Securities Act Section 12 (2) after the Gustafson Debacle

48 Pages Posted: 27 Jul 2001

See all articles by Stephen M. Bainbridge

Stephen M. Bainbridge

University of California, Los Angeles (UCLA) - School of Law


In a 1992 colloquy held in the pages of the Business Lawyer, Professors Louis Loss and Elliott Weiss debated the scope of liability under section 12(2) of the Securities Act of 1933. Following the United States Supreme Court's decision in Gustafson vs. Alloyd Co., the Business Lawyer invited Professor Stephen Bainbridge to substitute for Professor Loss as the defender of a broad interpretation of section 12(2) [subsequently re-numbered section 12(a)(2)]. In this article, Bainbridge argues that the Gustafson decision limited liability under section 12(2) to misrepresentations and omissions committed in connection with public offerings of securities. Bainbridge criticizes the Gustafson decision on a variety of grounds, including its inconsistency with prior precedent, the text of the statute, and the Act's legislative history.

JEL Classification: K22

Suggested Citation

Bainbridge, Stephen Mark, Securities Act Section 12 (2) after the Gustafson Debacle. Business Lawyer, Vol. 50, Pp. 1231, 1995. Available at SSRN: or

Stephen Mark Bainbridge (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-206-1599 (Phone)
310-825-6023 (Fax)


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