Section 551.509 - Civil liability(1) SECURITIES LITIGATION UNIFORM STANDARDS ACT. Enforcement of civil liability under this section is subject to the Securities Litigation Uniform Standards Act of 1998.(2) LIABILITY OF SELLER TO PURCHASER. A person is liable to the purchaser if the person sells a security in violation of s. 551.301 or 551.501 and, as to s. 551.501(2), the purchaser did not know the untruth or omission and the seller cannot sustain the burden of proof that the seller did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following: (a) The purchaser may maintain an action to recover the consideration paid for the security, less the amount of any income received on the security, and interest at the legal rate under s. 138.04 from the date of the purchase, costs, and reasonable attorney fees determined by the court, upon the tender of the security, or for actual damages as provided in par. (c).(b) The tender referred to in par. (a) may be made any time before entry of judgment. Tender requires only notice in a record of ownership of the security and willingness to exchange the security for the amount specified. A purchaser that no longer owns the security may recover actual damages as provided in par. (c).(c) Actual damages in an action arising under this subsection are the amount that would be recoverable upon a tender less the value of the security when the purchaser disposed of it, and interest at the legal rate under s. 138.04 from the date of the purchase, costs, and reasonable attorney fees determined by the court.(3) LIABILITY OF PURCHASER TO SELLER. A person is liable to the seller if the person buys a security in violation of s. 551.501 and, as to s. 551.501(2), the seller did not know the untruth or omission and the purchaser cannot sustain the burden of proof that the purchaser did not know and, in the exercise of reasonable care, could not have known of the untruth or omission. An action under this subsection is governed by the following: (a) The seller may maintain an action to recover the security, and any income received on the security, costs, and reasonable attorney fees determined by the court, upon the tender of the purchase price, or for actual damages as provided in par. (c).(b) The tender referred to in par. (a) may be made any time before entry of judgment. Tender requires only notice in a record of the present ability to pay the amount tendered and willingness to take delivery of the security for the amount specified. If the purchaser no longer owns the security, the seller may recover actual damages as provided in par. (c).(c) Actual damages in an action arising under this subsection are the difference between the price at which the security was sold and the value the security would have had at the time of the sale in the absence of the purchaser's conduct causing liability, and interest at the legal rate under s. 138.04 from the date of the sale of the security, costs, and reasonable attorney fees determined by the court.(4) LIABILITY OF UNREGISTERED BROKER-DEALER AND AGENT. A person acting as a broker-dealer or agent that sells or buys a security in violation of s. 551.401(1), 551.402(1), or 551.506 is liable to the customer. The customer, if a purchaser, may maintain an action for recovery of actual damages as specified in sub. (2) (a) to (c), or, if a seller, for a remedy as specified in sub. (3) (a) to (c).(5) LIABILITY OF UNREGISTERED INVESTMENT ADVISER AND INVESTMENT ADVISER REPRESENTATIVE. A person acting as an investment adviser or investment adviser representative that provides investment advice for compensation in violation of s. 551.403(1), 551.404(1), or 551.506 is liable to the client. The client may maintain an action to recover the consideration paid for the advice, interest at the legal rate under s. 138.04 from the date of payment, costs, and reasonable attorney fees determined by the court.(6) LIABILITY FOR INVESTMENT ADVICE. A person that receives directly or indirectly any consideration for providing investment advice to another person and that employs a device, scheme, or artifice to defraud the other person or engages in an act, practice, or course of business that operates or would operate as a fraud or deceit on the other person is liable to the other person. An action under this subsection is governed by the following: (a) The person defrauded may maintain an action to recover the consideration paid for the advice and the amount of any actual damages caused by the fraudulent conduct, interest at the legal rate under s. 138.04 from the date of the fraudulent conduct, costs, and reasonable attorney fees determined by the court, less the amount of any income received as a result of the fraudulent conduct.(b) This subsection does not apply to a broker-dealer or its agents if the investment advice provided is solely incidental to transacting business as a broker-dealer and no special compensation is received for the investment advice.(7) JOINT AND SEVERAL LIABILITY. The following persons are liable jointly and severally with and to the same extent as persons liable under subs. (2) to (6): (a) A person that directly or indirectly controls a person liable under subs. (2) to (6), unless the controlling person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist.(b) An individual who is a managing partner, executive officer, or director of a person liable under subs. (2) to (6), including an individual having a similar status or performing similar functions, unless the individual sustains the burden of proof that the individual did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist.(c) An individual who is an employee of or associated with a person liable under subs. (2) to (6) and who materially aids the conduct giving rise to the liability, unless the individual sustains the burden of proof that the individual did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which the liability is alleged to exist.(d) A person that is a broker-dealer, agent, investment adviser, or investment adviser representative that materially aids the conduct giving rise to the liability under subs. (2) to (6), unless the person sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct by reason of which liability is alleged to exist.(8) RIGHT OF CONTRIBUTION. A person liable under this section has a right of contribution as in cases of contract against any other person liable under this section for the same conduct.(9) SURVIVAL OF CAUSE OF ACTION. A cause of action under this section survives the death of an individual who might have been a plaintiff or defendant.(10) STATUTE OF LIMITATIONS. A person may not obtain relief: (a) Under sub. (2) for violation of s. 551.301, or under sub. (4) or (5), unless the action is instituted within one year after the violation occurred.(b) Under sub. (2), other than for violation of s. 551.301, or under sub. (3) or (6), unless the action is instituted within the earlier of 2 years after discovery of the facts constituting the violation or 5 years after the violation.(11) NO ENFORCEMENT OF VIOLATIVE CONTRACT. A person that has made, or has engaged in the performance of, a contract in violation of this chapter or a rule adopted or order issued under this chapter, or that has acquired a purported right under the contract with knowledge of conduct by reason of which its making or performance was in violation of this chapter, may not base an action on the contract.(12) NO CONTRACTUAL WAIVER. A condition, stipulation, or provision binding a person purchasing or selling a security or receiving investment advice to waive compliance with this chapter or a rule adopted or order issued under this chapter is void.(13) SURVIVAL OF OTHER RIGHTS OR REMEDIES. The rights and remedies provided by this chapter are in addition to any other rights or remedies that may exist, but this chapter does not create a cause of action not specified in this section or s. 551.411(5).The above annotations refer to ch. 551, 2005 stats., repealed by 2007 Wis. Act 196.
This chapter is not the exclusive remedy for securities fraud. It does not preempt common law fraud remedies. Esser Distributing v. Steidl, 149 Wis. 2d 64, 437 N.W.2d 884 (1989). Section 551.59(7) is operative only when an innocent party elects rescission and restitution and waives a breach of contract remedy. Criticare Systems, Inc. v. Sentek, Inc., 159 Wis. 2d 639, 465 N.W.2d 216 (Ct. App. 1990). Lack of reliance is a defense to all claims based on a misrepresentation theory. The application of s. 551.59(1) (b) does not restrict the defense to claims under s. 551.41(2). Carney v. Mantuano, 204 Wis. 2d 527, 554 N.W.2d 854 (Ct. App. 1996), 95-2529. The limitation period under s. 551.59(5) begins to run when the defrauded party is in possession of essential facts that will, if diligently investigated, disclose the fraud. Gieringer v. Silverman, 539 F. Supp. 498 (1982). A defrauded party may not recover any indirect or consequential damages under s. 551.59(1) (a). Jersild v. Aker, 775 F. Supp. 1198 (1991).