Recently, Southern District of New York Judge Sidney Stein ruled that a holder of securities sold to the public through a firm commitment underwriting was not subject to “seller” liability under �12(a) of the Securities Act because the holder did not transfer title to the purchasers and there was no showing that the holder had solicited the sales. In re Deutsche Telekom AG Securities Litigation, 2002 WL 244597 (S.D.N.Y. Feb. 20, 2002). This decision applies the same reasoning to securities holders that has been applied to issuers of securities sold through a firm commitment underwriting.
At issue in Deutsche Telekom was a public offering of 200 million shares of Deutsche Telekom AG that were held by defendant Kreditanstalt fur Wiederaufbau (KfW). 2002 WL 244597 at 1. As stated in the prospectus, KfW entered into a firm commitment underwriting agreement in which the underwriters agreed to purchase from KfW the 200 million shares being offered, and had an option to purchase an additional 30 million shares from KfW to cover any over-allotments. Id. at 2. Although the prospectus stated that “[KfW] is selling all of the shares that are being offered in the global offering,” KfW did not sign the registration statement that included the prospectus. Id. at 4, 5.
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