As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. We previously provided the statutory provisions of 15 U.S.C. § 77m – § 77o, which addressed limitations on actions under the Act and the liability of controlling persons under the Act, and provided that the statutes, rules and regulations concerning the Act may not be waived. As part of this comprehensive statutory scheme, Congress provided for additional remedies, and the limitations on those remedies, in 15 U.S.C. § 77p, which provides:
§ 77p. Additional remedies; limitation on remedies
(a) Remedies additional
Except as provided in subsection (b), the rights and remedies provided by this subchapter [15 U.S.C.A. § 77a et seq.] shall be in addition to any and all other rights and remedies that may exist at law or in equity.
(b) Class action limitations
No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging–
(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or
(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.
© Removal of covered class actions
Any covered class action brought in any State court involving a covered security, as set forth in subsection (b), shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b).
(d) Preservation of certain actions
(1) Actions under State law of State of incorporation
(A) Actions preserved
Notwithstanding subsection (b) or ©, a covered class action described in subparagraph (B) of this paragraph that is based upon the statutory or common law of the State in which the issuer is incorporated (in the case of a corporation) or organized (in the case of any other entity) may be maintained in a State or Federal court by a private party.
(B) Permissible actions
A covered class action is described in this subparagraph if it involves–
(i) the purchase or sale of securities by the issuer or an affiliate of the issuer exclusively from or to holders of equity securities of the issuer; or
(ii) any recommendation, position, or other communication with respect to the sale of securities of the issuer that–
(I) is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and
(II) concerns decisions of those equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters’ or appraisal rights.
(2) State actions
(A) In general
Notwithstanding any other provision of this section, nothing in this section may be construed to preclude a State or political subdivision thereof or a State pension plan from bringing an action involving a covered security on its own behalf, or as a member of a class comprised solely of other States, political subdivisions, or State pension plans that are named plaintiffs, and that have authorized participation, in such action.
(B) State pension plan defined
For purposes of this paragraph, the term “State pension plan” means a pension plan established and maintained for its employees by the government of the State or political subdivision thereof, or by any agency or instrumentality thereof.
(3) Actions under contractual agreements between issuers and indenture trustees
Notwithstanding subsection (b) or ©, a covered class action that seeks to enforce a contractual agreement between an issuer and an indenture trustee may be maintained in a State or Federal court by a party to the agreement or a successor to such party.
(4) Remand of removed actions
In an action that has been removed from a State court pursuant to subsection ©, if the Federal court determines that the action may be maintained in State court pursuant to this subsection, the Federal court shall remand such action to such State court.
(e) Preservation of State jurisdiction
The securities commission (or any agency or office performing like functions) of any State shall retain jurisdiction under the laws of such State to investigate and bring enforcement actions.
For purposes of this section, the following definitions shall apply:
(1) Affiliate of the issuer
The term “affiliate of the issuer” means a person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with, the issuer.
(2) Covered class action–
(A) In general
The term “covered class action” means–
(i) any single lawsuit in which–
(I) damages are sought on behalf of more than 50 persons or prospective class members, and questions of law or fact common to those persons or members of the prospective class, without reference to issues of individualized reliance on an alleged misstatement or omission, predominate over any questions affecting only individual persons or members; or
(II) one or more named parties seek to recover damages on a representative basis on behalf of themselves and other unnamed parties similarly situated, and questions of law or fact common to those persons or members of the prospective class predominate over any questions affecting only individual persons or members; or
(ii) any group of lawsuits filed in or pending in the same court and involving common questions of law or fact, in which–
(I) damages are sought on behalf of more than 50 persons; and
(II) the lawsuits are joined, consolidated, or otherwise proceed as a single action for any purpose.
(B) Exception for derivative actions
Notwithstanding subparagraph (A), the term “covered class action” does not include an exclusively derivative action brought by one or more shareholders on behalf of a corporation.
© Counting of certain class members
For purposes of this paragraph, a corporation, investment company, pension plan, partnership, or other entity, shall be treated as one person or prospective class member, but only if the entity is not established for the purpose of participating in the action.
(D) Rule of construction
Nothing in this paragraph shall be construed to affect the discretion of a State court in determining whether actions filed in such court should be joined, consolidated, or otherwise allowed to proceed as a single action.
(3) Covered security
The term “covered security” means a security that satisfies the standards for a covered security specified in paragraph (1) or (2) of section 77r(b) of this title at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive conduct occurred, except that such term shall not include any debt security that is exempt from registration under this subchapter pursuant to rules issued by the Commission under section 77d(2) of this title.
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