72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
Enrolled
House Bill 3666
Sponsored by COMMITTEE ON RULES AND PUBLIC AFFAIRS
CHAPTER ................
AN ACT
Relating to liability under securities laws; creating new
provisions; amending ORS 59.115 and 59.127 and section 4,
chapter 631, Oregon Laws 2003 (Enrolled Senate Bill 609); and
repealing section 7, chapter 631, Oregon Laws 2003 (Enrolled
Senate Bill 609).
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 59.115, as amended by section 1, chapter 631,
Oregon Laws 2003 (Enrolled Senate Bill 609), is amended to read:
59.115. (1) A person { - who offers or sells a security - }
is liable as provided in subsection (2) of this section to a
purchaser of { - the - } { + a + } security if the person:
(a) { - Offers or - } Sells { + or successfully solicits
the sale of + } a security, other than a federal covered
security, in violation of the Oregon Securities Law or of any
condition, limitation or restriction imposed upon a registration
or license under the Oregon Securities Law; { + or + }
(b) { - Offers or - } Sells { + or successfully solicits
the sale of + } a security { + in violation of ORS 59.135 (1) or
(3) or + } by means of an untrue statement of a material fact or
an omission to state a material fact necessary in order to make
the statements made, in light of the circumstances under which
they are made, not misleading (the buyer not knowing of the
untruth or omission), and who does not sustain the burden of
proof that the person did not know, and in the exercise of
reasonable care could not have known, of the untruth or
omission { + . + } { - ; or - }
{ - (c) Offers or sells a security in violation of ORS 59.135
(1), (2) or (3). - }
(2) The purchaser may recover:
(a) Upon tender of the security, the consideration paid for the
security, and interest from the date of payment equal to the
greater of the rate of interest specified in ORS 82.010 for
judgments and decrees for the payment of money or the rate
provided in the security if the security is an interest-bearing
obligation, less any amount received on the security; or
(b) If the purchaser no longer owns the security, damages in
the amount that would be recoverable upon a tender, less the
value of the security when the purchaser disposed of it and less
interest on such value at the rate of interest specified in ORS
82.010 for judgments and decrees for the payment of money from
the date of disposition.
Enrolled House Bill 3666 (HB 3666-A) Page 1
(3) Every person who directly or indirectly controls a seller
liable under subsection (1) of this section, every partner,
limited liability company manager, including a member who is a
manager, officer or director of such seller, every person
occupying a similar status or performing similar functions, and
every person who participates or materially aids in the sale is
also liable jointly and severally with and to the same extent as
the seller, unless the nonseller sustains the burden of proof
that the nonseller did not know, and, in the exercise of
reasonable care, could not have known, of the existence of facts
on which the liability is based. Any person held liable under
this section shall be entitled to contribution from those jointly
and severally liable with that person.
(4) Notwithstanding the provisions of subsection (3) of this
section, a person whose sole function in connection with the sale
of a security is to provide ministerial functions of escrow,
custody or deposit services in accordance with applicable law is
liable only if the person participates or materially aids in the
sale and the purchaser sustains the burden of proof that the
person knew of the existence of facts on which liability is based
or that the person's failure to know of the existence of such
facts was the result of the person's recklessness or gross
negligence.
(5) Any tender specified in this section may be made at any
time before entry of judgment.
(6) Except as otherwise provided in this subsection, no action
or suit may be commenced under this section more than three years
after the sale. An action under this section for a violation of
subsection (1)(b) of this section or ORS 59.135 may be commenced
within three years after the sale or two years after the person
bringing the action discovered or should have discovered the
facts on which the action is based, whichever is later. Failure
to commence an action on a timely basis is an affirmative
defense.
(7) An action may not be commenced under this section solely
because an offer was made prior to registration of the
securities.
(8) Any person having a right of action against a
broker-dealer, state investment adviser or against a salesperson
or investment adviser representative acting within the course and
scope or apparent course and scope of authority of the
salesperson or investment adviser representative, under this
section shall have a right of action under the bond or
irrevocable letter of credit provided in ORS 59.175.
(9) Subsection (4) of this section shall not limit the
liability of any person:
(a) For conduct other than in the circumstances described in
subsection (4) of this section; or
(b) Under any other law, including any other provisions of the
Oregon Securities Law.
(10) Except as provided in subsection (11) of this section, the
court may award reasonable attorney fees to the prevailing party
in an action under this section.
(11) The court may not award attorney fees to a prevailing
defendant under the provisions of subsection (10) of this section
if the action under this section is maintained as a class action
pursuant to ORCP 32.
SECTION 2. ORS 59.127, as amended by section 2, chapter 631,
Oregon Laws 2003 (Enrolled Senate Bill 609), is amended to read:
Enrolled House Bill 3666 (HB 3666-A) Page 2
59.127. (1) A person { - who offers to purchase or purchases
a security - } is liable as provided in subsection (2) of this
section to the person selling the security, if the person:
(a) Purchases { + or successfully solicits the purchase of + }
a security, other than a federal covered security, in violation
of any condition, limitation or restriction imposed upon a
registration under the Oregon Securities Law; { + or + }
(b) Purchases { + or successfully solicits the purchase of + }
a security { + in violation of ORS 59.135 (1) or (3) or + } by
means of an untrue statement of a material fact or an omission to
state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made,
not misleading (the seller not knowing of the untruth or
omission), and if the person does not sustain the burden of proof
that the person did not know, and in the exercise of reasonable
care could not have known, of the untruth or omission { + . + }
{ - ; or - }
{ - (c) Purchases a security in violation of ORS 59.135 (1),
(2) or (3). - }
(2) The seller may recover:
(a) Upon a tender of the consideration paid for the security,
the security plus interest from the date of purchase equal to the
greater of the rate of interest specified in ORS 82.010 for
judgments and decrees for the payment of money, or the rate
provided in the security if the security is an interest-bearing
obligation;
(b) Damages in the amount that would be recoverable upon a
tender, plus any amount received on the security, less the
consideration paid for the security; or
(c) If the purchaser no longer owns the security, damages equal
to the value of the security when the purchaser disposed of it
plus interest on such value at the rate of interest specified in
ORS 82.010 for judgments and decrees for the payment of money
from the date of disposition, less the consideration paid for the
security.
(3) Every person who directly or indirectly controls a
purchaser liable under subsection (1) of this section, every
partner, limited liability company manager, including a member
who is a manager, officer or director of such purchaser, every
person occupying a similar status or performing similar
functions, and every person who participates or materially aids
in the purchase is also liable jointly and severally with and to
the same extent as the purchaser, unless the nonpurchaser
sustains the burden of proof that the nonpurchaser did not know,
and, in the exercise of reasonable care, could not have known, of
the existence of facts on which the liability is based. Any
person held liable under this section shall be entitled to
contribution from those jointly and severally liable with the
person.
(4) Notwithstanding the provisions of subsection (3) of this
section, a person whose sole function in connection with the
purchase of a security is to provide ministerial functions of
escrow, custody or deposit services in accordance with applicable
law is liable only if the person participates or materially aids
in the purchase and the seller sustains the burden of proof that
the person knew of the existence of facts on which liability is
based or that the person's failure to know of the existence of
such facts was the result of the person's recklessness or gross
negligence.
Enrolled House Bill 3666 (HB 3666-A) Page 3
(5) Any tender specified in this section may be made at any
time before entry of judgment.
(6) Except as otherwise provided in this subsection, no action
or suit may be commenced under this section more than three years
after the purchase. An action under this section for a violation
of subsection (1)(b) of this section or ORS 59.135 may be
commenced within three years after the purchase or two years
after the person bringing the action discovered or should have
discovered the facts on which the action is based, whichever is
later. Failure to commence an action on a timely basis is an
affirmative defense.
(7) Any person having a right of action against a
broker-dealer, state investment adviser or against a salesperson
or investment adviser representative acting within the course and
scope or apparent course and scope of the authority of the
salesperson or investment adviser representative, under this
section shall have a right of action under the bond or
irrevocable letter of credit provided in ORS 59.175.
(8) Subsection (4) of this section shall not limit the
liability of any persons:
(a) For conduct other than in the circumstances described in
subsection (4) of this section; or
(b) Under any other law, including any other provisions of the
Oregon Securities Law.
(9) Except as provided in subsection (10) of this section, the
court may award reasonable attorney fees to the prevailing party
in an action under this section.
(10) The court may not award attorney fees to a prevailing
defendant under the provisions of subsection (9) of this section
if the action under this section is maintained as a class action
pursuant to ORCP 32.
SECTION 3. Section 4, chapter 631, Oregon Laws 2003 (Enrolled
Senate Bill 609), is amended to read:
{ + Sec. 4. + } (1) Any person who violates or
{ - participates or - } materially aids in a violation of ORS
59.135 (1), (2) or (3) is liable to any purchaser or seller of
the security for the actual damages { - sustained - } { +
caused by the violation + }, including the amount of any
commission, fee or other remuneration paid, together with
interest at the rate specified in ORS 82.010 for judgments for
the payment of money { + , unless the person who materially aids
in the violation sustains the burden of proof that the person did
not know and, in the exercise of reasonable care, could not have
known of the existence of the facts on which the liability is
based + }.
(2) Any person who directly or indirectly controls a person
liable under subsection (1) of this section and every partner,
limited liability company manager, including a member who is a
manager, officer or director or a person occupying a status or
performing functions of a person liable under subsection (1) of
this section, is { + jointly and severally + } liable to the
same extent as a person liable under subsection (1) of this
section, unless the person who may be liable under this
subsection sustains the burden of proof that the person did not
know and, in the exercise of reasonable care, could not have
known of the existence of the facts on which the liability is
based.
{ + (3) Any person held liable under this section is entitled
to contribution from those persons jointly and severally liable
with that person. + }
Enrolled House Bill 3666 (HB 3666-A) Page 4
{ - (3) - } { + (4) + } Except as provided in subsection
{ - (4) - } { + (5) + } of this section, the court may award
reasonable attorney fees to the prevailing party in an action
under this section.
{ - (4) - } { + (5) + } The court may not award attorney
fees to a prevailing defendant under the provisions of subsection
{ - (3) - } { + (4) + } of this section if the action under
this section is maintained as a class action pursuant to ORCP 32.
{ - (5) - } { + (6) + } An action or suit may be commenced
under this section within the later of:
(a) Three years after the date of the purchase or sale of a
security to which the action or suit relates; or
(b) Two years after the person bringing the action or suit
discovered or should have discovered the facts on which the
action or suit is based.
{ - (6) - } { + (7) + } Failure to commence an action or
suit under this section on a timely basis is an affirmative
defense.
SECTION 4. { + Section 7, chapter 631, Oregon Laws 2003
(Enrolled Senate Bill 609), is repealed. + }
SECTION 5. { + (1) The amendments to ORS 59.115 by section 1,
chapter 631, Oregon Laws 2003 (Enrolled Senate Bill 609), and
section 1 of this 2003 Act:
(a) Except as provided in paragraphs (b) and (c) of this
subsection, apply to sales of a security or successful
solicitations of the sale of a security that occur before, on or
after the effective date of this 2003 Act.
(b) Do not apply to any action in which a judgment has been
entered in the register of a court before the effective date of
this 2003 Act.
(c) For purposes of ORS 59.991, apply to conduct occurring on
or after the effective date of this 2003 Act.
(2) The amendments to ORS 59.127 by section 2, chapter 631,
Oregon Laws 2003 (Enrolled Senate Bill 609), and section 2 of
this 2003 Act:
(a) Except as provided in paragraphs (b) and (c) of this
subsection, apply to purchases of a security or successful
solicitations of the purchase of a security that occur before, on
or after the effective date of this 2003 Act.
(b) Do not apply to any action in which a judgment has been
entered in the register of a court before the effective date of
this 2003 Act.
(c) For purposes of ORS 59.991, apply to conduct occurring on
or after the effective date of this 2003 Act.
(3) Section 4, chapter 631, Oregon Laws 2003 (Enrolled Senate
Bill 609), as amended by section 3 of this 2003 Act:
(a) Except as provided in paragraphs (b) and (c) of this
subsection, applies to violations of ORS 59.135 that occur
before, on or after the effective date of this 2003 Act.
(b) Does not apply to any action in which a judgment has been
entered in the register of a court before the effective date of
this 2003 Act.
(c) For purposes of ORS 59.991, applies to conduct occurring on
or after the effective date of this 2003 Act.
(4) Except as provided in subsection (5) of this section:
(a) The amendments to ORS 59.255 by section 5, chapter 631,
Oregon Laws 2003 (Enrolled Senate Bill 609):
(A) Apply to suits brought on or after the effective date of
this 2003 Act; and
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(B) For purposes of ORS 59.991, apply to conduct occurring on
or after the effective date of this 2003 Act.
(b) The amendments to ORS 59.335 by section 6, chapter 631,
Oregon Laws 2003 (Enrolled Senate Bill 609):
(A) Apply to offers and sales of a security, and offers to
purchase and purchases of a security, that occur before, on or
after the effective date of this 2003 Act; and
(B) For purposes of ORS 59.991, apply to conduct occurring on
or after the effective date of this 2003 Act.
(5) The amendments to ORS 59.255 and 59.335 by sections 5 and
6, chapter 631, Oregon Laws 2003 (Enrolled Senate Bill 609), do
not apply to any action in which a judgment has been entered in
the register of a court before the effective date of this 2003
Act. + }
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Passed by House August 19, 2003
Repassed by House August 23, 2003
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate August 22, 2003
...........................................................
President of Senate
Enrolled House Bill 3666 (HB 3666-A) Page 6
Received by Governor:
......M.,............., 2003
Approved:
......M.,............., 2003
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2003
...........................................................
Secretary of State
Enrolled House Bill 3666 (HB 3666-A) Page 7