Securities & Investment Disputes
Who Else Is Liable? Control Persons and Aiders Under the Texas Securities Act
Draft for attorney review
Short answer
Under Texas Government Code section 4008.055, two groups are liable alongside the person who sold a security in violation of the Texas Securities Act. A control person, meaning anyone who controlled the seller, buyer or issuer, is jointly and severally liable, unless that person proves it did not know and could not have known the facts with reasonable care. An aider, meaning anyone who materially aided the seller, is liable if it acted with intent to deceive or defraud or with reckless disregard for the truth or the law. Texas is broader than federal law, which allows private claims against control persons but not against aiders.
Why secondary liability decides most cases
The company that sold the security is often the first defendant and the last to have money. By the time a Dallas investor learns that an offering was misdescribed or never qualified for an exemption, the issuer has spent the proceeds. Recovery then depends on who else the law reaches: the founders and managers who ran the sale, the salesmen and finders who brought in the money, and sometimes the professionals who helped. Texas Government Code section 4008.055 is the provision that answers that question for Texas Securities Act claims. It attaches to every primary claim in the Act's civil-liability subchapter: sales without registration (section 4008.051), sales by untrue statement (section 4008.052), and the rest. The primary claims themselves are explained in the Texas Securities Act guide.
Control persons: joint liability with a knowledge defense
Section 4008.055(a) provides that a person who directly or indirectly controls a seller, buyer or issuer of a security is liable under the primary-liability sections jointly and severally with the seller, buyer or issuer, and to the same extent. The statute does not define control. Courts treat it as a fact question about the power to direct the management and policies of the seller and the challenged sale: officers, directors, managing members, general partners and majority owners are the usual control persons, and a person can control without a title if he in fact ran the sale.
The defense is in section 4008.055(b): the control person is not liable if it proves that it did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. The burden is on the control person. A passive director who never saw the offering materials may meet it; a founder who wrote the deck will not. Joint and several liability means the investor may collect the whole judgment from any one of them, with contribution among the liable persons handled as in contract cases under section 4008.055(d).
Aiders: a higher bar, a wider net
Section 4008.055(c) reaches a person who directly or indirectly, with intent to deceive or defraud or with reckless disregard for the truth or the law, materially aids a seller, buyer or issuer of a security. That person is liable jointly and severally with the seller, buyer or issuer, to the same extent. Three elements follow:
- A primary violation by the seller, buyer or issuer.
- Material aid. Substantial assistance to the violation, not merely to the business in general. Drafting the offering documents, soliciting investors, structuring the deal or lending professional credibility to the sale can qualify; routine services unconnected to the sale generally do not.
- The required state of mind. Intent to deceive or defraud, or reckless disregard for the truth or the law. Negligence is not enough, and a reasonable-care defense is not available because the plaintiff already carries the burden on the aider's state of mind.
The practical targets are finders and salesmen paid to bring in investors, marketing affiliates, and, where the facts show knowledge or recklessness, lawyers, accountants and brokers who helped sell a deal they had reason to know was misdescribed or unregistered. The state of mind is proved circumstantially: what the aider saw, what red flags were ignored, and what the aider was paid.
Example
Suppose a Dallas company sells $3 million of preferred units to forty investors with a memorandum that states the company owns a patent it had only applied for. The sale is run by the CEO, approved by a three-member board, and the investors are brought in by a commissioned finder who is not registered with the Texas State Securities Board. The company fails. Under section 4008.052 the company is liable as seller without proof of intent. The CEO is a control person and cannot show reasonable care because he knew the application was pending. The two outside directors are control persons too, but may escape if they prove they never saw the patent statement and had no reason to question it. The finder is an unregistered agent, which gives a rescission claim under section 4008.051, and if he repeated the patent claim knowing it was false, an aider under section 4008.055(c). The company's outside law firm, which reviewed the memorandum, is an aider only if the investors can show it acted with intent or reckless disregard, a question of what the file shows the firm knew.
How the federal rules differ
| Question | Texas Securities Act, § 4008.055 | Federal Exchange Act, 15 U.S.C. § 78t |
|---|---|---|
| Control-person liability | Joint and several with the primary violator | Joint and several with the primary violator (§ 20(a)) |
| Control-person defense | Did not know and with reasonable care could not have known the facts | Acted in good faith and did not directly or indirectly induce the violation |
| Private aider claim | Yes, for intent to deceive or reckless disregard | No; § 20(e) reserves aiding-and-abetting to the SEC |
| Scienter for the primary claim | Not required for seller liability | Required under Rule 10b-5 |
| Forum | Texas state court, or federal court with a federal claim | Federal court |
The last two rows explain why professional-defendant cases are pleaded under Texas law whenever possible. The federal claim against the primary violator is harder, and the federal claim against the helper does not exist for private plaintiffs. The federal rules are explained in the Rule 10b-5 guide.
Deadlines
A section 4008.055 claim borrows the deadline of the primary claim it attaches to under section 4008.062. If the underlying violation was a sale without registration, the claim must be brought within three years after the sale. If it was a sale by untrue statement, within three years after the untruth was or should have been discovered and no more than five years after the sale. A compliant rescission offer that the buyer fails to reject in writing within 30 days cuts off the secondary claims along with the primary one.
For officers, finders and professionals who have been named
The defense starts with the category. A person named as a control person asks whether he actually had the power to direct the sale and, if so, builds the reasonable-care record: what he reviewed, what he was told, what processes existed. A person named as an aider asks whether the assistance was material to the sale and whether the plaintiff can plead and prove intent or reckless disregard, which is where many aider claims fail. Both check the limitations dates, the arbitration clause in the subscription agreement, and the company's indemnification and insurance. Texas Securities Act defendants also share in any rescission offer the company makes under section 4008.058. The company's own defense is covered in the guide for companies sued by an investor.
When to involve a litigator
For an investor, when the seller's ability to pay is in doubt, because the secondary defendants and the evidence of what they knew need to be identified before the three-year clock runs. For anyone named, immediately, because the reasonable-care and state-of-mind defenses are built from documents that must be preserved now. Tina Wysk represents investors, officers, finders and professionals in Texas Securities Act litigation in Dallas state and federal courts; see securities and investment disputes.
Questions on this topic
Who is a control person under the Texas Securities Act?
Anyone who directly or indirectly controlled the seller, buyer or issuer of the security, under Texas Government Code section 4008.055(a). The statute does not define control; courts look at the actual power to direct the company's management and the challenged sale. Officers, directors, managing members, general partners and majority owners are the usual examples, and a person with no title can be a control person if he in fact ran the offering.
Can a company's officers be personally liable for a securities sale they did not make themselves?
Yes. Section 4008.055 makes a person who controlled the seller or issuer jointly and severally liable to the same extent as the company, without any showing that the officer personally made the false statement. The officer escapes only by proving that he did not know and could not have known the facts with reasonable care. Officers who prepared or approved the offering materials rarely meet that burden.
What does it take to hold a lawyer or accountant liable as an aider?
Under section 4008.055(c), proof that the professional materially aided the seller and acted with intent to deceive or defraud or with reckless disregard for the truth or the law. Negligence is not enough. The claim is built from what the professional reviewed, what red flags appeared in the file, what was said to investors, and the professional's compensation. Professionals who performed routine work unconnected to the sale are generally outside the provision.
How is Texas aider liability different from federal law?
Texas allows private investors to sue aiders; federal law does not. Under 15 U.S.C. § 78t(e), only the SEC may pursue a person who knowingly or recklessly provided substantial assistance to a securities violation. Federal law does allow private claims against control persons under § 20(a), with a defense of good faith and no inducement. The difference is why claims against helpers are brought under the Texas Securities Act.
Is the deadline the same for a claim against a control person or aider?
Yes. Section 4008.062 applies the primary claim's deadline to the related section 4008.055 claim: three years after the sale for registration violations, and three years from discovery but no more than five years after the sale for untrue statements. A compliant rescission offer not rejected in writing within 30 days cuts off the secondary claims too. Federal control-person claims follow the two-year and five-year periods in 28 U.S.C. § 1658(b).
Sources
- Tex. Gov't Code § 4008.055 (control-person liability with reasonable-care defense, material aider liability for intent or reckless disregard, contribution; §§ 4008.058 and 4008.062 for rescission offers and limitations)
- 15 U.S.C. § 78t (Exchange Act § 20) (federal control-person liability with good-faith defense; aiding and abetting enforceable only by the SEC)
- 28 U.S.C. § 1658(b) (federal deadlines: two years from discovery, five years from violation)
- 17 C.F.R. § 240.10b-5 (federal primary antifraud rule that requires scienter)
Legal sources last checked November 6, 2026. Statutes and rules change; the date matters.
About the author
Tina Wysk
Shareholder, Hallett & Perrin, P.C.. Tina represents businesses and individuals, as plaintiffs and defendants, in contract, partnership, fiduciary duty, fraud, construction, trade secret and investment disputes in Texas state and federal courts and in arbitration.
About TinaThis guide is general information about Texas and federal law for business owners, not legal advice about your situation. Statutes, rules and court decisions change, and small facts change outcomes. Reading it or contacting Tina Wysk through this site does not create an attorney-client relationship.
