Section 112 of the Securities Act (Prince Edward Island) provides that if an offering memorandum, or any amendment thereto or any document incorporated by reference therein, contains a Misrepresentation, a purchaser who purchases a security offered thereunder during the period of distribution has, in addition to any other rights the purchaser may have at law and without regard to whether the purchaser relied on the Misrepresentation, a right of action for damages against the issuer and, subject to certain additional defences, against directors of the issuer at the date of the offering memorandum and every person who signed the offering memorandum, or, alternatively, a right of action for rescission against the issuer; provided that if the purchaser exercises a right of action for rescission, the purchaser will not have a right of action for damages against the issuer or against any aforementioned person.
No action may be commenced to enforce the rights of action described above more than: (a) in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the cause of action; or (b) in the case of any action other than an action for rescission: (i) 180 days after the purchaser first had knowledge of the facts giving rise to the cause of action; or (ii) 3 years after the date of the transaction that gave rise to the cause of action, whichever period first expires.
No person, other than the issuer, is liable if the person proves that:
(a)
the offering memorandum was sent to the purchaser without the person’s knowledge or consent and that, on becoming aware of its being sent, the person gave reasonable notice to the issuer that it was sent without the person’s knowledge and consent;
(b)
on becoming aware of any Misrepresentation in the offering memorandum, the person withdrew the person’s consent to the offering memorandum and gave reasonable notice to the issuer of the withdrawal and the reason for it; or
(c)
with respect to any part of the offering memorandum purporting to be made on the authority of an expert or to be a copy of, or an extract from, a report, statement or opinion of an expert, the person had no reasonable grounds to believe and did not believe that (i) there had been a Misrepresentation, or (ii) the relevant part of the offering memorandum (A) did not fairly represent the report, statement or opinion of the expert, or (B) was not a fair copy of, or an extract from, the report, statement or opinion of the expert.
Furthermore, no person other than the issuer is liable with respect to any part of the offering memorandum, or any amendment thereto, not purporting to be made on the authority of an expert or to be a copy of, or an extract from, a report, statement or opinion of an expert, unless the person (a) failed to conduct a reasonable investigation to provide reasonable grounds for a belief that there had been no Misrepresentation; or (b) believed that there had been a Misrepresentation.
In addition, a person referred to above is not liable if the person proves that the purchaser purchased the securities with knowledge of the Misrepresentation. In an action for damages, the defendant is not liable for any damages that the defendant proves do not represent the depreciation in value of the security resulting from the Misrepresentation. The amount recoverable under the rights of action described above must not exceed the price at which the securities purchased by the purchaser were offered.
All or any one or more of the persons who are found to be liable or who accept liability for damages are jointly and severally liable. The foregoing statutory rights of action for rescission or damages conferred by section 112 of the Securities Act (Prince Edward Island) are in addition to and without derogation from any other right the purchaser may have at law.
This summary is subject to the express provisions of the Securities Act (Prince Edward Island) and the regulations and rules made under it, and prospective investors should refer to the complete text of those provisions.
