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Series 63 practice questionmediumCivil Liabilities — Seller's Defense

An agent sold an unregistered security to a client. In a civil action by the client, the agent claims he did not know the security was unregistered. This defense is:

  1. AValid — the agent is not liable if he was unaware of the registration status
  2. BValid only if the agent can prove the broker-dealer told him the security was registered
  3. CInvalid — liability for selling unregistered securities is absolute regardless of the seller's knowledge✓ Correct answer
  4. DValid only if the agent has fewer than 2 years of experience in the industry
Explanation

Why C — Invalid — liability for selling unregistered securities is absolute regardless of the seller's knowledge

USA Section 410(a)(1) imposes seller liability for an unregistered, nonexempt sale without a lack-of-knowledge defense. The lack-of-knowledge and reasonable-care defense applies to a material misstatement or omission claim under Section 410(a)(2).

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