Section 12(a)(2) Elements and Defenses under the Securities Act

Summary

This practice note discusses Section 12(a)(2) (15 U.S.C. § 77l) claims under the Securities Act of 1933, as amended (Securities Act), for false or misleading statements in a prospectus or oral communication. Section 12(a)(2) creates potential liability for a person who offers or sells securities by means of a prospectus or oral communication that includes a materially false statement or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading. Section 12(a)(2) provides a primary remedy of rescission to the direct purchasers of such securities who have been damaged by the statement. This note reviews the elements of a Section 12(a)(2) claim and defenses you may use if your clients encounter such claims.