15 U.S.C. § 77p — Additional remedies; limitation on rem-

Page 152 TITLE 15—COMMERCE AND TRADE § 77o § 77o. Liability of controlling persons (a) Controlling persons Every person who, by or through stock owner- ship, agency, or otherwise, or who, pursuant to or in connection with an agreement or under- standing with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 77k or 77l of this title, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the control- ling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist. (b) Prosecution of persons who aid and abet vio- lations For purposes of any action brought by the Commission under subparagraph (b) or (d) of sec- tion 77t of this title, any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this subchapter, or of any rule or regulation issued under this subchapter, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided. (May 27, 1933, ch. 38, title I, § 15, 48 Stat. 84; June 6, 1934, ch. 404, title II, § 208, 48 Stat. 908; Pub. L. 111–203, title IX, § 929M(a), July 21, 2010, 124 Stat. 1861.) Editorial Notes AMENDMENTS 2010—Pub. L. 111–203 designated existing provisions as subsec. (a), inserted heading, and added subsec. (b). 1934—Act June 6, 1934, exempted from liability con- trolling persons having no knowledge or reasonable grounds for belief. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking. § 77p. Additional remedies; limitation on rem- edies (a) Remedies additional Except as provided in subsection (b), the rights and remedies provided by this subchapter 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 statu- tory or common law of any State or subdivision thereof may be maintained in any State or Fed- eral court by any private party alleging— (1) an untrue statement or omission of a ma- terial 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 contriv- ance in connection with the purchase or sale of a covered security. (c) 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 Fed- eral district court for the district in which the action is pending, and shall be subject to sub- section (b). (d) Preservation of certain actions (1) Actions under State law of State of incorpo- ration (A) Actions preserved Notwithstanding subsection (b) or (c), a covered class action described in subpara- graph (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 main- tained in a State or Federal court by a pri- vate 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 ex- clusively from or to holders of equity secu- rities 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 secu- rities, 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, po- litical subdivisions, or State pension plans that are named plaintiffs, and that have au- thorized 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 employ- ees by the government of the State or polit- ical subdivision thereof, or by any agency or instrumentality thereof. (3) Actions under contractual agreements be- tween issuers and indenture trustees Notwithstanding subsection (b) or (c), a cov- ered class action that seeks to enforce a con- tractual agreement between an issuer and an indenture trustee may be maintained in a State or Federal court by a party to the agree- ment 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 (c), if the Federal court determines that the action may Page 153 TITLE 15—COMMERCE AND TRADE § 77q 1 See References in Text note below. 1 See References in Text note below. 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 ac- tions. (f) Definitions 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 con- trolled 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, pre- dominate 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 af- fecting only individual persons or mem- bers; 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, consoli- dated, 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 cor- poration. (C) Counting of certain class members For purposes of this paragraph, a corpora- tion, 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 con- strued 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 secu- rity that satisfies the standards for a covered security specified in paragraph (1) or (2) of sec- tion 77r(b) of this title at the time during which it is alleged that the misrepresentation, omission, or manipulative or deceptive con- duct 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) 1 of this title. (May 27, 1933, ch. 38, title I, § 16, 48 Stat. 84; Pub. L. 105–353, title I, § 101(a)(1), Nov. 3, 1998, 112 Stat. 3227.) Editorial Notes REFERENCES IN TEXT Section 77d(2) of this title, referred to in subsec. (f)(3), was redesignated section 77d(a)(2) of this title by Pub. L. 112–106, title II, § 201(b)(1), (c)(1), Apr. 5, 2012, 126 Stat. 314. AMENDMENTS 1998—Pub. L. 105–353 amended section catchline and text generally. Prior to amendment, text read as fol- lows: ‘‘The rights and remedies provided by this sub- chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1998 AMENDMENT Pub. L. 105–353, title I, § 101(c), Nov. 3, 1998, 112 Stat. 3233, provided that: ‘‘The amendments made by this section [amending this section and sections 77v, 77z–1, 78u–4, and 78bb of this title] shall not affect or apply to any action commenced before and pending on the date of enactment of this Act [Nov. 3, 1998].’’ § 77q. Fraudulent interstate transactions (a) Use of interstate commerce for purpose of fraud or deceit It shall be unlawful for any person in the offer or sale of any securities (including security- based swaps) or any security-based swap agree- ment (as defined in section 78c(a)(78) 1 of this title) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or in- directly— (1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact nec- essary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (3) to engage in any transaction, practice, or course of business which operates or would op- erate as a fraud or deceit upon the purchaser. (b) Use of interstate commerce for purpose of of- fering for sale It shall be unlawful for any person, by the use of any means or instruments of transportation