SW Legal Educational Publishing

Misstatements in Registration Statement May Be Cited by Later Stock Buyers
Description Appeals court held that buyers of stock in the aftermarket may sue the promoters for misstatements and omissions in the offering statement. The purchasers are protected by Section 11 of the Securities Act of 1933, which does not only apply to buyers of the initial public offering.
Topic Securities Law
Key Words Registration Statement; Misstatements and Omissions
C A S E   S U M M A R Y
Facts Soon after Dignity Partners issued its initial public offering of stock, some news caused the stock to collapse in price and the company to incur large losses. Some initial investors, and others who bought the stock later when it was being traded, sued the promoters for misstatements and omissions, contending that they knew the negative information before they made the public offering. The district court dismissed the claims brought by investors who bought the stock after the initial offering. Those investors appealed.
Decision Reversed. Misstatements and omissions that were made in the registration statement, and that are the basis of stock purchases that are beyond the initial public offering, may be the basis of a securities fraud action. Purchasers in the aftermarket are within the group of purchasers protected against misstatements and omissions in the registration statement.
Citation Hertzberg v. Dignity Partners, Inc., - F.3d - (1999 WL 651947, 11th Cir.)

Back to Securities Law Listings

©1997-2000  South-Western, a division of Cengage Learning, Inc. Cengage Learning is a trademark used herein under license.