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Liability from Missouri Securities Laws

Missouri Securities Fraud can result in extensive civil liability and criminal liability. Several different types of people — even those not directly partaking in a securities transaction — can experience liability and in several different ways. A person acting as a broker-dealer/agent can be liable to the customer. An investment advisor can be liable to the client. Managing partners, executive officers, or a director of a person liable is liable if he/she knew, or reasonably could have known of a violation, is liable. If you materially aide another person in committing securities fraud, then you will be liable. The list of violations goes on and on.

After liability is established, what is the next step? The plaintiff(s), the wronged party in the civil action, may, under RSMo 409.5-509(b)(1), seek a remedy at law for money damages to cover compensatory damages, attorneys fees, and possibly punitive damages depending on the severity of the transgression; equitably relief is also possible if the plaintiff(s) wants to rescind the transaction (i.e., make it as as if it had never occurred). The statute of limitations period in which to bring the suit is in some cases one year after the violation occurred and in other case two years after the discovery of the violation, whichever is earlier.

The seller/wrongdoer can mitigate civil liability by offering to repurchases the securities or simply void the transaction. The Missouri Securities Commissioner has even promulgated an administrative regulation that provides that when a seller/wrongdoer makes an offer to repurchase the securities from the plaintiff at the original sale price plus interest and the offer is not accepted within 30 days from the date of receipt, the plaintiff is barred from bringing certain types of civil suits.

As you can imagine, securities purchases and transactions offer involve numerous people, so the potential for costly monetary liability is high.

What about criminal liability? The Missouri Securities Act can, for more serious consequences, impose a fine of up to $1 million and imprisonment of up to 10 years for those egregious cases where the securities laws have been violated willfully. To prove that such a violation was made willfully, though, the State would have to prove the wrongdoer has specific knowledge that he or she was intentionally making false statements or perpetrating wrongdoings. Generally, fines are imposed on individuals who violate the Missouri Act without this heightened knowledge.

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