Mark v. FSC Securities Corp.
United States Court of Appeals for the Sixth Circuit
870 F.2d 331 (6th Cir. 1989)
FSC (defendant) sold unregistered partnership interests in a horse-industry venture to investors including Mark (plaintiff), relying on subscription documents requiring investors to attest to their sophistication and disclose income and investment background; Mark brought a class action alleging securities fraud based on the interests being unregistered, and FSC offered Mark's own signed subscription documents (plus a blank template) as its only evidence supporting a Rule 506 safe-harbor exemption. The jury found FSC exempt under Rule 506, and Mark appealed.
Whether, to be exempt from securities-registration requirements under the safe-harbor provision of SEC Rule 506, an issuer must have a reasonable belief as to the sophistication of each purchaser.