Am I liable for incorrect or inaccurate statements made to investors?

Misleading or deceiving investors or withholding material information from them is against the law.  It’s fraud and investors who incur losses because they made a decision that they otherwise would not have made had they not been misled can file suit to reclaim their investment.

Rule 10b-5 prohibits fraud in the purchase or sale of a security and allows investors to sue for damages when they receive incorrect or misleading information.  The anti-fraud provisions of Rule 10b-5 apply to private placements under Regulation D and to offshore offerings under Regulation S, as well as to other registered and exempt offerings.  

Also, under the Dodd Frank Act, the SEC has instituted a whistleblower program whereby anyone who brings information to the SEC regarding a securities fraud that leads to a successful enforcement action will be rewarded with 10 – 30% of the total sanctions collected.

Issuers must therefore be careful not to say things they know are untrue to investors, whether in written materials or in oral presentations.  Having counsel to help you prepare your statements to investors is crucial in this regard.

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Last Modified: May 4, 2016