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← Series 63: Remedies & Administrative Provisions
Series 63 practice questionmediumCivil Liability — Material Omission

A seller offers a security by omitting a material fact, the buyer does not know of the omission, and the seller cannot prove that reasonable care would not have revealed it. What remedy may the buyer seek under the USA?

  1. ARescission while the buyer owns the security, or statutory damages if it has been sold✓ Correct answer
  2. BOnly criminal imprisonment of the seller
  3. CAutomatic punitive damages with no civil action
  4. DNo remedy unless the Administrator first revokes the security's registration
Explanation

Why A — Rescission while the buyer owns the security, or statutory damages if it has been sold

Section 410 gives the buyer a civil remedy for a sale made through a material misstatement or omission when the buyer lacked knowledge and the seller cannot establish the statutory reasonable-care defense. The remedy is generally rescission if the security is still owned or statutory damages if it was sold.

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