Mark v. FSC Securities Corp.

870 F.2d 331 (1989)

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Mark v. FSC Securities Corp.

United States Court of Appeals for the Sixth Circuit
870 F.2d 331 (1989)

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Facts

Malaga Arabian Limited Partnership (Malaga) hired FSC Securities Corporation (FSC) (defendant) to sell partnership interests in order to solicit investors in the Spanish Arabian Horse industry. A partnership interest was sold to James Mark (plaintiff). Mark brought a class-action suit against FSC, claiming securities fraud based on the fact that the partnership interests were unregistered. At trial, Laurence Leafer, a general partner of Malaga, testified as to what was done to ensure that investors were reasonably sophisticated. Leafer indicated that the subscription documents sent to potential investors required the investors to sign and acknowledge that they were sophisticated. FSC provided Mark’s signed subscription documents, accompanied by a set of blank subscription documents, as evidence. The subscription documents required the investors to indicate that their income met a certain threshold. The subscription documents also contained a questionnaire that required investors to divulge their educational and investment background. The jury determined that FSC was exempted from the securities-registration requirements by the safe-harbor provision of Securities and Exchange Commission (SEC) Rule 506, 17 C.F.R. § 230.506. Mark appealed.

Rule of Law

Issue

Holding and Reasoning (Simpson, J.)

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