Tennessee § 48-1-122 - Civil liabilities.

§ 48-1-122. Civil liabilities.

Any person who: Sells a security in violation of §§ 48-1-104 — 48-1-109, 48-1-110(f), or of any condition imposed under § 48-1-107(e), or any rule, or order under this part of which the person has notice; or Sells a security in violation of § 48-1-121(a) (the purchaser not knowing of the violation of § 48-1-121(a), and who does not carry the burden of proof of showing that the person did not know and in the exercise of reasonable care could not have known of the violation of § 48-1-121(a)); shall be liable to the person purchasing the security from the seller to recover the consideration paid for the security, together with interest at the legal rate from the date of payment, less the amount of any income received on the security, upon the tender of the security, or, if the purchaser no longer owns the security, 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 from the date of disposition. Tender shall require only notice of willingness to exchange the security for the amount specified. Any notice may be given by service as in civil actions or by certified mail addressed to the last known address of the person liable. Any person who purchases a security in violation of § 48-1-121(a) (the seller not knowing of the violation of § 48-1-121(a), and who does not carry the burden of proof of showing that the purchaser did not know and in the exercise of reasonable care could not have known of the violation of § 48-1-121(a)) shall be liable to the person selling the security to the purchaser to return the security, plus any income received by the purchaser thereon, upon tender of the consideration received, or, if the purchaser no longer owns the security, the excess of the value of the security when the purchaser no longer owns the security, the excess of the value of the security when the purchaser disposed of it, plus interest at the legal rate from the date of disposition, over the consideration paid for the security. Tender requires only notice of willingness to pay the amount specified in exchange for the security. Any notice may be given by service as in civil actions or by certified mail to the last known address of the person liable. Any person who willfully engages in any act or conduct which violates § 48-1-121 shall be liable to any other person (not knowing that any such conduct constituted a violation of § 48-1-121) who purchases or sells any security at a price which was affected by the act or conduct for the damages sustained as a result of such act or conduct unless the person sued shall prove that the person sued acted in good faith and did not know, and in the exercise of reasonable care could not have known, that such act or conduct violated § 48-1-121. Damages shall be the difference between the price at which the other person purchased or sold securities and the market value which the securities would have had at the time of the other person's purchase or sale in the absence of the act or conduct plus interest at the legal rate. Any person who shall make or cause to be made any statement in any application, report, or document filed pursuant to this part or any rule or order hereunder or any undertaking contained in a registration statement hereunder, or in any advice given in such person's capacity as an investment adviser, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, shall be liable to any person (not knowing that any such statement was false or misleading) who, in reliance upon such statement, shall have purchased or sold a security at a price which was affected by such statement, for damages (calculated as provided in subsections (a) and (b)) caused by such reliance, unless the person sued shall prove that the person sued acted in good faith and had no knowledge that such statement was false or misleading and in the exercise of reasonable care could not have known that such statement was false or misleading. A person seeking to enforce any liability under this section may sue either at law or in equity in any court of competent jurisdiction. In any such suit under this section, the court may, in its discretion, require an undertaking for the payment of the costs of such suit, and assess reasonable costs, including reasonable attorneys' fees, against either party litigant. Every person who directly or indirectly controls a person liable under this section, every partner, principal executive officer, or director of such person, every person occupying a similar status or performing similar functions, every employee of such person who materially aids in the act or transaction constituting the violation, and every broker-dealer or agent who materially aids in the act or transaction constituting the violation, are also liable jointly and severally with and to the same extent as such person, unless the person who would be liable under this subsection (g) proves that the person who would be liable did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There is contribution as in cases of contract among the several persons so liable. No action shall be maintained under this section unless commenced before the expiration of five (5) years after the act or transaction constituting the violation or the expiration of two (2) years after the discovery of the facts constituting the violation, or after such discovery should have been made by the exercise of reasonable diligence, whichever first expires. Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this part or any rule or order hereunder is void. The rights and remedies under this part are in addition to any other rights or remedies that may exist at law or in equity. The legal rate of interest shall be that as provided by § 47-14-121. Acts 1980, ch. 866, § 22; 1981, ch. 459, §§ 3, 4; T.C.A., § 48-16-122 ; Acts 1996, ch. 1072, §§ 4, 5; 2003, ch. 100, §§ 1, 2; T.C.A., § 48-2-122 . Code Commission Notes. Former § 48-2-122 was transferred to § 48-1-122 by the code commission in 2012. Compiler's Notes. The Securities Law of 1955, formerly codified as §§ 48-1601 — 48-1653, was repealed by Acts 1980, ch. 886, § 27. However, the section also contained a savings provision referring to former §§ 48-1601 — 48-1653 which read: “(b) Prior law exclusively governs all suits, actions, prosecutions, or proceedings which are pending or may be initiated on the basis of facts or circumstances occurring before the effective date of this Act, except that no civil suit or action may be maintained to enforce any liability under prior law unless brought within any period of limitation which applied when the cause of action accrued and in any event within two years after the effective date of this Act. “(c) All effective registrations under prior law, all administrative orders relating to such registrations, and all conditions imposed upon such registrations remain in effect so long as they would have remained in effect if this Act had not been passed. They are considered to have been filed, entered, or imposed under this Act, but are governed by prior law. “(d) Prior law applies in respect of any sale made within one year after the effective date of this Act pursuant to an offering exempt under prior law which offering was begun in good faith before such effective date. “(e) Judicial review of all administrative orders as to which review proceedings have not been instituted by the effective date of this Act are governed by Section 20, except that no review proceeding may be instituted unless the petition is filed within any period of limitation which applied to a review proceeding when the order was entered and in any event within 60 days after the effective date of this Act.” The effective date of the Act was July 2, 1980. Acts 2003, ch. 100, § 3 provided that the amendment to subsection (h) shall apply to all proceedings addressed by this part that are commenced on or after May 7, 2003. Law Reviews. Securities Issuer Liability for Third Party Misstatements: Refining the Entanglement Standard see 53 Vand. L. Rev. 947 (2000).