NASAA Series 63Remedies and Administrative ProvisionsHard
An investor purchased securities for $20,000 in a transaction that violated the registration provisions of the Uniform Securities Act. She held the securities for two years, received $500 in dividends, and now sues for rescission. The applicable legal interest rate is 6% per year, and she incurs $300 in court costs and $700 in attorney's fees. What is the approximate amount she is entitled to recover?
- A$22,400
- B$22,900
- C$23,700
- D$20,000
Show answer & explanationAnswer & explanation
Correct answer: B. $22,900
The recovery equals the purchase price plus interest, minus income received, plus costs and fees: $20,000 + ($20,000 × 6% × 2 years = $2,400) − $500 (dividends) + $300 (court costs) + $700 (attorney's fees) = $22,900.
Why the other options are wrong
- A. This adds interest but fails to include costs and attorney's fees, and doesn't subtract dividends.
- C. This overstates the recovery by not subtracting the dividends received.
- D. This ignores interest, dividends, and litigation costs entirely.
Civil Damages Formula
Under the Uniform Securities Act, a buyer's recovery equals the consideration paid plus interest at the legal rate, minus any income received, plus court costs and reasonable attorney's fees.
- Interest accrues from date of purchase to judgment/tender
- Income received (dividends/interest) reduces recovery
- Court costs and attorney's fees are added to the award
Memory trick: Price plus interest, minus income, plus costs and fees.