## Facts

- Two Massachusetts municipal retirement boards invested in a closed-end private equity fund structured as a limited partnership with a projected ten-plus-year life.
- Investors purchased limited partnership units through private placements exempt from Securities Act registration under § 4(a)(2) and Regulation D, and made irrevocable capital commitments.
- Investors were effectively illiquid for the fund’s duration and could not withdraw capital or sell interests until the fund closed.
- A large portion of the fund’s capital was invested in a vehicle whose sole holdings were shares of a Romanian compensation fund whose shares historically traded below par value.
- Plaintiffs alleged offering materials and periodic reports materially overstated asset values (and thus NAV), masking losses and portraying the fund as profitable.
- Plaintiffs filed a putative class action asserting, among other claims, liability under Securities Act § 12(a)(2) based on alleged misstatements in selling materials and related communications.
- Defendants moved to dismiss under Rule 12(b)(6).

## Issues

1. Whether purchasers in an unregistered private placement may sue under Securities Act § 12(a)(2) for alleged misstatements or omissions made in offering materials and related oral communications.
2. Whether the alleged statements were made “by means of a prospectus or oral communication” within the meaning of § 12(a)(2) when no statutory prospectus was required for the exempt offering.

## Decision

- The court granted defendants’ motion to dismiss the § 12(a)(2) claim.
- The court held § 12(a)(2) does not apply to the fund’s private, exempt offering because it was not a public offering conducted by means of a statutory prospectus.
- Even assuming material misstatements were adequately alleged, plaintiffs could not state a § 12(a)(2) claim because the transaction fell outside the statute’s scope.

## Legal Principles

- Securities Act § 12(a)(2) imposes civil liability only for misstatements or omissions made “by means of a prospectus or oral communication” in the sense used for registered, public offerings.
- Private placements exempt from registration under § 4(a)(2) and Regulation D generally do not involve a statutory prospectus and therefore fall outside § 12(a)(2).
- Materials that resemble a prospectus in common usage (e.g., private placement memoranda) do not, by themselves, satisfy § 12(a)(2)’s prospectus requirement for exempt offerings.

## Conclusion

The court dismissed the § 12(a)(2) claim because the limited partnership interests were sold through an unregistered private placement, and § 12(a)(2) is limited to misstatements tied to public offerings conducted using a statutory prospectus (or analogous oral communications).


Brockton Ret. Bd. v. Oppenheimer Glob. Res. Priv. Equity Fund I, L.P., No. 12-10552-RWZ, 2013 WL 753310 (D. Mass. Feb. 28, 2013)