Section 25501.5 – What Do It Mean?

In 2004, the California Legislature added Section 25501.5 to the Corporate Securities Law of 1968. Ever since then, I’ve been asked “What do it mean?”

Corporations Code Section 25501.5 generally authorizes an action for rescission (or damages, if the security is no longer owned) by any person “who purchases a security from or sells a security to a broker-dealer that is required to be licensed and has not”. A right of rescission makes sense when the unlicensed broker-dealer is acting as a principal (i.e., as a dealer). The statute makes less sense when the broker-dealer is acting as an agent (i.e., as a broker). When a broker-dealer is acting as an agent, the purchaser acquires the security from the security’s owner- not from the broker. It is certainly debatable whether a security owner should face a claim for rescission or damages when it is the broker-dealer that is violating the licensing requirement.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Written by:

more+
less-

Allen Matkins Leck Gamble Mallory & Natsis LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×