Opinion ID: 2120030
Heading Depth: 1
Heading Rank: 5

Heading: liability under securities act of nebraska

Text: The Securities Act of Nebraska (hereinafter the Act) is modeled after the 1956 Uniform Securities Act. [7] This court has stated that the Act should be liberally construed to afford the greatest possible protection to the public. [8] The Act provides: It shall be unlawful for any person to offer or sell any security in this state unless (1) such security is registered by notification under section 8-1105, by coordination under section 8-1106, or by qualification under section 8-1107, (2) the security is exempt under section 8-1110 or is sold in a transaction exempt under section 8-1111, or (3) the security is a federal covered security. [9] Civil liability for violation of the Act is governed by § 8-1118, which provides in pertinent part: (1) Any person who offers or sells a security in violation of section 8-1104 or offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made in the light of the circumstances under which they are made not misleading, the buyer not knowing of the untruth or omission, and who does not sustain the burden of proof that he or she did not know and in the exercise of reasonable care could not have known of the untruth or omission, shall be liable to the person buying the security from him or her. . . . We have interpreted the phrase [a]ny person who . . . sells as used in § 8-1118(1) to include one who does not actually transfer title to a security, but who solicits its purchase, motivated at least in part by desire to serve his or her own financial interests or those of the securities owner. [10] Although Freedom Financial is not a party to this case, the district court found that it offered or sold unregistered securities in Nebraska and sold securities by means of untrue statements of material fact and omissions to state a material fact, in violation of § 8-1118(1). Appellants' liability was predicated on this finding pursuant to § 8-1118(3), which provides in pertinent part: (3) Every person who directly or indirectly controls a person liable under subsections (1) and (2) of this section, including every . . . director, or person occupying a similar status or performing similar functions of a partner, limited liability company member, officer, or director. . . shall be liable jointly and severally with and to the same extent as such person, unless able to sustain the burden of proof that he or she did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. The district court found that the Pierces were directors of Freedom Financial and that they did not meet their burden of proving that they did not know, and in the exercise of reasonable care could not have known, of the facts upon which Freedom Financial's liability was based. The court further determined that FFG directly or indirectly controlled Freedom Financial and that it likewise did not meet its burden of proving that it did not know, and in the exercise of reasonable care could not have known, of such facts.