Securities Act, Liability, participation theory


The Securities Act of 1933 creates two private rights of action. Since 1971, seven circuits have adopted the "participation" theory, imposing section 12 liability not only on the transferor, but also on any person whose participation in the transaction is substantial in causing the transaction to occur. This article traces the development of the participation theory. The author argues that limiting section 12 liability to the transferor would significantly diminish the protections afforded by the act and that the scope of the act should be reexamined by Congress rather than determined by judicial interpretation. Finally, in light of his thesis, the author examines section 12 aiding and abetting liability.



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