Dahl (Plaintiff) alleged that he was not a seller of securities as to securities he had advocated due to him doing so unnecessarily.
Facts of the case
Does unnecessarily advocating unregistered securities make you a seller under the Securities Act?
“(Blackmun, J.) No. Advocating unregistered securities does not make you a seller as defined by the Securities Act. The court of appeals was incorrect in holding that the in pari delicto defense is unattainable
no precedent exists for holding that it is unattainable in a strict liability action like one under Â§ 12 of the Securities Act, neither is it a holding based on any reasonable opinion of congressional purpose. The question is if Dahl be considered a â€œsellerâ€ under the Securites Act, making him liable alongside Pinter to the other investors.Â
In the most literal way, a â€œseller’ is the person passing title only, however, it has long been true that offerors and titleholders are considered sellers. This extends seller liability to those who aggressively advocate or petition the sale of securities.Â
Consistent with the holding is advocating transparencies to the buyers of securities, which is the congressional purpose behind the Act. Although, in a situation where an individual advocates a stock unnecessarily, as a favor to the offeree, the intent is not advance
the threat of advocate predation upon the unwary does not exist. SÂ§ 12 of the Act is not applicable if someone, who may otherwise be a seller, advocates a stock not for his or anyone else’s gain but as a favor to the offeree. In this case, it is uncertain from the documentation if the district court ruled on this matter, so the issue must be decided on remand. Reversed and remanded.”
The Court held that the common-law in pari delicto defense was available in a private action brought under § 12(1) . Moreover, the Court held that one did not have to confer a benefit on himself or on a third party in order to qualify as a seller within the meaning of § 12(1) . Thus, the Court remanded for a determination of whether respondent bore substantially equal responsibility for the failure to register and distribute the securities and whether respondent was primarily a promoter of the offering.
Case Brief: 1988
Decided by: Rehnquist Court
Citation: 486 US 622 (1988) Argued: Dec 9, 1987 Decided: Jun 15, 1988