Part 5 of the California Corporate Securities Law of 1968 sets forth a number of fraudulent and prohibited practices.  One of these practices is to "to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication that includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in the light of the circumstances under which the statements were made, not misleading".  Cal. Corp. Code § 25401.  Part 5 does not specify any remedies for engaging in prohibited practices.  The remedies are found in Part 6.  The remedy for violating Section 25401 is either for rescission or for damages (if the plaintiff or the defendant, as the case may be, no longer owns the security).  Cal. Corp. Code § 25501.

In Ferry v. DF Growth REIT, LLC, 2024 WL 1298074, the plaintiffs alleged a violation of Section 25401 and that they continued to hold the securities.  Because they sought damages rather than rescission, U.S. District Court Judge  Anthony J. Battaglia ruled sua sponte that the plaintiffs lacked statutory standing.  Accordingly, he dismissed the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

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