Carlson v. Bear, Stearns & Company, Inc.
United States Court of Appeals for the Seventh Circuit
906 F.2d 315 (1990)
Certain Illinois-based purchasers of stock (purchasers) (plaintiffs) brought suit against their broker and its salesperson, seeking to rescind the purchases on the ground that the sellers were not registered dealers and salespersons in Illinois and that the securities were not registered pursuant to the Illinois Securities Act (Illinois act). The purchasers also sued Bear, Stearns, & Company, Inc. (Bear) (defendant), the broker that cleared the transactions. As the clearing broker, Bear received a flat fee per transaction for performing ministerial tasks, such as preparing and maintaining transaction records; receiving payment; and transmitting stock certificates, confirmations, and statements. The purchasers asserted that Bear was jointly and severally liable under the Illinois act because it (1) “participated or aided in any way” the improper sales or (2) was a party “by or on behalf of whom said sale was made.” The district court rescinded the transactions, ordering the broker and salesman to pay damages and attorney’s fees of almost $300,000. However, the district court ruled that Bear was not jointly and severally liable under the act. The purchasers appealed.
Rule of Law
Holding and Reasoning (Bauer, C.J.)
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