• Senate Conferees Propose to Effectively Overrule Gustafson v. Alloyd
  • July 2, 2010 | Authors: Bruce C. Bennett; David H. Engvall; David B. H. Martin
  • Law Firms: Covington & Burling LLP - New York Office ; Covington & Burling LLP - Washington Office
  • Perhaps lost in the flurry of activity as the House and Senate conferees seek to produce a version of financial services reform legislation is an effort by Senate conferees to add a provision intended to overturn the Supreme Court’s 1995 decision in Gustafson v. Alloyd Co., Inc. In Gustafson, the Court held that liability under §12(a)(2) of the Securities Act of 1933 was limited to sales effected by means of a prospectus meeting the requirements of §10 of that Act. In so holding, the Court resolved uncertainty as to whether §12(a)(2) liability attached to (i) private placements of newly-issued securities, (ii) M&A transactions structured as stock sales and (iii) secondary market transactions. Under Gustafson, §12(a)(2) liability typically does not attach in any of these situations.