Muddy Waters, Blue Skies: Civil Liability under the Mississippi Securities Act

The decade of the 1990s produced a series of actions by the United States Supreme Court and by Congress that, collectively, reduced the number of avenues by which plaintiffs relying on federal law may pursue alleged wrongdoers for securities fraud; imposed significant additional requirements on plaintiffs suing under federal securities law; preempted state registration requirements for several classes of securities; and curbed the availability of state courts as an alternative forum in which plaintiffs may pursue securities fraud claims. And yet, in spite of these changes, “Congress, the courts, and the SEC have made explicit that federal regulation was not designed to displace state blue sky laws. As a general rule, Mississippi law holds those who sell securities in violation of statutory registration requirements, or by means of some misrepresentation or omission of material fact, liable to anyone who buys securities from or through them. Likewise, those who buy securities by means of some misrepresentation or omission of material fact may be liable to anyone who sells securities to or through them. In addition to, or in lieu of, those who committed the material misrepresentation or omission may extend vicariously to others who are closely related to the primary wrongdoer or were involved in the transaction at issue. To the extent not foreclosed by recent changes in federal law, many acts and omissions that will give rise to liability under Mississippi law will also give rise to liability under federal securities law. Some federal securities claims may be brought in Mississippi state court, while others may not. In any event, while this Article focuses on Mississippi law, readers who have not already done so should familiarize themselves with the relevant federal statutory provisions and precedent—both because federal and state liability overlap to a significant degree, and because numerous provisions of Mississippi securities law are derived from or closely resemble federal law, leading Mississippi courts frequently to resort to cases construing analogous federal provisions in order to construe and apply Mississippi law