Sec Reg Damages Rules

  1. Section 11 Damages
    • Price paid (not greater than offering price) minus:
    • value at suit filing
    • Resale price if P sold before filing of suit
    • Resale price if P sold after filing but before judgment

    • total amount of damages can not exceed offering price
    • underwriter liabilty capped at total price underwritten and distributes
    • PSLRA liability for an outside director who did not know of the violation
  2. Section 16(b) Damages
    • requires disgorgement of profits
    • made from purchase and sale within 6 months OR
    • sale and purchase within 6 months
    • must be a beneficial owner at the time of the purchase and at the time of the sale

    • Equation:
    • (Highest price in six month period - Lowest price in six month period) number of shares
  3. Rule 10b-5 Damages
    • Out of Pocket Damages
    • Face to Face Transactions
    • PSLRA Liability
  4. Out of Pocket Damages
    Contract price - Securities True Value at the time of the transaction

    Section 21D(e)(1) award shall not exceed contract price - mean trading price during 90 day period beginning on date info disseminated to market
  5. Face to Face Transactions
    Restitution requires the D to give P whatever profit D made

    • Recissionary Measure:
    • If purchaser return of sales price
    • if seller return of securities OR difference between original sales price & subsequent resale price
  6. PSLRA Liability
    joint and several liability for covered person if knowingly committed a violation OR if damages exceed 10% of Ps net worth if net worth less than 200k

    • otherwise proportionate liability based on percentage of responsibility
    • Jury must determine percentage of responsibility and whether violation knowingly committed
    • can't tell jury how damages are allocated

    • Uncollectible share:
    • each covered person liable in proportion to percentage of responsibility
    • may not exceed 50% of proportionate share of covered person

    covered person: any 10b-5 D or any outside director in a Section 11 action
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Sec Reg Damages Rules