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Law Offices of Eric Norstedt, P.A.
2924 Davie Road, Suite 200
Davie, Florida, 33314
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Securities Law
FEDERAL SECURITIES LAW
 - Securities Act of 1933
 - Securities Act of 1934
    - Rules Promulgated under
      the Securities Act of 1934

STATE SECURITIES LAW

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Selected Sections of the

South Carolina Securities Act

 

Sections included on the South Carolina Securities Act Page:

Section 35-1-501 General fraud.
Section 35-1-502 Prohibited conduct in providing investment advice regarding securities.
Section 35-1-503 Evidentiary burden.
Section 35-1-504 Filing of sales and advertising literature.
Section 35-1-505 Misleading filings.
Section 35-1-506 Misrepresentations concerning registration or exemption.
Section 35-1-507 Qualified immunity.
Section 35-1-508 Criminal penalties.
Section 35-1-509 Civil liability.
Section 35-1-510 Rescission offers.

GENERAL FRAUD

It is unlawful for a person, in connection with the offer, sale, or purchase of a security, directly or indirectly:

(1) to employ a device, scheme, or artifice to defraud;

(2) to make an untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;  or

(3) to engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

PROHIBITED CONDUCT IN PROVIDING INVESTMENT ADVICE REGARDING SECURITIES

(a) It is unlawful for a person that advises others for compensation, either directly or indirectly or through publications or writings, as to the value of securities or the advisability of investing in, purchasing, or selling securities or that, for compensation and as part of a regular business, issues or promulgates analyses or reports relating to securities:

(1) to employ a device, scheme, or artifice to defraud another person;  or

(2) to engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

(b) A rule adopted under this chapter may define an act, practice, or course of business in connection with giving investment advice regarding securities as fraudulent, deceptive, or manipulative, and prescribe means reasonably designed to prevent a person from engaging in acts, practices, and courses of business defined as fraudulent, deceptive, or manipulative.

(c) A rule adopted under this chapter may specify the contents of a contract entered into, extended, or renewed in connection with giving investment advice regarding securities.

EVIDENTIARY BURDEN

(a) In a civil action or administrative proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden to prove the applicability of the claim.

(b) In a criminal proceeding under this chapter, a person claiming an exemption, exception, preemption, or exclusion has the burden of going forward with evidence of the claim.

FILING OF SALES AND ADVERTISING LITERATURE

(a) Except as otherwise provided in subsection (b), a rule adopted or order issued under this chapter may require the filing of a prospectus, pamphlet, circular, form letter, advertisement, sales literature, or other advertising record relating to a security or investment advice regarding securities, addressed or intended for distribution to prospective investors, including clients or prospective clients of a person registered or required to be registered as an investment adviser under this chapter.

(b) This section does not apply to sales and advertising literature specified in subsection (a) which relates to a federal covered security, a federal covered investment adviser, or a security or transaction exempted by Section 35‑1‑201, 35‑1‑202, or 35‑1‑203 except as required pursuant to Section 35‑1‑201(7).

MISLEADING FILINGS

It is unlawful for a person to make or cause to be made, in a record that is used in an action or proceeding or filed under this chapter, a statement that, at the time and in the light of the circumstances under which it is made, is false or misleading in a material respect, or, in connection with the statement, to omit to state a material fact necessary to make the statement made, in the light of the circumstances under which it was made, not false or misleading.

MISREPRESENTATIONS CONCERNING REGISTRATION OR EXEMPTION

The filing of an application for registration, a registration statement, a notice filing under this chapter, the registration of a person, the notice filing by a person, or the registration of a security under this chapter does not constitute a finding by the Securities Commissioner that a record filed under this chapter is true, complete, and not misleading.  The filing or registration or the availability of an exemption, exception, preemption, or exclusion for a security or a transaction does not mean that the Securities Commissioner has passed upon the merits or qualifications of, or recommended or given approval to, a person, security, or transaction.  It is unlawful to make, or cause to be made, to a purchaser, customer, client, or prospective customer or client a representation inconsistent with this section.

QUALIFIED IMMUNITY

A broker‑dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative is not liable to another broker‑dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative for defamation relating to a statement that is contained in a record required by the Securities Commissioner, or designee of the Securities Commissioner, the Securities and Exchange Commission, or a self‑regulatory organization, unless the person knew, or should have known at the time that the statement was made, that it was false in a material respect or the person acted in reckless disregard of the statement’s truth or falsity.

CRIMINAL PENALTIES

(a) A person that wilfully violates this chapter, or a rule adopted or order issued under this chapter, except Section 35‑1‑504 or the notice filing requirements of Section 35‑1‑302 or 35‑1‑405, or that wilfully violates Section 35‑1‑505 knowing that the statement made is false or misleading in a material respect, is guilty of a:

(1) felony and, upon conviction, must be fined not more than fifty thousand dollars or imprisoned not more than ten years, or both, if the person’s actions result in loss to an investor of twenty thousand dollars or more;

(2) felony and, upon conviction, must be fined in the discretion of the court or imprisoned not more than five years, or both, if the person’s actions result in loss to an investor of more than one thousand dollars but less than twenty thousand dollars;

(3) misdemeanor and, upon conviction, must be fined not more than thirty thousand dollars or imprisoned not more than three years, or both, if the person’s actions result in loss to an investor of one thousand dollars or less, or if no losses are proven.  An individual convicted of violating a rule or order under this chapter may be fined, but may not be imprisoned, if the individual did not have knowledge of the rule or order.

(b) The Securities Commissioner may refer that evidence as is available concerning violations of this chapter or of any rule or order under this chapter to the appropriate Division of the Attorney General’s Office or other appropriate prosecution, law enforcement, or licensing authorities who may institute the appropriate proceedings under this chapter.
(c) This chapter does not limit the power of this State to punish a person for conduct that constitutes a crime under other laws of this State.

CIVIL LIABILITY

(a) Enforcement of civil liability under this section is subject to the Securities Litigation Uniform Standards Act of 1998.

(b) A person is liable to the purchaser if the person sells a security in violation of Sections 35‑1‑301 or 35‑1‑501 or, by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading, the purchaser not knowing the untruth or omission and the seller not sustaining the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission.  An action under this subsection is governed by the following:

(1) The purchaser may maintain an action to recover the consideration paid for the security, less the amount of any income received on the security, and interest at the legal rate of interest from the date of the purchase, costs, and reasonable attorneys’ fees determined by the court, upon the tender of the security, or for actual damages as provided in paragraph (3).

(2) The tender referred to in paragraph (1) may be made any time before entry of judgment.  Tender requires only notice in a record of ownership of the security and willingness to exchange the security for the amount specified.  A purchaser that no longer owns the security may recover actual damages as provided in paragraph (3).

(3) Actual damages in an action arising under this subsection are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it, and interest at the legal rate of interest from the date of the purchase, costs, and reasonable attorneys’ fees determined by the court.

(c) A person is liable to the seller if the person buys a security in violation of Section 35‑1‑501 or by means of an untrue statement of a material fact or omission to state a material fact necessary in order to make the statement made, in light of the circumstances under which it is made, not misleading, the seller not knowing of the untruth or omission, and the purchaser not sustaining the burden of proof that the purchaser did not know, and in the exercise of reasonable care, could not have known of the untruth or omission.  An action under this subsection is governed by the following:

(1) The seller may maintain an action to recover the security, and any income received on the security, costs, and reasonable attorneys’ fees determined by the court, upon the tender of the purchase price, or for actual damages as provided in paragraph (3).

(2) The tender referred to in paragraph (1) may be made any time before entry of judgment.  Tender requires only notice in a record of the present ability to pay the amount tendered and willingness to take delivery of the security for the amount specified.  If the purchaser no longer owns the security, the seller may recover actual damages as provided in paragraph (3).

(3) Actual damages in an action arising under this subsection are the difference between the price at which the security was sold and the value the security would have had at the time of the sale in the absence of the purchaser’s conduct causing liability, and interest at the legal rate of interest from the date of the sale of the security, costs, and reasonable attorneys’ fees determined by the court.

(d) A person acting as a broker‑dealer or agent that sells or buys a security in violation of Section 35‑1‑401(a), 35‑1‑402(a), or 35‑1‑506 is liable to the customer.  The customer, if a purchaser, may maintain an action for recovery of actual damages as specified in subsections (b)(1) through

(3), or, if a seller, for a remedy as specified in subsections (c)(1) through (3).

(e) A person acting as an investment adviser or investment adviser representative that provides investment advice regarding securities for compensation in violation of Section 35‑1‑403(a), 35‑1‑404(a), or 35‑1‑506 is liable to the client.  The client may maintain an action to recover the consideration paid for the advice, interest at the legal rate of interest from the date of payment, costs, and reasonable attorneys’ fees determined by the court.

(f) A person that receives directly or indirectly any consideration for providing investment advice regarding securities to another person and that employs a device, scheme, or artifice to defraud the other person or engages in an act, practice, or course of business that operates or would operate as a fraud or deceit on the other person, is liable to the other person.  An action under this subsection is governed by the following:

(1) The person defrauded may maintain an action to recover the consideration paid for the advice and the amount of any actual damages caused by the fraudulent conduct, interest at the legal rate of interest from the date of the fraudulent conduct, costs, and reasonable attorneys’ fees determined by the court, less the amount of any income received as a result of the fraudulent conduct.
(2) This subsection does not apply to a broker‑dealer or its agents if the investment advice regarding securities that is provided is solely incidental to transacting business as a broker‑dealer and no special compensation is received for the investment advice regarding securities.

(g) The following persons are liable jointly and severally with and to the same extent as persons liable under subsections (b) through (f):

(1) a person that directly or indirectly controls a person liable under subsections (b) through (f), unless the controlling person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;

(2) an individual who is a managing partner, executive officer, or director of a person liable under subsections (b) through (f), including an individual having a similar status or performing similar functions, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;

(3) an individual who is an employee, or a person occupying a similar status or performing a similar function, of a person liable under subsections (b) through (f) and who materially aids the conduct giving rise to the liability, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;  and

(4) a person that is a broker‑dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under subsections (b) through (f), unless the person sustains the burden of proof that the person did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which liability is alleged to exist.

(5) a person who, with actual knowledge that a person is committing acts sufficient to violate Sections 35‑1‑501 and 35‑1‑502, nonetheless intentionally furthers the violation with actual awareness that the person is rendering substantial assistance to the person committing the violation of Sections 35‑1‑501 and 35‑1‑502, thereby becomes an aider and abettor of the violation, and is therefore jointly and severally liable with and to the same extent as the assisted person who engaged in the fraudulent activity, provided, however, this subsection (5) does not require any due diligence investigation nor impose liability for failure to perform any due diligence investigation otherwise required.

(h) A person liable under this section has a right of contribution as in cases of contract against any other person liable under this section for the same conduct.

(i) A cause of action under this section survives the death of an individual who might have been a plaintiff or defendant.

(j) A person may not obtain relief:

(1) under subsection (b) for violation of Section 35‑1‑301, or under subsection (d) or (e), unless the action is instituted within three years after the violation occurred;  or

(2) under subsection (b), other than for violation of Section 35‑1‑301, or under subsection (c) or

(f), unless the action is instituted within the earlier of three years after discovery of the facts constituting the violation or five years after the violation.

(k) A person that has made, or has engaged in the performance of, a contract in violation of this chapter or a rule adopted or order issued under this chapter, or that has acquired a purported right under the contract with knowledge of conduct by reason of which its making or performance was in violation of this chapter, may not base an action on the contract.

(l) A condition, stipulation, or provision including, but not limited to, any choice of law provision directly or indirectly binding a person purchasing or selling a security or receiving investment advice regarding securities to waive compliance with this chapter or a rule adopted or order issued under this chapter is void.

(m) The rights and remedies provided by this chapter are in addition to any other rights or remedies that may exist, but this chapter does not create a cause of action not specified in this section or Section 35‑1‑411(e).

RESCISSION OFFERS

A purchaser, seller, or recipient of investment advice regarding securities may not maintain an action under Section 35‑1‑509 if:

(1) The purchaser, seller, or recipient of investment advice regarding securities receives in a record, before the action is instituted:

(A) an offer stating the respect in which liability under Section 35‑1‑509 may have arisen and fairly advising the purchaser, seller, or recipient of investment advice regarding securities of that person’s rights in connection with the offer, and any financial or other information necessary to correct all material misrepresentations or omissions in the information that was required by this chapter to be furnished to that person at the time of the purchase, sale, or investment advice regarding securities;

(B) if the basis for relief under this section may have been a violation of Section 35‑1‑509(b), an offer to repurchase the security for cash, payable on delivery of the security, equal to the consideration paid, including without limitation all commissions and fees, and interest at the legal rate of interest from the date of the purchase, less the amount of any income received on the security, or, if the purchaser no longer owns the security, an offer to pay the purchaser upon acceptance of the offer damages in an amount that would be recoverable upon a tender, less the value of the security when the purchaser disposed of it, and interest at the legal rate of interest from the date of the purchase in cash equal to the damages computed in the manner provided in this subsection;

(C) if the basis for relief under this section may have been a violation of Section 35‑1‑509(c), an offer to tender the security, on payment by the seller of an amount equal to the purchase price paid, less income received on the security by the purchaser and interest at the legal rate of interest from the date of the sale;  or if the purchaser no longer owns the security, an offer to pay the seller upon acceptance of the offer, in cash, damages in the amount of the difference between the price at which the security was purchased and the value the security would have had at the time of the purchase in the absence of the purchaser’s conduct that may have caused liability and interest at the legal rate of interest from the date of the sale;

(D) if the basis for relief under this section may have been a violation of Section 35‑1‑509(d);  and if the customer is a purchaser, an offer to pay as specified in subparagraph (B);  or, if the customer is a seller, an offer to tender or to pay as specified in subparagraph (C);

(E) if the basis for relief under this section may have been a violation of Section 35‑1‑509(e), an offer to reimburse in cash the consideration paid for the advice and interest at the legal rate of interest from the date of payment;  or

(F) if the basis for relief under this section may have been a violation of Section 35‑1‑509(f), an offer to reimburse in cash the consideration paid for the advice, the amount of any actual damages that may have been caused by the conduct, and interest at the legal rate of interest from the date of the violation causing the loss;

(2) the offer under paragraph (1) states that it must be accepted by the purchaser, seller, or recipient of investment advice regarding securities within 30 days after the date of its receipt by the purchaser, seller, or recipient of investment advice or any shorter period, of not less than three days, that the Securities Commissioner, by order, specifies;

(3) the offeror has the present ability to pay the amount offered or to tender the security under paragraph (1);

(4) the offer under paragraph (1) is delivered to the purchaser, seller, or recipient of investment advice, or sent in a manner that ensures receipt by the purchaser, seller, or recipient of investment advice;  and

(5) the purchaser, seller, or recipient of investment advice that accepts the offer under paragraph

(1) in a record within the period specified under paragraph (2) is paid in accordance with the terms of the offer.

 


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The above is not the complete act. This page contains only certain sections of the statute which we believe you may find informative. We do not and cannot guarantee the above sections are current law in this state. Legislatures may enact revised statutes at any time. Moreover these sections are presented for informational purposes only and are presented "as is" with all faults and with no warranties or guarantees as to the accuracy. Further, The content on these pages are not offered or intended to be legal advice by this firm for any purpose or manner whatsoever. If you require the current and complete version of the Law in your state, you should visit the Legislature home page of the particular state for more information or contact an attorney for advice on obtaining such information.

 

 
 
 
 

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