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S.B. 91






Chief Sponsor: Benjamin M. McAdams

House Sponsor: Ryan D. Wilcox

             8      LONG TITLE
             9      General Description:
             10          This bill modifies the Utah Uniform Securities Act to address damage awards in civil
             11      actions.
             12      Highlighted Provisions:
             13          This bill:
             14          .    creates a negligence standard for when treble damages may be awarded if the
             15      violation involves fraud and an investment by a person over whom the violator
             16      exercised undue influence; and
             17          .    makes technical and conforming amendments.
             18      Money Appropriated in this Bill:
             19          None
             20      Other Special Clauses:
             21          None
             22      Utah Code Sections Affected:
             23      AMENDS:
             24          61-1-22, as last amended by Laws of Utah 2009, Chapter 351
             26      Be it enacted by the Legislature of the state of Utah:
             27          Section 1. Section 61-1-22 is amended to read:

             28           61-1-22. Sales and purchases in violation -- Remedies -- Limitation of actions.
             29          (1) (a) This Subsection (1) applies to a person who:
             30          (i) offers or sells a security in violation of:
             31          (A) Subsection 61-1-3 (1);
             32          (B) Section 61-1-7 ;
             33          (C) Subsection 61-1-17 (2);
             34          (D) a rule or order under Section 61-1-15 , which requires the affirmative approval of
             35      sales literature before it is used; or
             36          (E) a condition imposed under Subsection 61-1-10 (4) or 61-1-11 (7); or
             37          (ii) offers, sells, or purchases a security in violation of Subsection 61-1-1 (2).
             38          (b) A person described in Subsection (1)(a) is liable to a person selling the security to
             39      or buying the security from the person described in Subsection (1)(a). The person to whom the
             40      person described in Subsection (1)(a) is liable may sue either at law or in equity to recover the
             41      consideration paid for the security, together with interest at 12% per year from the date of
             42      payment, costs, and reasonable attorney fees, less the amount of income received on the
             43      security, upon the tender of the security or for damages if the person no longer owns the
             44      security.
             45          (c) Damages are an amount calculated as follows:
             46          (i) subtract from the amount that would be recoverable upon a tender under Subsection
             47      (7)(b) the value of the security when the buyer disposed of the security; and
             48          (ii) add to the amount calculated under Subsection (1)(c)(i) interest at:
             49          (A) 12% per year:
             50          (I) beginning the day on which the security is purchased by the buyer; and
             51          (II) ending on the date of disposition; and
             52          (B) after the period described in Subsection (1)(c)(ii)(A), 12% per year on the amount
             53      lost at disposition.
             54          (2) The court in a suit brought under Subsection (1) may award an amount equal to
             55      three times the consideration paid for the security, together with interest, costs, and attorney
             56      fees, less any amounts, all as specified in Subsection (1) upon a showing that:
             57          (a) the violation was reckless or intentional; or
             58          (b) the violation was of Subsection 61-1-1 (2), was negligent, and involved an

             59      investment by a person over whom the violator exercised undue influence.
             60          (3) A person who offers or sells a security in violation of Subsection 61-1-1 (2) is not
             61      liable under Subsection (1)(a) if the purchaser knew of the untruth or omission, or the seller did
             62      not know and in the exercise of reasonable care could not have known of the untrue statement
             63      or misleading omission.
             64          (4) (a) Every person who directly or indirectly controls a seller or buyer liable under
             65      Subsection (1), every partner, officer, or director of such a seller or buyer, every person
             66      occupying a similar status or performing similar functions, every employee of such a seller or
             67      buyer who materially aids in the sale or purchase, and every broker-dealer or agent who
             68      materially aids in the sale or purchase are also liable jointly and severally with and to the same
             69      extent as the seller or purchaser, unless the nonseller or nonpurchaser who is so liable sustains
             70      the burden of proof that the nonseller or nonpurchaser did not know, and in exercise of
             71      reasonable care could not have known, of the existence of the facts by reason of which the
             72      liability is alleged to exist.
             73          (b) There is contribution as in cases of contract among the several persons so liable.
             74          (5) A tender specified in this section may be made at any time before entry of
             75      judgment.
             76          (6) A cause of action under this section survives the death of a person who might have
             77      been a plaintiff or defendant.
             78          (7) (a) An action may not be maintained to enforce liability under this section unless
             79      brought before the earlier of:
             80          (i) the expiration of five years after the act or transaction constituting the violation; or
             81          (ii) the expiration of two years after the discovery by the plaintiff of the facts
             82      constituting the violation.
             83          (b) A person may not sue under this section if:
             84          (i) the buyer or seller received a written offer, before suit and at a time when the buyer
             85      or seller owned the security, to refund the consideration paid together with interest at 12% per
             86      year from the date of payment, less the amount of any income received on the security, and the
             87      buyer or seller failed to accept the offer within 30 days of its receipt; or
             88          (ii) the buyer or seller received such an offer before suit and at a time when the buyer
             89      or seller did not own the security, unless the buyer or seller rejected the offer in writing within

             90      30 days of its receipt.
             91          (8) A person who has made or engaged in the performance of any contract in violation
             92      of this chapter or any rule or order issued under this chapter, or who has acquired a purported
             93      right under any such contract with knowledge of the facts by reason of which its making or
             94      performance was in violation, may not base a suit on the contract.
             95          (9) A condition, stipulation, or provision binding a person acquiring a security to waive
             96      compliance with this chapter or a rule or order issued under this chapter is void.
             97          (10) (a) The rights and remedies provided by this chapter are in addition to any other
             98      rights or remedies that may exist at law or in equity.
             99          (b) This chapter does not create a cause of action not specified in this section or
             100      Subsection 61-1-4 (6).

Legislative Review Note
    as of 11-14-11 3:11 PM

Office of Legislative Research and General Counsel

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