A. Enforcement of civil liability pursuant to this section is subject to the federal Securities Litigation Uniform Standards Act of 1998 (P.L. 105-353, 112 Stat. 3227, et seq.).
B. A person is liable to the purchaser if the person sells a security in violation of Section 301 [58-13C-301 NMSA 1978] of the New Mexico Uniform Securities Act or, by means of an untrue statement of a material fact or an omission to state a material fact necessary in order to make the statement made, in light of the circumstances pursuant to which it is made, not misleading, the purchaser not knowing the untruth or omission and the seller not sustaining the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action pursuant to this subsection is governed by the following:
(1) the purchaser may maintain an action to recover the consideration paid for the security, less the amount of any income received on the security, and interest at the legal rate of interest from the date of the purchase, costs and reasonable attorney fees determined by the court, upon the tender of the security, or for actual damages as provided in Paragraph (3) of this subsection;
(2) the tender referred to in Paragraph (1) of this subsection may be made any time before entry of judgment. Tender requires only notice in a record of ownership of the security and willingness to exchange the security for the amount specified. A purchaser that no longer owns the security may recover actual damages as provided in Paragraph (3) of this subsection; and
(3) actual damages in an action arising pursuant to this subsection are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it, and interest at the legal rate of interest from the date of the purchase, costs and reasonable attorney fees determined by the court.
C. A person is liable to the seller if the person buys a security by means of an untrue statement of a material fact or omission to state a material fact necessary in order to make the statement made, in light of the circumstances pursuant to which it is made, not misleading, the seller not knowing of the untruth or omission, and the purchaser not sustaining the burden of proof that the purchaser did not know, and in the exercise of reasonable care could not have known, of the untruth or omission. An action pursuant to this subsection is governed by the following:
(1) the seller may maintain an action to recover the security, and any income received on the security, costs and reasonable attorney fees determined by the court, upon the tender of the purchase price, or for actual damages as provided in Paragraph (3) of this subsection;
(2) the tender referred to in Paragraph (1) of this subsection may be made any time before entry of judgment. Tender requires only notice in a record of the present ability to pay the amount tendered and willingness to take delivery of the security for the amount specified. If the purchaser no longer owns the security, the seller may recover actual damages as provided in Paragraph (3) of this subsection; and
(3) actual damages in an action arising pursuant to this subsection are the difference between the price at which the security was sold and the value the security would have had at the time of the sale in the absence of the purchaser's conduct causing liability, and interest at the legal rate of interest from the date of the sale of the security, costs and reasonable attorney fees determined by the court.
D. A person acting as a broker-dealer or agent that sells or buys a security in violation of Subsection A of Section 401 [58-13C-401 NMSA 1978] of the New Mexico Uniform Securities Act, Subsection A of Section 402 [58-13C-402 NMSA 1978] of that act or Section 506 [58-13C-506 NMSA 1978] of that act is liable to the customer. The customer, if a purchaser, may maintain an action for recovery of actual damages as specified in Paragraphs (1) through (3) of Subsection B of this section, or, if a seller, for a remedy as specified in Paragraphs (1) through (3) of Subsection C of this section.
E. A person acting as an investment adviser or investment adviser representative that provides investment advice for compensation in violation of Subsection A of Section 403 [58-13C-403 NMSA 1978] of the New Mexico Uniform Securities Act, Subsection A of Section 404 [58-13C-404 NMSA 1978] of that act or Section 506 [58-13C-506 NMSA 1978] of that act is liable to the client. The client may maintain an action to recover the consideration paid for the advice, interest at the legal rate of interest from the date of payment, costs and reasonable attorney fees determined by the court.
F. A person that receives, directly or indirectly, any consideration for providing investment advice to another person and that employs a device, scheme or artifice to defraud the other person or engages in an act, practice or course of business that operates or would operate as a fraud or deceit on the other person, is liable to the other person. An action pursuant to this subsection is governed by the following:
(1) the person defrauded may maintain an action to recover the consideration paid for the advice and the amount of any actual damages caused by the fraudulent conduct, interest at the legal rate of interest from the date of the fraudulent conduct, costs and reasonable attorney fees determined by the court, less the amount of any income received as a result of the fraudulent conduct; and
(2) this subsection does not apply to a broker-dealer or its agents if the investment advice provided is solely incidental to transacting business as a broker-dealer and no special compensation is received for the investment advice.
G. The following persons are liable jointly and severally with and to the same extent as persons liable pursuant to Subsections B through F of this section:
(1) a person that directly or indirectly controls a person liable pursuant to Subsections B through F of this section, unless the controlling person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;
(2) an individual who is a managing partner, executive officer or director of a person liable pursuant to Subsections B through F of this section, including an individual having a similar status or performing similar functions, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist;
(3) an individual who is an employee of or associated with a person liable pursuant to Subsections B through F of this section and who materially aids the conduct giving rise to the liability, unless the individual sustains the burden of proof that the individual did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist; and
(4) a person that is a broker-dealer, agent, investment adviser or investment adviser representative that materially aids the conduct giving rise to the liability pursuant to Subsections B through F of this section, unless the person sustains the burden of proof that the person did not know and, in the exercise of reasonable care could not have known, of the existence of conduct by reason of which liability is alleged to exist.
H. A person liable pursuant to this section has a right of contribution as in cases of contract against any other person liable pursuant to this section for the same conduct.
I. A cause of action pursuant to this section survives the death of an individual who might have been a plaintiff or defendant.
J. A person shall not obtain relief unless the suit is brought:
(1) within two years after discovery of the violation or after discovery should have been made by the exercise of reasonable diligence; and
(2) within five years after the act or transaction constituting the violation.
K. A person that has made, or has engaged in the performance of, a contract in violation of the New Mexico Uniform Securities Act or a rule adopted or order issued pursuant to that act, or that has acquired a purported right pursuant to the contract with knowledge of conduct by reason of which its making or performance was in violation of the New Mexico Uniform Securities Act, may not base an action on the contract.
L. A condition, stipulation or provision binding a person purchasing or selling a security or receiving investment advice to waive compliance with the New Mexico Uniform Securities Act, or a rule adopted or order issued pursuant to that act, is void.
M. The rights and remedies provided by the New Mexico Uniform Securities Act are in addition to any other rights or remedies that may exist, but that act does not create a cause of action not specified in this section or Subsection E of Section 411 [58-13C-411 NMSA 1978] of that act.
History: Laws 2009, ch. 82, § 509.
ANNOTATIONSEffective dates. — Laws 2009, ch. 82, § 704 made the New Mexico Uniform Securities Act effective January 1, 2010.
Cases under prior law. — The pre-2010 cases below were decided under the former New Mexico Securities Act of 1986, Chapter 58, Article 13B. Due to the similarities between the two laws, the case annotations have been retained and included as annotations to the New Mexico Uniform Securities Act.
Purpose of section. — As opposed to Section 58-13B-39 (now Section 58-13C-508), NMSA 1978, which provides for criminal penalties, the legislative purpose in enacting the civil penalty in this section was that the civil penalty constitute an integral part of an overall remedial regulatory and administrative scheme to protect the public. State v. Kirby, 2003-NMCA-074, 133 N.M. 782, 70 P.3d 772, cert. denied, 133 N.M. 727, 69 P.3d 237.
Civil penalty in Securities Act is more remedial than punitive in its effect. While the civil penalty may by its nature have effects of deterrence and punishment, those effects are incidental to and do not override the penalty's primarily remedial purpose. State v. Kirby, 2003-NMCA-074, 133 N.M. 782, 70 P.3d 772, cert. denied, 133 N.M. 771, 69 P.3d 237.
Double jeopardy. — Criminal prosecutions under the Securities Act, following administratively imposed civil penalties under that Act, do not place defendants in double jeopardy under N.M. Const., art. II, § 15, or under Section 30-1-10 NMSA 1978. State v. Kirby, 2003-NMCA-074, 133 N.M. 782, 70 P.3d 772, cert. denied, 133 N.M. 771, 69 P.3d 237.
As no special relationship between purchasers and land developers, no constructive fraud arises. — Constructive fraud arises only when there exists a special confidential or fiduciary relationship between the parties to a transaction or contract; it is not actual fraud in the sense of actual evil design or contrivance. No such confidential or fiduciary relationship exists between purchasers and land developers. Baum v. Great W. Cities, Inc., 703 F.2d 1197 (10th Cir. 1983) (decided under former law).
Section affords plaintiff remedy of voiding fraudulent transaction notwithstanding plaintiff's later delay in disposing of the stock. Treider v. Doherty & Co., 1974-NMCA-109, 86 N.M. 735, 527 P.2d 498, cert. denied, 86 N.M. 730, 527 P.2d 493 (decided under former law).
Fraud allegations in summary judgment motion. — Allegations of common-law and security fraud must be construed most favorably to the plaintiff in his opposition to a motion for summary judgment. Jones v. Ford Motor Co., 599 F.2d 394 (10th Cir. 1979) (decided under former law).
Agent of seller of unregistered securities. — There was substantial evidence in the record to support the trial court's determination that defendant was a salesman or agent of a seller of an unregistered security. Segal v. Goodman, 1993-NMSC-018, 115 N.M. 349, 851 P.2d 471(decided under former law).
Law reviews. — For article, "A Survey of the Securities Act of New Mexico," see 2 N.M.L. Rev. 1 (1972).
For article, "The Use (or Abuse) of the Limited Partnership in Financing Real Estate Ventures in New Mexico," see 3 N.M.L. Rev. 251 (1973).
For comment, "Securities: Private Placements in New Mexico," see 7 N.M.L. Rev. 105 (1976-77).
Am. Jur. 2d, A.L.R. and C.J.S. references. — 69A Am. Jur. 2d Securities Regulation - State § 166 et seq.
What acts in connection with sale of unauthorized securities will render a person, other than officer or director of a corporation, civilly liable under state securities acts (blue sky laws) for purchase price, 59 A.L.R.2d 1030.
Waiver of rights or release of liability in advance of controversy, under state securities act or blue sky law, 61 A.L.R.2d 1308.
What gives rise to right of recession under state blue-sky laws, 52 A.L.R. 5th 491.
When is it unnecessary to show direct reliance on misrepresentation or omission in civil securities fraud action under § 10(b) of the Securities Exchange Act of 1934 (15 USCS § 78j(b)) and SEC Rule 10b-5 (17 CFR § 240.10b, § 240.10b-5), 93 A.L.R. Fed. 444.
Who may be liable in civil action, under § 12(1) of Securities Act of 1933 (15 USCS § 77l(1)), for selling or offering securities for sale in violation of registration or prospectus provisions of Act - post-Pinter cases, 105 A.L.R. Fed. 725.
Who may be liable in actions under § 12(2) of Securities Act of 1933 (15 USCS § 77l(2)), on basis of false or misleading statement in prospectus or oral communication, 106 A.L.R. Fed. 753.
Conduct creating civil liability, under § 12(2) of Securities Act of 1933 (15 USC § 77l(2)), based on misrepresentations in or omissions from prospectus or oral communication regarding sale of security, 112 A.L.R. Fed. 387.
Persons entitled to relief under civil liability provisions of § 12 of Securities Act of 1933 (15 USC § 77l), 113 A.L.R. Fed. 575.
Standard of liability in private actions under § 14(a) of Securities Exchange Act of 1934 (15 USCS § 78n(a)) and SEC rules thereunder, 125 A.L.R. Fed. 377.
What constitutes "willfulness" for purposes of criminal provisions of federal securities laws, 136 A.L.R. Fed. 457.