Broker-Dealer Litigation - Greenberg Traurig LLP

Purvis v. Arizona Corp. Comm’n, No. 1 CA-CV 10-0311, 2011 WL 662842 (Ariz. Ct. App, Div.
1 Feb. 24, 2011).
Appellant argued that promissory notes issued in connection with bridge loan
transactions were not “securities” requiring registration under the 1933 Securities Act. The court
held that a note is a “security” under Ariz. Rev. Stat. § 44-1801.26, and the appellant failed to
carry his burden and establish that any statutory exemption applied. Accordingly, it affirmed the
Commission’s decision holding appellant liable for violations of the Arizona Securities Act.
West v. State of Indiana, 942 N.E.2d 862 (Ind. Ct. App. 2011).
Defendant was convicted for using fraud in the offer or sale of a security and for selling
unregistered securities. He argued that his conviction should be overturned because the term
“investment contract” is undefined and, thus, the definition of a security under Indiana Code §
23-2-1-1(k) is unconstitutionally vague. At trial, the State applied the test from American
Fletcher Mort. Co. v. U.S. Steel Credit Corp., 635 F.2d 1247 (7 th Cir. 1980), as adopted by
Indiana courts in Manns v. Skolnik, 666 N.E.2d 1236 (Ind. Ct. App. 1996), to determine whether
the transaction was an investment contract. According to the test, an investment contract arises
whenever a person (1) invests money (2) in a common enterprise (3) premised upon a reasonable
expectation of profits (4) to be derived from the entrepreneurial or managerial efforts of others.
The court affirmed the conviction and held that, although a person of ordinary intelligence may
not generally understand whether a particular document falls under the definition of a security,
that lack of comprehension does not render the statute void when the jury was given sufficient
information to determine under the American Fletcher test whether the investment contract was a
security.
A.
A.
B. Liabilities under the Securities Act of 1933
1. Section 11
B.1
Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762
(1st Cir. Mass. 2011).
The Court of Appeals for the First Circuit affirmed in part and vacated and remanded in
part the district court’s dismissal of plaintiffs-appellants’ putative class action complaint alleging
violation of, inter alia, Section 11 of the Securities Act of 1933 from plaintiffs-appellants’
purchase of mortgage-backed securities. The Court affirmed the district court’s holding that
plaintiffs-appellants lacked Article III standing to pursue claims based upon trusts from which
they had not purchased securities. Following a de novo review regarding the sufficiency of
alleged misstatements, the Court sustained alleged misstatements concerning lending guidelines,
for which plaintiffs-appellants alleged a wholesale abandonment of underwriting standards. The
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