As I mentioned in my Insider Trading post, securities are subject to regulations both at the federal and state levels. The Missouri Securities Act of 2003 pertains to all transactions in securities, regardless of whether they need to be registered (see: Exemptions from Securities Registration). The primary anti-fraud section of the Missouri Act is codified in 409.5-501. It is substantially similar to SEC Rule 10b-5, even using the same language such as “device, scheme, or artifice” and “material fact.”
There are, though, some differences in the Missouri act. RSMo 409.5-502 outlaws fraud by any person who receives any compensation primarily for giving investment advice. Moreover, RSMo 409.5-505 makes it illegal to make any materially false or misleading statement in a document filed with the Missouri Commissioner of Securities or in any proceeding under the Missouri Act. RSMo 409.5-506 prohibits any representation to a potential purchaser, customer, client that a document has been approved by the Missouri Commissioner of Securities. The reasoning for this is that if brokers or securities companies were permitted to put a stamp of approval from the Missouri Commissioner of Securities, then it is possible that a third party could interpret that as the State of Missouri tacitly approving or endorsing the product.
In the event that someone is accused of one of the above violations and litigation ensues, several “gray area” things have to be shown. Statements need to be concerned with material facts, defined as what a reasonable investor would want to know. And depending on the particular violation alleged, a certain statement of mind or level of intent needs to be shown with particularity. Finally, if criminal sanctions are sought, proof beyond a reasonable doubt is necessary. If a civil action is pursued, a mere preponderance of the evidence is all that is required (i.e., more likely than not).