A rule promulgated by the Securities and Exchange Commission that makes it unlawful for any person to (a) employ any device, scheme, or artifice to defraud; (b) make any untrue statement of material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (c) engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person. What this means in lay terms is that no-one can sell a security by making an untrue statement about something important.
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Statutory provision that imposes liability on any person who offers or sells a security for any untrue statement of material fact or omission of a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading. This section is like Rule 10b-5 in that it prohibits people from making untrue statements in order to sell securities, but it is stricter because the person making the untrue statement has to prove he or she didn’t know it was false.