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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionmediumCivil Liability — Material Omissions

For a buyer's civil claim under Section 410 based on a material omission, which statement is correct?

  1. AThe buyer need not prove a specific intent to defraud, but the seller may have a statutory reasonable-care defense✓ Correct answer
  2. BThe buyer must prove the seller intended to cause the buyer's exact dollar loss
  3. CAn omission creates no liability unless the security was unregistered
  4. DFederal covered status eliminates state civil liability for fraud
Explanation

Why A — The buyer need not prove a specific intent to defraud, but the seller may have a statutory reasonable-care defense

Section 410 civil liability for a material misstatement or omission does not require the buyer to prove a specific intent to defraud. The buyer must satisfy the statutory elements, and the seller may avoid liability by proving the applicable lack-of-knowledge and reasonable-care defense.

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