17-12a509.   Civil liability.(a) Securities litigation uniform standards act.Enforcement of civil liability under this section is subject to thesecurities litigation uniform standards act of 1998.

      (b)   Liability of seller to purchaser. A person is liable tothe purchaser if the person sells a security in violation ofK.S.A. 17-12a301, and amendments thereto, or by means of an untrue statement ofa material fact or an omission to state a material fact necessaryin order to make a statement made, in light of the circumstancesunder which it is made, not misleading, the purchaser not knowingthe untruth or omission and the seller not sustaining the burden ofproof that the seller did not know and, in the exercise ofreasonable care, could not have known of the untruth or omission. An actionunder this subsection is governed by the following:

      (1)   The purchaser may maintain an action to recover theconsideration paid for the security, less the amount of any incomereceived on the security, and interest from thedate of the purchase at the rate provided for interest on judgments by K.S.A.16-204, and amendments thereto, costs, and reasonable attorneys' feesdetermined by the court, upon the tender of the security, or foractual damages as provided in paragraph (3).

      (2)   The tender referred to in paragraph (1) may be made anytime before entry of judgment. Tender requires only notice in arecord of ownership of the security and willingness to exchange thesecurity for the amount specified. A purchaser that no longer ownsthe security may recover actual damages as provided in paragraph(3).

      (3)   Actual damages in an action arising under this subsectionare the amount that would be recoverable upon a tender less thevalue of the security when the purchaser disposed of it, andinterest from the date of the purchaseat the rate provided for interest onjudgments by K.S.A. 16-204, and amendments thereto,costs, andreasonable attorneys' fees determined by the court.

      (c)   Liability of purchaser to seller. A person is liable tothe seller if the person buys a security by means of an untruestatement of a material fact or omission to state a material factnecessary in order to make the statement made, in light of thecircumstances under which it is made, not misleading, the seller notknowing of the untruth or omission, and the purchaser not sustainingthe burden of proof that the purchaser did not know, and in the exercise ofreasonable care, could not have known of the untruth oromission. An action under this subsection is governed by thefollowing:

      (1)   The seller may maintain an action to recover the security,and any income received on the security, costs, and reasonableattorneys' fees determined by the court, upon the tender of thepurchase price, or for actual damages as provided in paragraph (3).

      (2)   The tender referred to in paragraph (1) may be made anytime before entry of judgment. Tender requires only notice in arecord of the present ability to pay the amount tendered andwillingness to take delivery of the security for the amountspecified. If the purchaser no longer owns the security, the sellermay recover actual damages as provided in paragraph (3).

      (3)   Actual damages in an action arising under this subsectionare the difference between the price at which the security was soldand the value the security would have had at the time of the salein the absence of the purchaser's conduct causing liability, andinterest from the date of the sale of thesecurityat the rate provided for interest onjudgments by K.S.A. 16-204, and amendments thereto,costs, and reasonable attorneys' fees determined by thecourt.

      (d)   Liability of unregistered broker-dealer and agent. Aperson acting as a broker-dealer or agent that sells or buys asecurity in violation ofK.S.A. 17-12a401(a), 17-12a402(a), or17-12a506, andamendments thereto, is liable to the customer. The customer, if apurchaser, may maintain an action for recovery of actual damages as specifiedin subsections (b)(1) through (3), or, if a seller, fora remedy as specified in subsections (c)(1) through (3).

      (e)   Liability of unregistered investment adviser and investmentadviser representative. A person acting as an investment adviseror investment adviser representative that provides investment advicefor compensation in violation ofK.S.A. 17-12a403(a), 17-12a404(a),or 17-12a506, andamendments thereto, is liable to the client. The client maymaintain an action to recover the consideration paid for the advice,interest from the date of paymentat the rate provided for interest onjudgments by K.S.A. 16-204, and amendments thereto,costs, andreasonable attorneys' fees determined by the court.

      (f)   Liability for investment advice. A person that receivesdirectly or indirectly any consideration for providing investmentadvice to another person and that employs a device, scheme, orartifice to defraud the other person or engages in an act, practice,or course of business that operates or would operate as a fraud ordeceit on the other person, is liable to the other person. Anaction under this subsection is governed by the following:

      (1)   The person defrauded may maintain an action to recover theconsideration paid for the advice and the amount of any actualdamages caused by the fraudulent conduct, interestfrom the date of the fraudulent conductat the rate provided for interest onjudgments by K.S.A. 16-204, and amendments thereto,costs, and reasonableattorneys' fees determined by the court, less the amount of anyincome received as a result of the fraudulent conduct.

      (2)   This subsection does not apply to a broker-dealer or itsagents if the investment advice provided is solely incidental to transactingbusiness as a broker-dealer and no special compensationis received for the investment advice.

      (g)   Joint and several liability. The following persons areliable jointly and severally with and to the same extent as personsliable under subsections (b) through (f):

      (1)   A person that directly or indirectly controls a personliable under subsections (b) through (f), unless the controllingperson sustains the burden of proof that the person did not know,and in the exercise of reasonable care could not have known, of theexistence of conduct by reason of which the liability is alleged toexist;

      (2)   an individual who is a managing partner, executive officer,or director of a person liable under subsections (b) through (f),including an individual having a similar status or performingsimilar functions, unless the individual sustains the burden ofproof that the individual did not know and, in the exercise ofreasonable care could not have known, of the existence of conductby reason of which the liability is alleged to exist;

      (3)   an individual who is an employee of or associated with aperson liable under subsections (b) through (f) and who materiallyaids the conduct giving rise to the liability, unless theindividual sustains the burden of proof that the individual did notknow and, in the exercise of reasonable care could not have known,of the existence of conduct by reason of which the liability isalleged to exist; and

      (4)   a person that is a broker-dealer, agent, investmentadviser, or investment adviser representative that materially aidsthe conduct giving rise to the liability under subsections (b)through (f), unless the person sustains the burden of proof that theperson did not know and, in the exercise of reasonable care couldnot have known, of the existence of conduct by reason of whichliability is alleged to exist.

      (h)   Right of contribution. A person liable under this sectionhas a right of contribution as in cases of contract against anyother person liable under this section for the same conduct.

      (i)   Survival of cause of action. A cause of action under thissection survives the death of an individual who might have been aplaintiff or defendant.

      (j)   Statute of limitations. A person may not obtain relief:

      (1)   Under subsection (b) for violation ofK.S.A. 17-12a301, andamendments thereto, or under subsection (d) or (e), unless theaction is instituted within one year after the violation occurred;or

      (2)   under subsection (b), other than for violation ofK.S.A. 17-12a301, and amendments thereto, or under subsection (c) or (f),unlessthe action is instituted within the earlier of two years afterdiscovery of the facts constituting the violation or five yearsafter the violation.

      (k)   No enforcement of violative contract. A person that hasmade, or has engaged in the performance of, a contract in violation of this actor a rule adopted or order issued under this act, orthat has acquired a purported right under the contract withknowledge of conduct by reason of which its making or performancewas in violation of this act, may not base an action on thecontract.

      (l)   No contractual waiver. A condition, stipulation, orprovision binding a person purchasing or selling a security orreceiving investment advice to waive compliance with this act or arule adopted or order issued under this act is void.

      (m)   Survival of other rights or remedies. The rights andremedies provided by this act are in addition to any other rightsor remedies that may exist, but this act does not create a cause ofaction not specified in this section orK.S.A. 17-12a411(e), andamendments thereto.

      History:   L. 2004, ch. 154, § 38; July 1, 2005.