§ 78C-38. Civil liabilities.
Article 5.
Civil Liabilities andCriminal Penalties.
§ 78C‑38. Civilliabilities.
(a) Any person who:
(1) Engages in thebusiness of advising others, for compensation, either directly or throughpublications or writings, as to the value of securities or as to theadvisability of investing in, purchasing, or selling securities, or who, forcompensation and as a part of a regular business, issues or promulgatesanalyses or reports concerning securities, in violation of G.S. 78C‑8(b),G.S. 78C‑16(a), (a1), or (b) (an action pursuant to a violation of G.S.78C‑16(b) may not be maintained except by those persons who directlyreceived advice from the unregistered investment adviser representative), G.S.78C‑10(b), or of any rule or order under G.S. 78C‑30(d) whichrequires the affirmative approval of sales literature before it is used, or
(2) Receives, directlyor indirectly, any consideration from another person for advice as to the valueof securities or their purchase or sale, whether through the issuance of analyses,reports or otherwise and employs any device, scheme, or artifice to defraudsuch other person or engages in any act, practice or course of business whichoperates or would operate as a fraud or deceit on such other person, inviolation of G.S. 78C‑8(a)(1) or (2),
isliable to any person who is given such advice in such violation, who may sueeither at law or in equity to recover (i) the consideration paid for suchadvice together with interest thereon at the legal rate as provided in G.S. 24‑1from the date of payment of the consideration, plus (ii) the actual damages tosuch person proximately caused by such violation, plus (iii) costs of theaction and reasonable attorneys' fees. An action based on violation of G.S. 78C‑8(b)may not prevail where the person accused of the violation sustains the burdenof proof that he did not know, and in the exercise of reasonable care could nothave known of the existence of the facts by reason of which the liability isalleged to exist.
(b) (1) Everyperson who directly or indirectly controls a person liable under subsection (a)of this section, including every partner, officer, or director of the person,every person occupying a similar status or performing similar functions, andevery dealer or salesman who materially aids in the conduct giving rise to theliability is liable jointly and severally with and to the same extent as theperson, unless able to sustain the burden of proof that the person did notknow, and in the exercise of reasonable care could not have known, of theexistence of the facts by reason of which the liability is alleged to exist.
(2) Unless liable undersubdivision (1) of this subsection, every employee or associate of a personliable under subsection (a) of this section who materially aids in the conductgiving rise to the liability and every other person who materially aids in theconduct giving rise to the liability is liable jointly and severally with andto the same extent as the person if the employee or associate or other personactually knew of the existence of the facts by reason of which the liability isalleged to exist.
(3) There iscontribution among the several persons liable under subdivisions (1) and (2) ofthis subsection as provided among tort‑feasors pursuant to Chapter 1B ofthe General Statutes.
(c) Every cause ofaction under this statute survives the death of any person who might have beena plaintiff or defendant.
(d) No person may sueunder this section more than three years after the rendering of investmentadvice in violation of G.S. 78C‑16.
No person may sue under thissection for any other violation of this Chapter more than three years after theperson discovers facts constituting the violation, but in any case no laterthan five years after the rendering of investment advice, except that if aperson who may be liable under this section engages in any fraudulent ordeceitful act that conceals the violation or induces the person to forgo orpostpone commencing an action based upon the violation, the suit may be commencednot later than three years after the person discovers or should have discoveredthat the act was fraudulent or deceitful.
(e) No person who hasmade or engaged in the performance of any contract in violation of anyprovision of this Chapter or any rule or order hereunder, or who has acquiredany purported right under such contract with knowledge of the facts by reasonof which its making or performance was in violation, may base any suit on thecontract.
(f) Any condition,stipulation, or provision binding any person receiving any investment advice towaive compliance with any provision of this Chapter or any rule or orderhereunder is void.
(g) The rights andremedies provided by this Chapter are in addition to any other rights orremedies that may exist at law or in equity, but this Chapter does not createany cause of action not specified in this section or G.S. 78C‑17(e). Ifthe requirements of Chapter 1D of the General Statutes are met, punitivedamages are available to the extent provided in that Chapter. (1987 (Reg. Sess., 1988), c.1098, s. 1; 1991, c. 456, s. 8; 2003‑413, ss. 21‑24.)