Monday, April 28, 2008

Attorney Who Assists Securities Offering May Be Sued

An attorney who had set up a number of limited liability companies for a client was sued for state securities law violations and fraud. He had sought and won summary judgment "claiming he was only involved in securities work and the plaintiffs are unable to provide any evidence that his action caused them to invest or lose their investment. "  The grant of summary judgment was reversed by the North Dakota Supreme Court:

"We hold that an attorney may be liable for violations of the Securities Act if he is an agent representing the broker-dealer, issuer, or is self-employed and effects or attempts to effect the purchase or sale of securities, and he participates or aids in any way in the sale or contract for sale made in violation of the Securities Act. An attorney who merely provides legal services, drafts documents used in the purchase or sale of the security, or engages in the legal profession's traditional advisory functions is not an agent within the meaning of N.D.C.C. ยง 10-04-02(1). To be liable as an agent, the attorney must do more than act as legal counsel, the attorney must actively assist in offering securities for sale, solicit offers to buy, or actually perform the sale. The question of whether an attorney is an agent who aided or participated in any way in the sale is a question of fact unless the evidence is such that reasonable persons can draw only one conclusion from the evidence." (Mike Frisch)

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