that under subsection (a)(2) lue of the subject secu tus or oral communica hat person is asserted. rial fact required to be tement not misleading. nay be, shall not be re LIMITATION OF ACTIONS SEC. 13. [77m] No action shall be maintained to liability created under section 11 or section 12(a)(2) u within one year after the discovery of the untrue stat omission, or after such discovery should have been ma ercise of reasonable diligence, or, if the action is to en ity created under section 12(a)(1), unless brought wit after the violation upon which it is based. In no eve such action be brought to enforce a liability created u 11 or section 12(a)(1) more than three years after the bona fide offered to the public, or under section 12(a)( three years after the sale. 1 CONTRARY STIPULATIONS VOID SEC. 14. [77n] Any condition, stipulation, or provi any person acquiring any security to waive complian provision of this title or of the rules and regulations of sion shall be void. LIABILITY OF CONTROLLING PERSONS SEC. 15. [770] Every person who, by or through ship, agency, or otherwise, or who, pursuant to or i with an agreement or understanding with one or mor sons by or through stock ownership, agency, or otherw any person liable under section 11 or 12, shall also be and severally with and to the same extent as such co son to any person to whom such controlled person is 1 the controlling person had no knowledge of or reason to believe in the existence of the facts by reason of whi ity of the controlled person is alleged to exist. SEC. 16. [77p] ADDITIONAL REMEDIES; LIMITATION ON RE (a) REMEDIES ADDITIONAL.-Except as provided i (b), the rights and remedies provided by this title shal 1 See also section 24(e) of the Investment Company Act of 1940, infra. 2 Section 16 of the Securities Act of 1933 was amended to add limitations or tion 101 of the Securities Litigation Uniform Standards Act of 1998. Section tained the following findings: SEC. 2. FINDINGS. The Congress finds that (1) the Private Securities Litigation Reform Act of 1995 sought to prev vate securities fraud lawsuits; (2) since enactment of that legislation, considerable evidence has been gress that a number of securities class action lawsuits have shifted from courts; (3) this shift has prevented that Act from fully achieving its objectives; (4) State securities regulation is of continuing importance, together wit tion of securities, to protect investors and promote strong financial market (5) in order to prevent certain State private securities class action lawsu from being used to frustrate the objectives of the Private Securities Litig of 1995, it is appropriate to enact national standards for securities class a volving nationally traded securities, while preserving the appropriate en of State securities regulators and not changing the current treatment of in Section 101(c) of that Act contained the following effective date provision fo to section 16 of the Securities Act of 1933 and section 28(f) of the Securities 1934: (c) APPLICABILITY.-The amendments made by this section shall not affect o tion commenced before and pending on the date of enactment of this Act. tion to any and all other rights and remedies that may exist at law or in equity. (b) CLASS ACTION LIMITATIONS.-No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging (1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or (2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security. (c) REMOVAL OF COVERED CLASS ACTIONS.-Any covered class action brought in any State court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b). (d) PRESERVATION OF CERTAIN ACTIONS. (1) ACTIONS UNDER STATE LAW OF STATE OF INCORPORATION. (A) ACTIONS PRESERVED.-Notwithstanding subsection (b) or (c), a covered class action described in subparagraph (B) of this paragraph that is based upon the statutory or common law of the State in which the issuer is incorporated (in the case of a corporation) or organized (in the case of any other entity) may be maintained in a State or Federal court by a private party. (B) PERMISSIBLE ACTIONS.-A covered class action is described in this subparagraph if it involves— (i) the purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer; or (ii) any recommendation, position, or other communication with respect to the sale of securities of the issuer that (I) is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and (II) concerns decisions of those equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters' or appraisal rights. (2) STATE ACTIONS.— In addition, section 102 of the Securities Litigation Uniform Standards Act contained the following provision with respect to reciprocal subpoena enforcement: SEC. 102. PROMOTION OF RECIPROCAL SUBPOENA ENFORCEMENT. (a) COMMISSION ACTION.-The Securities and Exchange Commission, in consultation with State securities commissions (or any agencies or offices performing like functions), shall seek to encourage the adoption of State laws providing for reciprocal enforcement by State securities commissions of subpoenas issued by another State securities commission seeking to compel persons to attend, testify in, or produce documents or records in connection with an action or investigation by a State securities commission of an alleged violation of State securities laws. (b) REPORT.-Not later than 24 months after the date of enactment of this Act, the Securities and Exchange Commission (hereafter in this section referred to as the "Commission") shall submit a report to the Congress (1) identifying the States that have adopted laws described in subsection (a); (2) describing the actions undertaken by the Commission and State securities commissions to promote the adoption of such laws; and (3) identifying any further actions that the Commission recommends for such purposes. (A) IN GENERAL.-Notwithstanding any ot of this section, nothing in this section may be preclude a State or political subdivision there pension plan from bringing an action involvi security on its own behalf, or as a member of prised solely of other States, political subdivisi pension plans that are named plaintiffs, and t thorized participation, in such action. (B) STATE PENSION PLAN DEFINED.-For this paragraph, the term "State pension pla pension plan established and maintained for i by the government of the State or political thereof, or by any agency or instrumentality th (3) ACTIONS UNDER CONTRACTUAL AGREEMEN ISSUERS AND INDENTURE TRUSTEES.-Notwithsta section (b) or (c), a covered class action that seek a contractual agreement between an issuer and a trustee may be maintained in a State or Federa party to the agreement or a successor to such party (4) REMAND OF REMOVED ACTIONS.-In an act been removed from a State court pursuant to subs the Federal court determines that the action m tained in State court pursuant to this subsection, court shall remand such action to such State court. (e) PRESERVATION OF STATE JURISDICTION.—Th commission (or any agency or office performing like any State shall retain jurisdiction under the laws of s investigate and bring enforcement actions. (f) DEFINITIONS. For purposes of this section, t definitions shall apply: (1) AFFILIATE OF THE ISSUER.-The term "aff issuer" means a person that directly or indirectly, or more intermediaries, controls or is controlled by common control with, the issuer. (2) COVERED CLASS ACTION. (A) IN GENERAL.-The term "covered d means (i) any single lawsuit in which (I) damages are sought on behalf 50 persons or prospective class me questions of law or fact common to t or members of the prospective class, erence to issues of individualized rel alleged misstatement or omission, over any questions affecting only ind sons or members; or (II) one or more named parties se damages on a representative basis themselves and other unnamed part situated, and questions of law or fact those persons or members of the pros predominate over any questions affec dividual persons or members; or |