AMI 2700 Issues—Claim for Damages Based on Securities Fraud—Purchaser's Claim Against Selle...
Ark. Model Jury Instr., Civil AMI 2700
Arkansas Model Jury Instructions-Civil
December 2023 Update
Chapter 27. Securities Fraud
AMI 2700 Issues—Claim for Damages Based on Securities Fraud—Purchaser's Claim Against Seller
[Plaintiff] claims damages from [defendant] and has the burden of proving each of four essential propositions:
First, that [defendant] sold a security to [plaintiff] in this state;
Second, that [plaintiff][offered to return the security purchased][no longer owns the security];
Third, that [defendant] sold such security by means of [an untrue statement of a material fact][or][an omission to state a material fact necessary in order to make any statement made, in light of the circumstances under which it was made, not misleading];
And fourth, that [plaintiff] did not know [that the statement was untrue][or][a material fact was omitted].
A fact or statement of fact is “material” if it was a substantial factor in influencing [plaintiff]'s decision. It is not necessary, however, that it be the paramount or decisive factor, but only one that a reasonable person would attach importance to in making a decision.
[If you find from the evidence in this case that each of these propositions has been proved, then your verdict should be for [plaintiff]; but if, on the other hand, you find from the evidence that any of these propositions has not been proved, then your verdict should be for [defendant].]
NOTE ON USE
Do not use the final bracketed paragraph when the case is submitted on interrogatories.
COMMENT
This instruction is based on Ark. Code Ann. § 23-42-106(a)(1)(B).
The Arkansas Securities Act (“the Act”), codified as Ark. Code Ann. §§ 23-42-101 et seq., creates a comprehensive regulatory scheme for securities transactions in this State. It regulates instruments that meet the statutory definition of “security,” transactions involving such instruments, and professionals who regularly engage in such transactions. This jury instruction is for the civil claim most often brought in the courts of this State, the Blue Sky fraud claim.
The civil liability statute, § 23-42-106, creates several other causes of action, including a cause for violation of registration requirements (§ 23-42-301), misrepresentation of the fact of exemption from registration (§ 23-42-212), sale of unregistered, nonexempt securities (§ 23-42-501), and market manipulation (§ 23-42-508). This statute also creates a cause of action for violation of Section 23-42-507, which is substantially identical to Rule 10-b(5), promulgated pursuant to Section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C.A. § 78j(b)). Particularized instructions for such causes of action have not been prepared because such causes of action are infrequently brought in Arkansas state courts.
The issue of whether an underlying instrument involved in the transaction is properly denominated a “security” is a mixed question of law and fact ordinarily resolved by the court. See, e.g., Carder v. Burrow, 327 Ark. 545, 940 S.W.2d 429 (1997). If a case requires a determination of fact with respect to whether the instrument is a security, the specific factual issue should be presented to the jury by an inquiry tailored to the particular fact in dispute. An interrogatory or interrogatories may provide the appropriate means. See AMI 3502. Because of the complexity of this determination and the impossibility of anticipating all such factual inquiries, a form instruction is not included in this Chapter.
The definition of “material” in this instruction is derived from AMI 402. The Committee believes it is substantially identical to that endorsed by the United States Supreme Court under federal securities law. See Basic Inc. v. Levinson, 485 U.S. 224, 240, 108 S. Ct. 978, 988, 99 L. Ed. 2d 194 (1988) (“[M]ateriality depends on the significance the reasonable investor would place on the withheld or misrepresented information.”); TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S. Ct. 2126, 2132, 48 L. Ed. 2d 757 (1976) (“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.”).
Section 23-42-102 provides definitions for a variety of terms that appear in the Act. Those definitions have not been incorporated into these instructions because the Committee believes such definitions will seldom be necessary. In the event of a factual dispute about the applicability of a particular term to a claim, the statutory definitions may provide a basis for supplemental instruction.
© 2023 Arkansas Supreme Court Committee on Jury Instructions-Civil
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