Professor Adam Pritchard

A shareholder sought leave under s. 138.8 of the Securities Act to commence a statutory secondary market misrepresentation action under s. 138.3 against a solar energy company and two of its officers.

The alleged misrepresentations concerned financial statements, internal control disclosures, and statements incorporated into a prospectus supplement.

The court held that the plaintiff demonstrated a reasonable possibility of success regarding alleged misrepresentations in the issuer’s original Q4 2009 financial statements and the October 2009 prospectus supplement, including related press releases and conference calls.

However, the plaintiff failed to establish sufficient evidence of misrepresentation in earlier 2009 interim financial statements or the 2008 revenue recognition disclosure.

Leave was granted in part and refused in part.