Academic

I'm pretty sure this is available somewhere in the bowels of the blogosphere, but I'm reprising it again.  As every securities lawyer and professor knows, there is a funny quirk in the "in terrorem" civil liability statute under the 1933 Securities Act for having violated Section 5 by distributing securities without either registration or an exemption from registration. 

The statute, Section 12(a)(1), gives a rescission right (or "put") to the purchaser, so for a year after the offering, if the value of the shares go down, the purchaser has the right to tender them back and get a refund of the purchase price.  The problem is that the statute makes any person who "offers or sells" in violation of Section 5 liable, but the liability extends to the person "purchasing the security from him."  In other words, there's a glitch if you try to go after somebody who merely offered rather than sold.

The Supreme Court tried to sort this out in a case called Pinter v. Dahl.  There is now a tradition in my securities regulation class where, after we study the case, I sing the following song, set to the tune of the Ballad of the Beverly Hillbillies (Flatt & Scruggs version):

Come and listen to my story bout a guy Maurice,
California boy just a-waitin? to be fleeced.
Then one day put some money in with Bill
Out in Oklahoma where the wildcatters drill.
       Oil, that is, black gold.  Texas tea.

Well, the next thing you know Maurice is on the dole,
Askin? lots of friends he knows to throw cash down the hole
Said Beej Pinter is the guy you wanna see
And they each put some money in without an SEC
       Filing, that is.  Form S-1.

Well, now it?s time to figure out if anyone can claim
That someone not the issuer can bear part of the blame
For selling shares unregistered with no gratuity,
To share a heapin? helpin? of some liability.
      Section 12(a)(1) that is.  33 Act. 

Write a check.
Y?all invest now, hear?