Business, 31.07.2020 21:01 rbrummitt1522

A broker-dealer that is offering a new issue in a State has obtained a legal opinion from its counsel that the issue is exempt from registration in that State. After the offering is completed, the State Administrator determines that the issue should have been registered. Which statement is TRUE regarding the broker-dealer's liability in this situation

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Answer from: kelbruggie

C. The broker-dealer has civil liability since it offered the securities in contravention of State law

Explanation:

Note: This question is not complete. A complete question is therefore provided before answering the question as follows:

A broker-dealer that is offering a new issue in a State has obtained a legal opinion from its counsel that the issue is exempt from registration in that State. After the offering is completed, the State Administrator determines that the issue should have been registered. Which statement is TRUE regarding the broker-dealer's liability in this situation?

A. The broker-dealer has no liability because it can rely on the legal opinion as its defense

B. The broker-dealer has no liability because it acted in good faith in the transaction

C. The broker-dealer has civil liability since it offered the securities in contravention of State law

D. The broker-dealer has criminal liability because it has shown scienter in this transaction

The answer to the question is provided as follows:

It is not possible for a broker-dealer to avoid civil liability by relying on a legal opinion.

The reason is that the court interprets a legal opinion as just an opinion but not the law itself.

Under this circumstance, it is possible to hold both the broker-dealer and the attorney who gave the legal opinion that is incorrect civilly liable. The reason is that the offer of the securities by the broker-dealer contravenes the law of the State.

However, it should be noted that there is no criminal liability under this circumstance as the illegal action was not "scienter".

"Scienter" is a Latin word which implies "not thought out in advance" or "not intentional".

Therefore, the correct option is C. The broker-dealer has civil liability since it offered the securities in contravention of State law

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A broker-dealer that is offering a new issue in a State has obtained a legal opinion from its counse...