Civil Liabilities Arising in Connection with Prospectuses and Communications
Section 12 of the Securities Act lays out the consequences of misleading customers or potential customers with respect to offering and selling a security. Untrue statements of a material fact or the omission of a material fact in a written prospectus or oral communication whose result is to mislead a customer are subject to civil prosecution in a court of law. Anyone who offers or sells a security misleadingly bears the burden of proof that he or she did not know and could not have known of the untruth or the omission. Failing to provide a convincing argument, that person will be liable to anyone who purchased the security.
In a later clarification by the SEC (Rule 159), any information provided to the purchaser after the point of sale, or after the signing of a contract of sale, does not rectify a prior untruth or omission in any oral or written communication with a buyer. Even if the person has not learned of the untruth or omi