A customer can recover money from an unlawful sale even when the agent never intended to break the law. Criminal penalties require a separate analysis.
When an agent's sale violates state securities law, your customer may have a private right of action, meaning the right to sue directly. Section 410, written as §410, creates specified civil claims against sellers. Civil liability means legal responsibility to provide a remedy to the injured person.
As an agent, use the tested 1956 Uniform Securities Act, as amended, for these rules. It is a model statute that states enact, sometimes with differences. Its civil remedies appear in §410.
As an agent, you represent a seller or brokerage firm in securities transactions. A broker-dealer conducts the business of securities transactions for customers or its own account. Section 410(a) provides two distinct grounds for a buyer's recovery. Identify which ground the facts establish before evaluating a defense.
Registration and specified sales violations. Under §410(a)(1), a buyer may recover for violations of applicable broker-dealer, agent, or securities registration requirements. These registration claims do not require proof of willfulness.
Common mistakes
- Treating an innocent registration error as a complete defense. Section 410(a)(1) does not require willfulness for the applicable registration violation.
- Subtracting today's $4,000 market value from Mei's tender recovery. That incorrectly produces $7,200 instead of $11,200; she returns the security.
- Stopping Daniel's damages calculation at $8,300. That omits the $560 disposition-interest adjustment and overstates recovery.
Bottom line
- Section 410 registration liability does not require willfulness; material-misstatement liability includes the buyer-knowledge condition and seller's reasonable-care defense.
- Tender recovery includes price, interest, costs, and reasonable attorneys' fees, less income; former-owner damages also subtract disposition value and its subsequent interest.
- Covered control persons and material assistants may share joint and several liability, subject to their defense and contribution rights.
- Civil suit must begin within three years after the contract or two years after discovery, whichever occurs first.
Exam shortcut
Circle the requested outcome first: customer recovery, criminal punishment, or time to act. That choice determines which dates and facts matter. For recovery calculations, mark “still owns” or “disposed of” before touching the numbers. Draw a separate interest interval beginning at disposition when needed. Put the two civil expiration dates beside each other and cross out the later one. For an offer, underline ownership at receipt and the response verb.
The full lesson (about 3,237 words, 22 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- F13
Browse all free Series 63 lessons or jump into free Series 63 practice questions.