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If the seller of a security determines that the sale of securities has violated any provision of the USA, the seller may offer the affected parties rescission. All offers of recession must be in writing and include an agreement to repurchase the securities at the original purchase price and must include interest for the time period that the money was invested. If the buyer does not accept the offer of rescission within 30 days, the seller has no further liability with regard to the sale of those securities, and the buyer forfeits the right to sue. An investor's acknowledgment that a sale is in violation of the USA is never valid.

EXAMPLE A customer with an investment objective of speculation convinces his representative to sell him an interest in a private placement that will pay the representative a commission and is in violation of the USA. The investor is a nonaccredited investor and signs a letter stating that he recognizes that the investment is in violation of the USA and that he will not sue or otherwise hold the representative or his firm responsible for any losses.

This acknowledgment by the client is neither valid nor enforceable and in no way protects the representative or the firm.

Investment advisers that breach their fiduciary duty or are found to have made unsuitable transactions based on a client's investment objectives can be held liable for:

• The amount of the loss.

• Interest on the amount invested.

• Reasonable legal costs.

• The cost of the advice.

Minus any income received as a result of the advice


If a buyer of a security finds that the sale of the security violates any of the provisions of the USA, the purchaser has two years from the discovery of the violation or three years from the purchase date, whichever comes first, to take action.


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