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← Series 63: Remedies & Administrative Provisions
Series 63 practice questionmediumAdministrator Remedies: Fraud vs. Unintentional Violations

An agent unknowingly uses a firm script that omits a material risk in a securities sale. Which statement best describes potential civil liability under Section 410?

  1. AThe buyer may pursue the statutory seller remedy, but the seller may assert the lack-of-knowledge and reasonable-care defense✓ Correct answer
  2. BThe Administrator may award private damages directly without court process
  3. COnly the firm can ever be liable
  4. DRegistration of the security eliminates antifraud liability
Explanation

Why A — The buyer may pursue the statutory seller remedy, but the seller may assert the lack-of-knowledge and reasonable-care defense

Section 410(a) creates a buyer's civil remedy and gives the seller a defense by proving lack of knowledge and that reasonable care could not have revealed the untruth or omission. The Administrator investigates and may pursue administrative or court remedies but does not adjudicate the buyer's private damages claim.

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