Chapter Ten Sanctions and Penalties for Violations - Article Fifty Five

​a. In case a prospectus, when approved by the Authority, contained incorrect statements of material matters or omitted material facts required to be stated in the prospectus, the person purchasing the Security that was the subject of such prospectus shall be entitled to compensation for the damages incurred by him as a result thereof. A statement or omission shall be considered material for the purposes of this paragraph if it is proven to the Committee that had the investor been aware of the truth when making such purchase it would have affected the purchase price.

b. The following persons shall be liable under paragraph (a) of this Article:

  1. The party issuing the Security. The issuer shall be liable irrespective of whether it had acted reasonably, or it was not aware of the incorrect statements in connection with material matters, or of the omission of material facts that should have been disclosed in the prospectus.
  2. The senior officers of the issuing party of the Security in accordance with the definition provided in the rules issued by the Authority. Such liability could be relieved according to paragraph (c.1 and 2) of this Article.
  3. The members of the board of directors of the issuing party, or persons performing similar functions, as of the date on which the prospectus was approved by the Authority. Such liability could be relieved in accordance with paragraph (c.1 and 2) of this Article.
  4. The underwriters who have undertaken to offer on behalf of the issuer the Security for sale to the public, provided that an underwriter shall not be liable for more than the total price of the Securities underwritten or amount of Securities distributed by him (whichever amount is greater).
  5. The accountant, engineer or appraiser and others identified in the prospectus, who have consented in writing to be so identified, as having certified the accuracy and truthfulness of the information stated in the prospectus; however, such person’s liability shall not extend to information in parts of the prospectus which are not so certified by him. That person shall be responsible for any part of the prospectus understood to have been prepared according to his statement and approval in his capacity defined under this paragraph, unless he proves that he was convinced after conducting reasonable investigations and on the basis of reasonable grounds, that that part of the prospectus is not in violation of paragraph (a) of this Article.

c. Any of the persons mentioned in paragraph (b.2, 3 and 4) of this Article shall be liable as provided for in the provisions of paragraph (a) of this Article unless it is proven that:

  1. As to any part of the prospectus not certified by the person described in paragraph (b.5) of this Article that, after reasonable investigation, and on the basis of reasonable grounds, he was convinced that such part of the prospectus was not in violation of paragraph (a) of this Article;
  2. As to any part of the prospectus purporting to have been made based on the statement of a person set forth in paragraph (b.5) of this Article, and the person invoking the defense is identified in paragraphs (b.2, 3, 4) of this Article, he had no reasonable ground at that time to believe that such part of the prospectus contained what could be deemed a violation of paragraph (a) of this Article.

d. In determining that investigation shall be deemed reasonable or what shall constitute reasonable ground for belief for the purposes of paragraph (c) of this Article, the standard of reasonableness for the purpose of this Article shall be that of the prudent man in the management of his property.

e. Damages may be obtained through a claim brought on the basis of paragraph (a) of this Article, which damages shall represent the difference between the price actually paid for purchasing the Security (not to exceed the price at which it was offered to the public) and the value thereof as of the date of bringing the legal action or the price which such Security could have been disposed of on the Exchange prior to filing the complaint with the Committee, provided that if the defendant proves that any portion in the decline in value of the Security is due to causes which are not related to the omission or the incorrect statement which is the substance of the suit, such portion shall be excluded from the damages for which the defendant is responsible. The defendants are individually and jointly and severally liable for damages for which they are responsible under this Article. The amount of indemnification shall be subject to the provisions of the contract or agreement entered into between the parties identified in paragraph (b) of this Article or as the Committee believes is equitable and does not harm the interest of investors or otherwise contravene the spirit of this Law.