§ 77j. Information required in prospectus.

(a) A prospectus

(1) when relating to a security other than a security issued by a foreign government or political subdivision thereof, shall contain the same statements made in the registration statement, but it need not include the documents referred to in paragraphs (28)-(32) of Schedule A of section 77aa of this title.

(2) when relating to a security issued by a foreign government or political subdivision thereof shall contain the same statements made in the registration statement, but it need not include the documents referred to in paragraphs (13) and (14) of Schedule B of section 77aa of this title.

(b) Notwithstanding the provisions of subsection (a) of this section

(1) When a prospectus is used more than thirteen months after the effective date of the registration statement, the information in the statements contained therein shall be as of a date not more than twelve months prior to such use, so far as such information is known to the user of such prospectus or can be furnished by such user without unreasonable effort or expense.

(2) there may be omitted from any prospectus any of the statements required under subsection (a) of this section which the Commission may by rules or regulations designate as not being necessary or appropriate in the public interest or for the protection of investors.

(3) any prospectus shall contain such other information as the Commission may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors.

(4) in the exercise of its powers under paragraphs (2) and (3) of this subsection, the Commission shall have authority to classify prospectuses according to the nature and circumstances of their use, and, by rules and regulations and subject to such terms and conditions as it shall specify therein, to prescribe as to each class the form and contents which it may find appropriate to such use and consistent with the public interest and the protection of investors.

(c) The statements or information required to be included in a prospectus by or under authority of subsection (a) or (b) of this section, when written, shall be placed in a conspicuous part of the prospectus in type as large as that used generally in the body of the prospectus.

(d) In any case where a prospectus consists of a radio broadcast, copies thereof shall be filed with the Commission under such rules and regulations as it shall prescribe. The Commission may by rules and regulations require the filing with it of forms of prospectuses used in connection with the sale of securities registered under this subchapter. (May 27, 1933, ch. 38, title I, § 10, 48 Stat. 81; June 6, 1934, ch. 404, § 205, 48 Stat. 906.)

TRANSFER OF FUNCTIONS

All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Com

mission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, §§ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

CROSS REFERENCES

Definition of prospectus

Investment Company Act of 1940, see section 80a-2 (a) (30) of this title.

Prospectus within this subchapter, see section 77b (10) of this title.

Trust Indenture Act of 1939, see section 77ccc (3) of this title.

Prohibitions unless prospectus meets the requirements of this section, see section 77e of this title.

Rules and regulations, authority of Commission to make, amend, and rescind, see section 77s of this title. Trust Indenture Act of 1939

Prospectus under, see section 77eee of this title. Transportation of prospectus concerning securities not registered under this subchapter in interstate commerce or mails as unlawful, see section 77fff of this title.

§ 77k. Civil liabilities on account of false registration statement.

(a) In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue—

(1) every person who signed the registration statement;

(2) every person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted;

(3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner;

(4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him;

(5) every underwriter with respect to such security. If such person acquired the security after the issuer has made generally available to its security holders an earning statement covering a period of at least twelve months beginning after the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such omission, but such reliance may be established without proof of the reading of the registration statement by such person.

(b) Notwithstanding the provisions of subsection (a) of this section no person, other than the issuer, shall be liable as provided therein who shall sustain the burden of proof

(1) that before the effective date of the part of the registration statement with respect to which his liability is asserted (A) he had resigned from or had taken such steps as are permitted by law to resign from, or ceased or refused to act in, every office, capacity, or relationship in which he was described in the registration statement as acting or agreeing to act, and (B) he had advised the Commission and the issuer in writing that he had taken such action and that he would not be responsible for such part of the registration statement; or

(2) that if such part of the registration statement became effective without his knowledge, upon becoming aware of such fact he forthwith acted and advised the Commission, in accordance with paragraph (1) of this subsection, and, in addition, gave reasonable public notice that such part of the registration statement had become effective without his knowledge; or

(3) that (A) as regards any part of the registration statement not purporting to be made on the authority of an expert, and not purporting to be a copy of or extract from a report or valuation of an expert, and not purporting to be made on the authority of a public official document or statement, he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (B) as regards any part of the registration statement purporting to be made upon his authority as an expert or purporting to be a copy of or extract from a report or valuation of himself as an expert, (i) he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) such part of the registration statement did not fairly represent his statement as an expert or was not a fair copy of or extract from his report or valuation as an expert; and (C) as regards any part of the registration statement purporting to be made on the authority of an expert (other than himself) or purporting to be a copy of or extract from a report or valuation of an expert (other than himself), he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement of the expert or was not a fair copy of or extract from the report or valuation of the expert;

and (D) as regards any part of the registration statement purporting to be a statement made by an official person or purporting to be a copy of or extract from a public official document, he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue, or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement made by the official person or was not a fair copy of or extract from the public official document.

(c) In determining, for the purpose of paragraph (3) of subsection (b) of this section, what constitutes reasonable investigation and reasonable ground for belief, the standard of reasonableness shall be that required of a prudent man in the management of his own property.

(d) If any person becomes an underwriter with respect to the security after the part of the registration statement with respect to which his liability is asserted has become effective, then for the purposes of paragraph (3) of subsection (b) of this section such part of the registration statement shall be considered as having become effective with respect to such person as of the time when he became an underwriter.

(e) The suit authorized under subsection (a) of this section may be to recover such damages as shall represent the difference between the amount paid for the security (not exceeding the price at which the security was offered to the public) and (1) the value thereof as of the time such suit was brought, or (2) the price at which such security shall have been disposed of in the market before suit, or (3) the price at which such security shall have been disposed of after suit but before judgment if such damages shall be less than the damages representing the difference between the amount paid for the security (not exceeding the price at which the security was offered to the public) and the value thereof as of the time such suit was brought: Provided, That if the defendant proves that any portion or all of such damages represents other than the depreciation in value of such security resulting from such part of the registration statement, with respect to which his liability is asserted, not being true or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading, such portion of or all such damages shall not be recoverable. In no event shall any underwriter (unless such underwriter shall have knowingly received from the issuer for acting as an underwriter some benefit, directly or indirectly, in which all other underwriters similarly situated did not share in proportion to their respective interests in the underwriting) be liable in any suit or as a consequence of suits authorized under subsection (a) of this section for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public. In any suit under this

or any other section of this subchapter the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees, and if judgment shall be rendered against a party litigant, upon the motion of the other party litigant, such costs may be assessed in favor of such party litigant (whether or not such undertaking has been required) if the court believes the suit or the defense to have been without merit, in an amount sufficient to reimburse him for the reasonable expenses incurred by him, in connection with such suit, such costs to be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard.

(f) All or any one or more of the persons specified in subsection (a) of this section shall be jointly and severally liable, and every person who becomes liable to make any payment under this section may recover contribution as in cases of contract from any person who, if sued separately, would have been liable to make the same payment, unless the person who has become liable was, and the other was not, guilty of fraudulent misrepresentation.

(g) In no case shall the amount recoverable under this section exceed the price at which the security was offered to the public. (May 27, 1933, ch. 38, title I, § 11, 48 Stat. 82; June 6, 1934, ch. 404, § 206, 48 Stat. 907.)

AMENDMENTS

1934 Subsection (a), last paragraph, added by act June 6, 1934.

Subsection (b), paragraph (3), clauses (c) and (d), amended by act June 6, 1934.

Subsections (c) and (e) amended by act June 6, 1934.

TRANSFER OF FUNCTIONS

All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, §§ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

CROSS REFERENCES

Fraudulent interstate transactions, see section 77q of this title.

Information and documents to determine eligibility of indenture trustee and analysis of indenture, section as inapplicable to, see section 77eee of this title.

Liability for misleading statements under the

Public Utility Holding Company Act of 1935, see section 79p of this title.

Securities Exchange Act of 1934, see section 78r of this title.

Liability of controlling persons under this section, see section 770 of this title.

Limitation of actions, see section 77m of this title. Material misstatements and unlawful representations under the Investment Advisers Act of 1940, see sections 80b-7 and 80b-8 of this title.

Taxation of costs, see section 1920 of Title 28, Judiciary and Judicial Procedure.

Undertaking, for costs and reasonable attorneys' fees

under

Securities Exchange Act of 1934, see sections 781 and 78r of this title.

Trust Indenture Act of 1939, see sections 77000 and 77www of this title.

FEDERAL RULES OF CIVIL PROCEDURE

Costs, see rule 54, following section 2072 of Title 28, Judiciary and Judicial Procedure.

Effect of rule 54 on this section, see note by Advisory Committee under said rule 54.

One form of action, see rule 2.

§ 777. Civil liabilities arising in connection with prospectuses and communications.

Any person who

(1) sells a security in violation of section 77e of this title, or

(2) sells a security (whether or not exempted by the provisions of section 77c of this title, other than paragraph (2) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact 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 (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. (May 27, 1933, ch. 38, title I, § 12, 48 Stat. 84.)

CROSS REFERENCES

Information and documents to determine eligibility of indenture trustee and analysis of indenture, section as inapplicable to, see section 77eee of this title.

Liability of controlling persons under this section, see section 770 of this title.

Limitation of actions, see section 77m of this title.

FEDERAL RULES OF CIVIL PROCEDURE

One form of action, see rule 2, following section 2072 of title 28, Judiciary and Judicial Procedure.

§ 77m. Limitation of actions.

No action shall be maintained to enforce any liability created under section 77k or 771 (2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 777 (1) of this title, unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 77k or 771 (1) of this title more than three years after the security was bona fide offered to the public, or under section 777 (2) of this title more than three years after the sale. (May 27, 1933, ch. 38, title I, § 13, 48 Stat. 84; June 6, 1934, ch. 404, § 207, 48 Stat. 908.)

CROSS REFERENCES

Damages from manipulation of security prices, see section 781 (e) of this title.

Liability for misleading statements under

Public Utility Holding Company Act of 1935, see section 79p of this title.

Securities Exchange Act of 1934, see section 78r of this title.

Trust Indenture Act of 1939, see section 77www of this title.

FEDERAL RULES OF CIVIL PROCEDURE

General rules of pleading, affirmative defenses, see rule 8 (c), following section 2072 of Title 28, Judiciary and Judicial Procedure.

§ 77n. Contrary stipulations void.

Any condition, stipulation, or provision binding any person acquiring any security to waive compliance with any provision of this subchapter or of the rules and regulations of the Commission shall be void. (May 27, 1933, ch. 38, title I, § 14, 48 Stat. 84.)

TRANSFER OF FUNCTIONS

All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, §§ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

CROSS REFERENCES

Contrary stipulations void under

Investment Advisers Act of 1940, see section 80b-15 of this title.

Investment Company Act of 1940, see section 80a-46 of this title.

Public Utility Holding Company Act of 1935, see section 79z of this title.

Securities Exchange Act of 1934, see section 78cc of this title.

Trust Indenture Act of 1939, see section 77aaaa of this title.

Rules and regulations, authority of Commission to make, amend, and rescind, see section 77s of this title.

§ 770. Liability of controlling persons.

Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 77k or 771 of this title, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist. (May 27, 1933, ch. 38, title I, 15, 48 Stat. 84; June 6, 1934, ch. 404, § 208, 48 Stat. 908.)

CROSS REFERENCES

Definition of the term, person, see section 77b (2) of this title.

Liability of controlling persons under

Public Utility Holding Company Act of 1935, see section 79z-1 of this title.

Securities Exchange Act of 1934, see section 78t of this title.

§ 77p. Additional remedies.

The rights and remedies provided by this subchapter shall be in addition to any and all other rights and remedies that may exist at law or in equity. (May 27, 1933, ch. 38, title I, § 16, 48 Stat. 84.)

CROSS REFERENCES Securities Exchange Act of 1934 as providing additional remedies, see section 78bb of this title.

§ 77q. Fraudulent interstate transactions.

(a) It shall be unlawful for any person in the sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly—

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

(b) It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.

(c) The exemptions provided in section 77c shall not apply to the provisions of this section. (May 27, 1933, ch. 38, title I, § 17, 48 Stat. 84.)

CROSS REFERENCES

Fraud and false statements, see chapter 47 of Title 18, Crimes and Criminal Procedure.

Information and documents to determine eligibility of indenture trustee and analysis of indenture, section as inapplicable to, see section 77eee of this title.

§ 77r. State control of securities.

Nothing in this subchapter shall affect the jurisdiction of the securities commission (or any agency or office performing like functions) of any State or Territory of the United States, or the District of Columbia, over any security or any person. (May 27, 1933, ch. 38, title I, § 18, 48 Stat. 85.)

TRANSFER OF FUNCTIONS

All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, §§ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out in note under section 78d of this title.

CROSS REFERENCES

Jurisdiction of other tribunals unaffected insofar as not in conflict with

Investment Company Act of 1940, see section 80a-49 of this title.

Public Utility Holding Company Act of 1935, see section 79u of this title.

Securities Exchange Act of 1934, see section 78bb of this title.

Trust Indenture Act of 1939, see section 77zzz of this title.

§ 77s. Special powers of Commission.

(a) The Commission shall have authority from time to time to make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this subchapter, including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers, and defining accounting, technical, and trade terms used in this subchapter. Among other things, the Commission shall have authority, for the purposes of this subchapter, to prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and earning statement, and the methods to be followed in the preparation of accounts, in the appraisal or valuation of assets and liabilities, in the determination of depreciation and depletion, in the differentiation of recurring and nonrecurring income, in the differentiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable, of consolidated balance sheets or income accounts of any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer; but insofar as they relate to any common carrier subject to the provisions of section 20 of Title 49, the rules and regulations of the Commission with respect to accounts shall not be inconsistent with the requirements imposed by the Interstate Commerce Commission under authority of such section 20. The rules and regulations of the Commission shall be effective upon publication in the manner which the Commission shall prescribe. No provision of this subchapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commission, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

(b) For the purpose of all investigations which, in the opinion of the Commission, are necessary and proper for the enforcement of this subchapter, any member of the Commission or any officer or officers designated by it are empowered to administer oaths and affirmations, subpena witnesses, take evidence, and require the production of any books, papers, or other documents which the Commission deems relevant or material to the inquiry. Such attendance of witnesses and the production of such documentary evidence may be required from any place in the United States or any Territory at any designated place of hearing. (May 27, 1933, ch. 38, title I, § 19, 48 Stat. 85; June 6, 1934, ch. 404, § 209, 48 Stat. 908.) AMENDMENTS

1934 Subsection (a) amended by act June 6, 1934, which inserted "technical" in first sentence and added last sentence.

TRANSFER OF FUNCTIONS

All executive and administrative functions of the Securities and Exchange Commission were, with certain exceptions, transferred to the Chairman of such Commission, with authority vested in him to authorize their performance by any officer, employee, or administrative unit under his jurisdiction, by 1950 Reorg. Plan No. 10, §§ 1, 2, eff. May 24, 1950, 15 F. R. 3175, 64 Stat. 1265, set out out in note under section 78d of this title.

CROSS REFERENCES

Administration of oaths, etc., under

Investment Advisers Act of 1940, see section 80b-9 (b) of this title.

Investment Company Act of 1940, see section 80a-41 (b) of this title.

Public Utility Holding Company Act of 1935, see section 79r (c) of this title.

Securities Exchange Act of 1934, see section 78u (b) of this title.

Trust Indenture Act of 1939, see section 77uuu (a) of this title.

Attendance of witnesses, and production of documents, judicial enforcement of orders for, see section 77v (b) of this title.

Authority of Commission comparable to subsection (a) of this section under

Investment Advisers Act of 1940, see section 80b-11 of this title.

Investment Company Act of 1940, see sections 80a-29 and 80a-37 of this title.

Public Utility Holding Company Act of 1935, see section 79t of this title.

Securities Exchange Act of 1934, see section 78c (b) and 78m (b) of this title.

Trust Indenture Act of 1939, see section 77sss of this title.

Rules and regulations

Action to enjoin acts or practices constituting violation of, see section 77t of this title. Availability of information contained in or filed with any registration statement, see section 77f (d) of this title.

Classes of securities exempt from this subchapter by reason of small amount involved or limited character of public offering, see section 77c (b) of this title.

Information required in prospectus, see section 77j of this title.

Information required in registration statement, see section 77g of this title.

Integration of procedure with other Acts, see section 77hhh of this title.

Investigation to determine violation of, see section 77t of this title.

Jurisdiction of offenses and violations under rules and regulations, see section 77v (a) of this title. Penalty for violation of, see section 77x of this title. RULES OF PRACTICE

Rules of Practice before the Securities Exchange Commission are set out following section 78u of this title. § 77t. Injunctions and prosecution of offenses.

(a) Whenever it shall appear to the Commission, either upon complaint or otherwise, that the provisions of this subchapter, or of any rule or regulation prescribed under authority thereof, have been or are about to be violated, it may, in its discretion, either require or permit such person to file with it a statement in writing, under oath, or otherwise, as to all the facts and circumstances concerning the subject matter which it believes to be in the public interest to investigate, and may investigate such facts.

(b) Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute