Full opinion text
ORDER GRANTING SUMMARY JUDGMENT GOLD, District Judge. THIS CAUSE is before the Court upon Defendant UBS PaineWebber, Inc.’s Motion for Summary Judgment (DE #91, filed December 8, 2003) seeking to dismiss Plaintiffs’ Second Amended Complaint (DE # 52, filed March 3, 2003). Plaintiffs filed their Response to Defendant’s Motion for Summary Judgment (DE # 107) on January 5, 2004. Defendant UBS Paine-Webber, Inc. (UBS or Defendant) filed its Reply (DE # 121) on January 20, 2004. Defendant Mark Advisors L.L.C. (Mark Advisors) also filed a Motion for Summary Judgment (DE # 97) on December 8, 2003, and Plaintiffs filed their Response (DE # 106) on January 5, 2004. Defendant Mark Advisors filed its Reply (DE # 118) on January 20, 2004. Finally, Plaintiffs filed a Motion for Class Certification (DE #83, filed August 29, 2003). Defendant Mark Advisors filed its Opposition to the Motion (DE # 101) on December 22, 2003, and Defendant UBS filed its Opposition (DE # 103) on the same day. Plaintiffs filed their Reply (DE #115) on January 9, 2004. The Court held oral argument regarding these Motions on January 30, 2004. After the Oral Argument, Plaintiffs filed a Motion to Supplement Motion to Certify Class Action (DE # 133, filed February 24, 2004). Upon review of the parties’ arguments, the record, and the relevant statutes and case law, and for the reasons stated in this Order, Defendant UBS’ Motion for Summary Judgment is GRANTED. Plaintiffs have not stated a claim for fraud pursuant to Section 12(a)(2) of the Securities Act, 15 U.S.C. § 771. Specifically, I conclude that Defendants did not offer investment opportunities in the PW Aspen Fund (“Fund”) through the use of a registered public offering, and therefore, as a matter of law, Plaintiffs cannot bring a Section 12(a)(2) claim in connection with their investments in the Fund. Thus, it is unnecessary to reach Defendant Mark Advisor’s Motion for Summary Judgment because regardless of whom the defendant is, Plaintiffs cannot allege violations of Section 12(a)(2) involving the offering at issue in this case. I do not enter final judgment, however, because I am allowing Plaintiffs the opportunity to amend their complaint to allege violations of Section 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b) (Section 10(b)), and 17 C.F.R. § 240.10b-5 (Rule 10b-5). Plaintiffs have twenty days from the date of entry of this Order to amend their complaint, or ten days to file an immediate appeal with the Eleventh Circuit pursuant to the certification process described in 28 U.S.C. § 1292(b). In the event that they choose the latter route, the twenty-day period within which they may file an Amended Complaint and the statute of limitations for bringing a Section 10(b) claim will be automatically stayed pending Eleventh Circuit review. Because the Motion for Summary Judgment ■ is GRANTED, Plaintiffs’ Motion for Class Certification and Plaintiffs’ Motion to Supplement are DENIED AS MOOT. Jurisdiction This Court has subject-matter jurisdiction pursuant to federal question jurisdiction, 28 U.S.C. § 1331, and diversity jurisdiction, § 1331. Factual Background Plaintiffs’ sole claim in this action is that Defendants violated § 12(a)(2) of the Securities Act of 1933 (the Securities Act or the Act or the 1933 Act) by making misrepresentations in the offering, and communications relating to the offering, through which they sold interests in the PW Aspen Fund. (Statement ¶ 1). UBS and Mark Advisors formed the Fund in 1999. (Plaintiffs Statement ¶ 5). Morris Mark, the sole member and President of Mark Advisors, was the portfolio manager of the Fund. (Id. at ¶ 2). Bruce Ruden-berg, Plaintiffs’ Financial Advisor or FA, represented that Mark would use hedging strategies in his management of the Fund. (Id. at ¶¶ 17,18). The offering of investments in the Fund was not registered under the 1933 Act. (Statement ¶ 2; Brousseau Declaration Exh. 1, Plaintiffs’ Response to Paine-Webber’s Discovery Requests (“Plaintiff [sic] admit that Defendants did not file a registration statement with the Securities and Exchange Commission in connection with their offering and sale of interests of PW Aspen Fund.”)). The offering was made pursuant to materials referred to as a Confidential Offering Memorandum (COM). (Brousseau Declaration ¶ 11 and at Exhibit D). The COM reads as follows: The interests in PW Aspen Fund, L.L.C. (the “Fund”) which are described in this Confidential Memorandum (“Memorandum”) have not been and will not be registered under the Securities Act of 1933, as amended (“1933 Act”), or the securities laws of any of the States of the United States. The offering contemplated by this Memorandum will be made in reliance upon an exemption from the registration requirements of the 1933 Act for offers and sales of securities which do not involve any public offering, and analogous exemptions under state securities laws. (Brousseau Declaration at Exhibit D). According to UBS’ Statement of Material Facts, the offering and issuance of interests in the Fund was made pursuant to Rule 506 of Regulation D, 17 C.F.R. § 230.506. (¶ 10, citing Brousseau Declaration Exh. N, Form D filed with the Securities and Exchange Commission (SEC) in 1999). The Investor Application included a section titled “Accredited Investor Representation,” which reads as follows: “The Undersigned is an ‘accredited investor’ under Regulation D [generally, net worth in excess of $1 million for individuals (together with spouse) or total assets in excess of $5 million for entitles]. ...” (Brousseau Declaration Exh. E, Investor Application at 11 (brackets in original)). Further, UBS states that there were less than 35 “purchasers” of interests in the PW Aspen Fund as the term is defined in SEC Regulation D. (Statement ¶ 16). Plaintiffs state that whether Defendants met the requirements of Regulation D are subject to dispute. (Plaintiffs’ Statement at 19, ¶ 8). Beginning in February 2000, Plaintiffs received monthly brokerage account statements and semi-annual reports regarding the status of their investments in the Fund. (Statement ¶¶ 4, 6). They received quarterly letters beginning April 2000 (Statement ¶ 5). They also received offers to purchase their interests in the Fund on two separate occasions more than a year before they filed this action. (Statement ¶ 7). Many of these materials stated that Mark’s investment strategy was to make long-term investments. (Brousseau Declaration Exh. F). In April 2002, Defendants arranged a conference call to give Plaintiffs the opportunity to ask Mark questions regarding the Fund. (Plaintiffs’ Statement ¶ 12). Plaintiffs state that it was during this call that they first learned that Mark had not been managing the Fund in the manner in which they had been informed that he would. (Id. at ¶ 23). Accordingly, Plaintiffs brought this action, initially in state court, on August 9, 2002. (Statement ¶ 3). Standard of Review Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment when the pleadings and supporting materials show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The court’s focus in reviewing a motion for summary judgment is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997). The moving party has the burden to establish the absence of a genuine issue as to any material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Tyson Foods, Inc., 121 F.3d at 646. Once the moving party has established the absence of a genuine issue of material fact, to which the nonmoving party bears the burden at trial, it is up to the nonmoving party to go beyond the pleadings and designate “specific facts showing that there is a genuine issue for trial.” Celotex v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Issues of fact are genuine only if a reasonable jury, considering the evidence presented could find for the nonmoving party. See Anderson, 477 U.S. at 247-51, 106 S.Ct. at 2510-11, 106 S.Ct. 2505. In determining whether to grant summary judgment, the district court must remember that, “credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id., 477 U.S. at 255, 106 S.Ct. at 2513. Analysis Upon review of the record, the parties’ arguments, and applicable case law, I conclude that Plaintiffs’ claim is not time-barred, but that Defendants are entitled to summary judgment as a matter of law because Section 12(a)(2) does not apply to type of offering at issue here. Thus, Plaintiffs cannot bring a Section 12(a)(2) claim against any of the Defendants for this offering. I am allowing Plaintiffs the opportunity to amend their Second Amended Complaint within twenty days to allege violations of Section 10(b) of the Securities Exchange Act. In the alternative, they can file an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) based on the issues I have indicated are appropriate for certification within ten days of the date of entry of this Order. See infra Part III for a discussion of 28 U.S.C. § 1292(b). If they decide to take the latter course, this case and the statute of limitations period for bringing a Section 10(b) claim will be automatically stayed pending Eleventh Circuit review. I. A Material Issue of Fact Remains Regarding the Statute of Limitations. I first address Defendant UBS’ argument that Plaintiffs’ sole claim is time-barred because if UBS is correct, I need not reach the other issues in this case. Section 13 of the Act provides the statute of limitations for alleged violations of § 12(a)(2): “No action shall be maintained to enforce any liability created under section 77k or 111(a)(2) of this title unless brought within one year after the discovery of the untrue statement or omission, or after such discovery should have been made by the exercise of reasonable diligence ....” 15 U.S.C. § 77m. Defendants argue that dismissal is warranted pursuant to this statute as to each of the Plaintiffs’ principal allegations: that Defendants fraudulently represented that they would (1) hedge through short selling, (2) conservatively manage the Fund to minimize loss, and (3) engage in substantial portfolio diversification. (Motion at 13). UBS states that more than a year prior to commencing suit, Plaintiffs had knowledge, or at least “inquiry notice” (i.e., “knowledge of facts that would lead a reasonable person to begin investigating the possibility that his legal rights had been infringed”), that each of these investment strategies did not occur. (Motion at 14, citing Franze v. Equitable Assurance, 296 F.3d 1250, 1254 (11th Cir.2002); Theoharous v. Fong, 256 F.3d 1219 (11th Cir.2001)). Plaintiffs argue that they were not put on inquiry notice until the April 2002 conference call with Mark. Based on the record and applicable case law, I conclude that there is a material dispute as to whether Plaintiffs were on inquiry notice more than a year prior to filing suit. Accordingly, summary judgment on this ground is not warranted. In the cases Defendant cites, the plaintiffs were put on inquiry notice because the allegedly concealed information was closely related to the information that was disclosed more than a year prior to filing suit. In Frame, the plaintiffs alleged that the defendant made misrepresentations in violations of securities laws when selling life insurance policies. Frame, 296 F.3d at 1252. Plaintiffs thought that they were buying pension, retirement, or education funding plans because Defendants’ agents had allegedly obscured the nature of the costs under the policies, particularly the fact that these costs would increase as the investors’ ages increased. Id. The court stated that to be placed on inquiry notice of securities fraud, an investor needs to have knowledge of facts that would lead a reasonable person to begin investigating the possibility that his legal rights had been infringed. Id. at 1254, citing The-oharous, 256 F.3d at 1228. The court found that this standard had been met. Id. The defendant had provided the plaintiffs with a prospectus and policy prior to their purchases. Id. at 1255. These documents revealed that the insurance premiums increased over the policy period. Id. The Eleventh Circuit stated that for purposes of inquiry notice, a plaintiff is deemed to have knowledge of the information contained in the offering. Id. Because the offering materials disclosed that the premiums increased, the plaintiffs could not argue that they did not have knowledge that the costs would increase as their ages increased. Id.; see also Theoharous, 256 F.3d 1219 (concluding that the securities claims regarding the defendant company’s alleged misrepresentations of solid financial health were time-barred because the company’s filing for bankruptcy more than a year prior to commencement of the action put the plaintiffs on inquiry notice). These cases are distinguishable from the present action. Defendant argues in large part that the general decline in the value of Plaintiffs’ investments was sufficient to put them on inquiry notice of the alleged misrepresentations. (See, e.g., Motion at 18-19). Most of the allegations, however, do not state that Defendants misrepresented a drop in value, but that Defendants concealed changes in Mark’s investment strategy. For example, Plaintiffs state that Defendants fraudulently represented that Mark would not invest more than 25% in any one industry (Second Amended Complaint ¶ 27) and that Mark would invest a minimum of $2 million in the Fund (Second Amended Complaint ¶ 28). In the cases Defendant cites, the information alleged to have been concealed related to the information disclosed; thus, the revealed information would have been sufficient to arouse the suspicion of a reasonable person. In Frame, the plaintiffs alleged that the defendant’s agents fraudulently obscured the fact that the premiums would increase. Frame, 296 F.3d at 1252. The prospectus and related documents included a table showing that the premiums would increase. Id. at 1255. In Theoharous, the plaintiffs alleged that the defendant company fraudulently represented that it was experiencing solid financial health. The- oharous, 256 F.3d at 1228. The company, however, filed for bankruptcy. Id. This event is clearly sufficient to put a reasonable person on notice that the company was not solid financially. In this case, the reports of plummeting values were sufficient to put Plaintiffs on notice that their investment was decreasing in value, but were not necessarily sufficient to put a reasonable person on notice that Mark had changed his investment strategy or that fraud had occurred. See LaGrasta v. First Union Securities, Inc., 358 F.3d 840 (11th Cir.2004) (stating that a drop in an investment’s value is not necessarily sufficient to place plaintiffs on inquiry notice of securities fraud). In LaGrasta, the court reversed the district court’s dismissal of the securities complaint as time-barred. Id. The district court had held that the plaintiffs were put on inquiry notice more than a year prior to filing suit because a significant drop in stock price had occurred. Id. at 846. The Eleventh Circuit acknowledged that a decline in value may be a relevant factor in arousing suspicion among investors but nonetheless “decline[d] the invitation to adopt a bright-line rule that a certain price drop within a certain period of time constitutes inquiry notice as a matter-of law.” Id. at 849. The court explained that “[t]here may be numerous reasons, other than fraud, for a stock to decline (even steeply) in price.” Id. at 847 (parenthesis in original). Similarly, in this case, the decline in value does not necessarily indicate that Mark was not employing the investment strategies Plaintiffs understood him to be using. A reasonable person could attribute the decline to a variety of factors, such as normal fluctuations and declines in the financial market, other than fraud. Defendant also argues that Plaintiffs were put on inquiry notice because they received materials disclosing that Mark was not engaging in hedging strategies, or short-term selling. UBS spends a considerable amount of time arguing that its various reports revealed that Mark’s strategy was one of long-term investment, which is incompatible with what Plaintiffs understood as hedging. (Motion at 19-21). The Second Amended Complaint, however, includes other allegations that do not relate to hedging. As explained above, Plaintiffs state that Defendants fraudulently represented that Mark would not invest more than 25% in any one industry (Second Amended Complaint ¶27), and that Mark would invest a minimum of $2 million in the Fund (Second Amended Complaint ¶ 28). Defendant has failed to cite to specific sections of the record where its periodic reports and letters reveal information sufficient to put Plaintiffs on inquiry notice of each of these allegations. Even if Plaintiffs understood hedging to mean short term investment, and even if they knew that the Fund remained “fully invested on the long" side” (Motion at 17), these facts would at most indicate that Plaintiffs were put on inquiry notice that Mark was not hedging. The revealed information is not necessarily sufficient to have placed Plaintiffs on inquiry notice regarding their remaining allegations. Accordingly, material issues of fact remain as to whether Plaintiffs were put on inquiry notice more than a year before filing suit, and therefore, summary judgment is not granted as to Defendant’s statute-of-limitations argument. II. As a Matter of Law, Section 12(a)(2) Does Not Apply to the Offering. Defendants are entitled to summary judgment based on UBS’ remaining arguments. For the reasons stated below, .1 conclude that Plaintiffs cannot bring a Section 12(a)(2) claim for statements made in connection with the offering Defendants used to solicit investments in the Fund. After outlining the parties’ arguments, I will explain my conclusions. A. Parties’ Arguments Defendant argues that Plaintiffs cannot bring an action pursuant to Section 12(a)(2) because the statute only applies to registered offerings, and the offering of interests in the Fund was not registered. UBS bases its argument on Gustafson v. Alloyd Co., 513 U.S. 561, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995). Plaintiffs offer a limited view of Gustafson, and interpret the decision to mean simply that Section 12(a)(2) applies to all public, not private, offerings, regardless of whether they are registered. (Opposition at 41, citing Gustafson, 513 U.S. at 578, 115 S.Ct. at 1071). They further argue, that Defendants’ offering materials, though referred to as a Confidential Offering Memorandum (COM), “could not have been more public in nature, and therefore, Section 12(a)(2) applies.” (Id.). They state, based on Swenson v. Engelstad, 626 F.2d 421 (5th Cir.1980), that the determination of whether an offering is public or private depends upon factors such as the number of offer-ees. (Id. at 43). They contend that Regulation D does not provide an exemption from Section 12(a)(2)’s anti-fraud provisions. (Id. at 42). Finally, they state in their Local Rule 7.5 Statement of Material Facts that whether Defendant met the requirements of Regulation D is in dispute although they do not cite to the record for support and do not argue this point in their brief. (Plaintiffs’ Statement at 19, ¶ 8). Defendant argues that if Plaintiffs believe that the offering was improperly registered, they should have brought a claim under Section 12(a)(1) instead of Section 12(a)(2). B. Plaintiffs cannot bring a Section 12(a)(2) claim against Defendants for offering interests in the PW Aspen Fund. A key issue in this case is whether Gus-tafson limits Section 12(a)(2) liability to registered public offerings or whether a private placement memoranda (PPM) or COM can subject an offeror to Section 12(a)(2) liability. A second related issue regards the applicability of the Sioenson case to this action. Swenson, 626 F.2d 421. In that case, the former Fifth Circuit identified factors a court should use to determine whether an offering needs to be registered for purposes of Section 12(a)(1) liability, not whether an offering is subject to Section 12(a)(2) fraud. Id. Further, Swenson was decided well before the Supreme Court decided Gustafson and the SEC promulgated Regulation D. Thus, the Fifth Circuit was not addressing the issues that confront me today: whether only registered offerings are subject to Section 12(a)(2) liability and whether compliance with Regulation D exempts parties from registration requirements and therefore renders Section 12(a)(2) inapplicable. I conclude that Regulation D does do so, as I will explain in Part II.B(2), infra. The third issue for which there is no binding precedent is whether a cause of action for improperly failing to register an offering lies under Section 12(a)(2). Although Plaintiffs did not argue this point in their brief or during oral argument, they state in their Local Rule 7.5 Statement that whether Defendant complied with Regulation D is subject to dispute. To the extent that they are claiming that Defendants should have registered the offering, I conclude that this claim does not lie under Section 12(a)(2), but under Section 12(a)(1), which allows a party to bring an action against an offeror or seller for noncompliance with regulation requirements. 15 U.S.C. § 77i(l); see infra Part II.B(3). Further, a review of the record reveals that there is no material dispute that UBS did comply with Regulation D. See infra Part II.B(4). Thus, even if a cause of action for noncompliance with registration requirements did exist under Section 12(a)(2), summary judgment for Defendant would still be warranted. I will discuss each of my conclusions: first, Section 12(a)(2) only applies to registered offerings; second, Swenson does not apply to this case; third, a cause of action for violating registration requirements does not lie under Section 12(a)(2); and fourth, even if Section 12(a)(2) applied to claims for noncompliance with registration requirements, there is no dispute that the offering in this case complied with Regulation D. These conclusions lead me to grant summary judgment for Defendants. (1) Section 12(a)(2) Only Applies to Registered Offerings, so Whether an Unregistered Offering Is Public in Nature Is Irrelevant. The parties do not dispute that the offering of interests in the Fund was not registered. (Statement ¶ 2). Thus, this issue involves a question of law: whether Section 12(a)(2) applies to unregistered offerings. I conclude, based on the Gustafson decision and cases and commentary that have interpreted this decision, that it does not. In Gustafson, respondent companies, Al-loyd Holdings and Wind Point Partners II, L.P., brought a Section 12(a)(2) action against individual petitioners for alleged misrepresentations during the sale of Al-loyd, Inc.’s stock to Wind Point through Alloyd Holdings. 513 U.S. at 564, 115 S.Ct. at 1064. Petitioners and Alloyd Holdings entered into a contract of sale to effect this transaction. Id. at 565, 115 S.Ct. at 1065. Prior to the transaction, Wind Point had conducted a review of Alloyd, Inc.’s finances and had relied on its year-end estimates of its own financials. Id. After the sale, however, the year-end audit of Alloyd, Inc. revealed that its actual- earnings were lower than the estimates the parties had relied on in negotiating. Id. Respondents brought an action under Section 12(a)(2). Id. They alleged that Petitioners had made inaccurate statements regarding the financial status of their company. Id. at 565-566, 115 S.Ct. at 1065. The Supreme Court granted cer-tiorari to examine the issue of whether Section 12(a)(2) applies to contracts of sale. Id. The Court began its analysis by examining the language of the statute. In relevant part, the section provides that any person who offers or sells a security (whether or not exempted by the provisions of section 77c of this title, other than paragraph (2) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing-such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. Id. at 567, 115 S.Ct. at 1066, citing 15 U.S.C. § 77Z(2), now § 77Z(a)(2). The Court stated that the courts of appeals agree that the term oral communication in the phrase “prospectus or oral communication” is restricted to those oral communications that relate to a prospectus. Id. at 568, 115 S.Ct. at 1066. Thus, the Court turned to the question of whether a contract of sale is a prospectus. Id. In analyzing this issue, the Court examined Section 10 of the Securities Act,, which sets forth the information that must be .contained in a prospectus. Id. Section 10 provides the following: a prospectus relating to a security other than a security issued by a foreign government or political subdivision thereof, shall contain the information contained in the registration statement ...; “(2) a prospectus relating to a security issued by a foreign government or political subdivision thereof shall contain the information contained in the registration statement .... ” Id. at 568-569, 115 S.Ct. at 1066, citing 15 U.S.C. § 77j(a). The Court concluded, based on this language, that “[slave for the explicit and well-defined exemptions for securities listed under § 3, see 15 U.S.C. § 77c (exempting certain classes of securities from the coverage of the Act), its mandate is unqualified: ‘[A] prospectus ... shall contain the information contained in the registration statement.’ ” Id. at 569, 115 S.Ct. at 1066. The Court stated that in the case before it, there was no dispute that the contract w¡as not required to contain the information in the registration statement, and that a Section 3 statutory exemption did not apply. Id., 115 S.Ct. at 1067. Thus, the Court concluded that because the contract at issue did not need to comply with Section 10’s registration requirements, it was not a prospectus. Id. Further, because for the most part only public offerings require the preparation and filing of a registration statement, the Court concluded that it follows that a prospectus is confined to documents related to public offerings. Id. The majority of courts addressing the issue have interpreted Gustafson to mean that an offering that is a private placement within the meaning of Section 4(2), which exempts from registration offerings that are not made to the public (15 U.S.C. § 77d(2)), is not a prospectus and is therefore not subject to Section 12(a)(2) liability. In other words, these cases state that an offering that is exempt from registration pursuant to Section 4(2) is not subject to Section 12(a)(2) liability. See, e.g., In re WorldCom, Inc. Sec. Litig., 294 F.Supp.2d 431 (S.D.N.Y.2003) (dismissing Section 12(a)(2) because, despite the fact that there were hundreds of offerees, the court concluded that the offering was not made in connection with a public offering); AIG Global Sec. Lending Gorp. v. Banc of America Securities LLC, 254 F.Supp.2d 373, 389 (S.D.N.Y.2003) (granting dismissal due to the fact that there was no legal or factual basis for plaintiffs’ argument that Gustafson was distinguishable because the securities were sold pursuant to a “public style private offering.”); Kainos Labs., Inc. v. Beacon Diagnostics, Inc., Civ. No. 97-4618, 1998 WL 2016634, *5 (N.D.Cal. Sept.14, 1998) (“The PPM alone cannot lay the basis for a claim brought under Section 12(a)(2) because it indicates in no uncertain terms that its use should be limited only to the recipient of the PPM.”); Vannest v. Sage, Rutty & Co., Inc., 960 F.Supp. 651 (W.D.N.Y.1997) (following the line of cases concluding that a PPM by definition is not a public offering within the meaning of Section 12(a)(2)); Lennon v. Christoph, Civ. No. 94-6152, 1996 U.S. Dist. LEXIS 9943, *52-*53 (N.D.Ill. July 12, 1996) (granting summary judgment to the defendants as to the Section 12(a)(2) claims because “[b]y definition, a private placement memorandum such as the one at issue here does not involve a public offering”); In re JWP Inc. Sec. Litig., 928 F.Supp. 1239 (S.D.N.Y.1996) (holding that Section 12(a)(2) did not apply to a private placement memorandum which was subject to a Section 4(2) exemption); Glamorgan Coal Corp. v. Rainer’s Group, Civ. No. 93-7581, 1995 WL 406167, *1 (S.D.N.Y. July 10, 1995) (concluding that a PPM cannot subject offerors to Section 12(a)(2) liability); ESI Montgomery County v. Montenay Internat’l Corp., 899 F.Supp. 1061 (S.D.N.Y.1995) (concluding that because the plaintiff had acknowledged that the offering was made pursuant to a private placement memoranda exempt from registration by Section 4(2), an amended Section 12(a)(2) claim would be futile). Several of the cited cases require further comment because, like this case, they involve an offering which was made pursuant to a COM or PPM, but which the plaintiffs argue was in essence a public offering that should be subject to Section 12(a)(2) liability. After discussing these cases, I will apply them to the instant action and explain why I conclude, as a majority of courts have, that Defendants’ offering is a private placement not requiring a prospectus and therefore not subject to Section 12(a)(2) liability. In In re JWP Inc. Sec. Litig., the defendants sought summary judgment on the securities claims that had been asserted against them. In re JWP Inc. Sec. Litig., 928 F.Supp. 1239. The court granted the motion as to the issue of Section 12(a)(2) liability, stating that the offering documents did hot satisfy the definition of a prospectus. Id. at 1259. In that case, the pertinent information concerning JWP’s offerings was set forth in a private placement memoranda pursuant to § 4(2) of the 1933 Act. Id. This Section exempts from Section 5’s registration requirements “transactions by an issuer not involving a public offering.” Id., citing 15 U.S.C. § 77d(2). Applying Gustafson, the JWP court held that “private placement memo-randa like those at issue are not ‘prospectuses’ for the purposes of a claim under § 12(a)(2).” Id. Thus, the court granted summary judgment to defendants on the Section 12(a)(2) claims. Id. Further, the court rejected the plaintiffs “attempt to resurrect their § 12(a)(2) claim by contending that JWP’s private placement memoranda were so permeated by fraud that the exemption to registration under § 4(2) did not apply and the notes should have been sold in a registered offering.” Id. The court stated that if the .plaintiffs wanted to argue that the offering should have been registered, they should have brought a claim under Section 12(a)(1). Id. Similarly, in ESI Montgomery County v. Montenay Intemat’l Corp., 899 F.Supp. 1061 (S.D.N.Y.1995), the plaintiff sought leave to amend its complaint, which alleged a Section 12(a)(2) violation. Id. Defendants moved for summary judgment and dismissal of the amended complaint, arguing that based on Gustafson and the fact that the offering was private, the amendment would be futile. Id. at 1064. The court discussed factors such as the number of offerees and acknowledged that had these factors been alleged, it would not have been able to grant the defendants relief. Id. at 1065. Because the plaintiff had instead acknowledged that the offering was made pursuant to a private offering memoranda and that it was exempt from registration by Section 4(2), an amendment of the 12(a)(2) claim would be futile. Id. Thus, the court suggests that once a plaintiff admits that an offering is subject to a Section 4(2) exemption, any attempted Section 12(a)(2) claim would be futile. In Vannest v. Sage, Rutty & Co., Inc., 960 F.Supp. 651 (W.D.N.Y.1997), the court granted a motion for summary judgment on the issue of Section 12(a)(2) liability even though the plaintiffs alleged that the offering was actually more similar to a public, rather than a private, offering. Id. In that case, Defendant argued based on Gustafson that as a matter of law Section 12(a)(2) was inapplicable because the offering at issue was a private placement. The court described the Gustafson decision as follows: There, the Supreme Court determined that “prospectus” as used in Section 12(a)(2) is a document used only in a public offering of securities by an issuer or controlling shareholder. Because a prospectus must contain the information contained in the registration statement — see Section 10,15 U.S.C. § 77j — , and because only public offerings require a registration statement, the Supreme Court concluded that a prospectus “is a term of art referring to a document that describes a public offering of securities by an issuer or controlling shareholder.” Id. at 654, citing Gustafson, 513 U.S. at 584, 115 S.Ct. at 1073-1074. The plaintiffs argued that the defendant had the burden of proving that the transaction was not a public offering, and that in order to meet this burden, it had to present evidence regarding the number of offerees, the of-ferees’ sophistication, the size and manner of the offering, and the issuer’s relationship to the offerees. Id. (citation omitted). The court acknowledged that Gustaf-son’s “attempt to equate public offerings with those that are registered ignores the important fact that not all public offerings are registered.” Id. (citation omitted). The court explained that courts have taken different approaches since Gustafson was decided. Id. Some courts have determined that by definition, offerings made via a PPM are not public offerings. Id. (citations omitted). Others have refused to dismiss Section 12(a)(2) claims when the securities were offered via a PPM but the plaintiffs argued that the offering was not truly private. Id. at 655 (citations omitted). The court emphasized that the PPM expressly and repeatedly stated that the offering was not subject to registration requirements and that the securities were intended to be sold only to purchasers qualified by Rule 506 of Regulation D. Id. Further, the court stated that the plaintiffs had not asserted a Section 12(a)(1) claim and did not dispute that the offering was made via a PPM. Id. Although the plaintiffs argued that the offering was not truly private, they had not argued so for the previous six years and thus the court concluded that they had never seriously contested the private nature of the offering until Gustafson. Id. Thus, the court chose to follow the line of cases concluding that a PPM by definition is not a public offering within the meaning'of Section 12(a)(2). Id. The court emphasized in reaching its conclusion that the “stated intent at the time [of the offering] was to characterize the offering as private.” Id. Accordingly, the court granted summary judgment for defendant on the Section 12(a)(2) claim. ■ Id. Further, the fact that there are hundreds of offerees does not turn a COM or PPM into a public offering. In In re Worldcom, Inc. Sec. Litig., 294 F.Supp.2d 431 (S.D.N.Y.2003), the court granted the defendants’ motion to dismiss on the issue of whether the offering could subject its offerors to Section 12(a)(2) liability. Id. In assessing whether the offering was a private placement, the court noted the following factors: (1) the PPM stated that it was not for the public generally and (2) it stated that the notes it was offering had not been registered under the Securities Act. Id. at 454. Although the plaintiffs referred to the offering materials as a “private placement” in their complaint, they sought to amend to add that the offering was mass-produced and offered to hundreds of investors and sold to over 200 buyers in the initial public offering. Id. at 454. The court judged from the terms of the offering materials that it was not issued in connection with a public offering despite the possibility that it had been offered to hundreds of investors. Id. at 455. Thus, under Gtistafson, Section 12(a)(2) liability did not apply. Id. at 455. Similarly, in Glamorgan Coal Corp. v. Ratner’s Group, Civ. No. 93-7581, 1995 WL 406167 (S.D.N.Y.1995), the court concluded that a PPM cannot subject offerors to Section 12(a)(2) liability even though the PPM “contain[ed] information similar to that found in a public offering prospectus” and “[hjundreds of copies” of the PPM were provided to potential investors throughout the country. Id. at *1. The court stated, “every court since Gustafson ... has held- in light of Gustafson, that § 12(a)(2) applies only to initial public offerings.” Id. at *2 (citations omitted). Accordingly, the court granted the defendants’ motions to dismiss the Section 12(a)(2) claims and did not grant leave to amend because “no matter how the plaintiff might word the claim, the document involved cannot be ‘silkenized’ into a § 12(a)(2) ‘prospectus.’ ” Id. at *3 (citation omitted). Similar .considerations led the court in Kainos Labs., Inc. v. Beacon Diagnostics, Inc., Civ. No. 97-4618, 1998 WL 2016634 (N.D.Cal. Sept.14, 1998) to conclude that the PPM at issue was private and grant the defendant’s motion to dismiss. Id. The court noted that m^ny courts applying Gustafson have found that PPMs are by definition' not public offerings. Id. at *4 (citations omitted). The court stated that the PPM at issue explicitly stated that it was furnished on a confidential basis. Id. at *5. Thus, the court concluded,' “The PPM alone cannot lay the basis for a claim brought under Section 12(a)(2) because it indicates in no uncertain terms that its use should be limited only to the recipient of the PPM.” Id. Plaintiffs argued that the offering must have been made to a number of undetermined investors because the defendant had raised at least $4.2 million from undisclosed investors. Id. The court stated that “neither the complaint nor the prospectus explicitly state that [the defendant] has raised money from a ‘number of undetermined investors,’ and it is not a reasonable inference to assume that [the defendant] has done so.” Id. Applying the principles of the above-cited cases to the facts in this case leads me to conclude that Section 12(a)(2) does not apply to Defendants’ offering. Like the plaintiffs in the cases I have discussed, Plaintiffs here argue that the COM in this case was tantamount to a public offering and therefore Section 12(a)(2) applies. The offering itself, however, expressly referred to itself as “confidential.” (Brousseau Declaration at Exhibit D). It specifically stated that it was not subject to registration. Id. Further, it clearly stated that it was exempt because it was not a public offering. Id. The facts that it was intended to be private, it clearly expressed that it was private, and that it was not registered under the Act indicate that the offering was truly a COM, which most cases have held is, by definition, not a prospectus or public offering within the meaning of Section 12(a)(2). Plaintiffs argue that regardless of the express and repeated intent that the offering be a COM,'it was public in nature, mainly because there were a large number of offer-ees. Even though Plaintiffs attempt to dispute the number of offerees, they do not bring a claim under Section 12(a)(1) alleging registration violations. See infra Part B(3). They instead rely on Fisk v. SuperAnnuities, Inc., 927 F.Supp. 718 (S.D.N.Y.1996), which did examine the number of offerees, but on a motion to dismiss. Id. Fisk, however, is not persuasive authority. In Fisk, the court denied the motion to dismiss a Section 12(a)(2) claim. Id. The offering at issue was made pursuant to a PPM that stated it was only being offered to an accredited investor as the term is defined in Regulation D. Id. at 730. The plaintiff argued that the offering was not limited to the sort of investors the Supreme Court had previously described when defining Section 4(2)’s private placement exemption. Id. The court explained that the burden of proving an exemption from registration under the Securities Act is on the person claiming it. Id. (citations omitted). The court concluded, just as I did when faced with a similar motion to dismiss, that at the motion to dismiss stage, it was inappropriate to decide that the plaintiff could not prevail on the Section 12(a)(2) claim under any facts. Compare Fisk, 927 F.Supp. at 730 (“The fact that the PPM indicates that the offering was [exempt from registration] does not mean that plaintiff cannot prevail on the Section 12(a)(2) claim under any fact that might be proved”) with Order on Defendants’ Motions to Dismiss (DE # 66) at 12 (“Defendants have not met their burden of establishing that Plaintiffs are not entitled to any relief under any set of facts .... ”). The Fisk court did not reach the issue of whether Section 12(a)(2) applies to offerings that are properly exempt from registration under Section 4(2). The court simply concluded that the burden of proving proper exemption rests with the party claiming the exemption. Although I disagree with that conclusion (see infra Part II.B(3)), I also determine that Defendant UBS has shown that its offering is properly exempt from registration (see infra Part II.B(4)). In sum, the majority of cases and the above-cited commentary interpret Gustaf-son to mean that a private placement memorandum, which is exempt from Section 5’s registration requirements pursuant to Section 4(2), cannot subject an offeror to Section 12(a)(2) liability. Upon application of the decisions and commentary to the facts in this case, Section 12(a)(2) is inapplicable to the offering of interests in the PW Aspen Fund. The offering itself provides that it is a Confidential Offering Memorandum exempt from registration because it does not involve a public offering. (Brousseau Declaration at Exhibit D). These facts suggest that Defendants cannot be subject to Section 12(a)(2) liability for statements made in and related to this offering. (2) Cases such as Swenson, Which Examine Factors to Determine Whether an Offering Is Exempt, Do Not Apply to this Case. Plaintiffs argue that rather than focus on the COM label or the fact that the offering was not registered, I should analyze the four factors the former Fifth Circuit articulated in Swenson v. Engelstad to determine whether an offering is exempt from registration under Section 4(2). 626 F.2d 421. In its Motion for Summary Judgment, UBS argues that this case and others like it represented courts’ attempts to provide guidance to the financial community regarding what types of transactions fit within Section 4(2). (Motion at 27-30). Defendant argues that the advent of Regulation D, promulgated pursuant to Section 4(2), obviated the need for the less precise standards articulated by courts before the SEC stepped in to provide guidance and bright line rules to assist the financial community. (Id.). Plaintiffs argue that Swenson is still good law in the Eleventh Circuit. (Opposition at 44). Although Swenson remains good law, it does not apply to this case. Sivenson, and many of the cases similar to it, did not examine the factors in relation to a Section 12(a)(2) claim. Rather, most of these cases examined the factors when assessing liability under other sections of the Act. Further, most of these cases were decided before the Supreme Court ruled in Gustaf-son or the SEC promulgated Regulation D, and most do not discuss Regulation D’s effect on the four-factor test. The cases that do hint at the relationship between the factors and Regulation D suggest that they are alternate routes to showing that an exemption applies. SEC, v. Ralston Purina Co., 346 U.S. 119, 73 S.Ct. 981, 97 L.Ed. 1494 (1953) laid the foundation for the former Fifth Circuit’s decision in Swenson. In Ralston Purina, the Commission filed an action against a corporation pursuant to Section 20(b) to enjoin the corporation from offering unregistered shares of its stock to its employees. Id. Section 20(b) provides the following: Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this subchap-ter, or of any rule or regulation prescribed under authority thereof, the Commission may, in its discretion, bring an action' in any district court of the United States .... 15 "U.S.C. § 77t(b). The company argued that it was not required to register the offering because it was private and exempt under Section 4(2). Id. The Eighth Circuit agreed with the company and dismissed the action. Id. The Supreme Court reversed. Id. In so holding, however, the Court noted that “[t]he Securities Act nowhere defines the scope of § 4(l)’s private offering exemption.” Id. at 122, 73 S.Ct. at 983. It stated that whether an offering is exempt turns on whether the offerees need the Act’s protection. Id. at 125, 73 S.Ct. at 984. Further, the burden was on the offeror to prove an exemption. Id. at 126, 73 S.Ct. at 985. Because the defendant did not show that the offerees had access to the kind of information which registration would disclose, the Court stated that the offering should have complied with Section 5’s registration requirements. Id. at 127, 73 S.Ct. at 985. Based in part on Ralston Purina, the Swenson court reversed a district court’s judgment for a defendant who claimed that an exemption from registration applied to his offering. Swenson, 626 F.2d 421. The plaintiffs had alleged several securities claims, including actions under Sections 12(a)(1) and 12(a)(2). Id. The former Fifth Circuit examined the issue of whether the offering fit within Section 4(2)’s exemption from Section 5’s registration requirements, and thus absolved the investors from liability under Section 12(a)(1) and Section 15 of the Act. Id. at 425. In that context, not during a discussion of 12(a)(2) liability, the court cited Ralston Purina for the proposition that the private offering exemption is an affirmative defense that must be raised and proved by the defendant. Id., citing Ralston Purina, 346 U.S. at 126, 73 S.Ct. at 985. Further, the court stated that whether an offering is public or private is a question of fact which must be resolved by examining the particular circumstances of each case. Id. The court articulated four useful factors in evaluating the character of an offering: (1) the number of offerees and their relationship to each other and to the issuer, (2) the number of units offered, (3) the size of the offering, and (4) the manner of the offering. Id. The court further explained that the ultimate issue is “ ‘whether the particular class of persons affected need the protection of the Act.’ ” Id. (quotation omitted). The former Fifth Circuit stated that one of the defendants had not carried his burden of proving the number or identity of the offerees, and thus, he did not meet the four-factor test with regard to the plaintiffs’ Section 12(a)(1) claim. Id. at 427. Accordingly, the court reversed the judgment for this defendant. 626 F.2d 421. Two important factors distinguish Ral-ston Punna, Swenson, and most of the other cases on which Plaintiffs rely from the present action. First, the issue in these cases was not whether the offeror was subject to liability for fraud under Section 12(a)(2). Second, most of these cases were decided before Regulation D was promulgated. See, e.g., Doran v. Petroleum Mgmt. Corp., 545 F.2d 893, 897 (5th Cir.1977) (pre-Regulation D case examining factors when addressing Sections 5 and 12(a)(1) claims); SEC v. Murphy, 626 F.2d 633 (9th Cir.1980) (pre-Regulation D case affirming summary judgment against the defendant where violations of Sections 5 and 17 of the Act and Section 10(b) of the Securities Exchange Act were involved, but not of Section 12(a)(2)); Cook v. Avien, 573 F.2d 685, (1st Cir.1978) (examining various factors to determine whether an offering was public when addressing the plaintiffs’ Section 12(a)(1) claim); SEC v. Continental Tobacco Co. of South Carolina, 463 F.2d 137 (5th Cir.1972) (involving an alleged failure to register an offering, not a Section 12(a)(2) claim); Hill York Corp. v. American Internad Franchises, 448 F.2d 680, 695 (5th Cir.1971) (examining specific factors of the offering in assessing a Section 12(a)(1) claim, and wrongly, in light of the future decision in Gustafson, stating that “contrary to a Section 12(1) violation, liability under Section 12(2) would not be affected by a finding that the offering was private”). In Ralston Purina, the issue was whether the SEC could enjoin the offeror for failing to register its offering. Ralston Purina, 346 U.S. 119, 73 S.Ct. 981, 97 L.Ed. 1494. Thus, the question in that case was whether the defendant company was subject to sanctions for not registering its offering, not whether the company was subject to sanctions for fraud. Further, this 1953 case was decided well before Regulation D was promulgated. The Court specifically noted the lack of guidance in the statute regarding what constitutes a public versus a private offering. Id. at 122, 73 S.Ct. 981. This language indicates that Regulation D might alter the Court’s view of which securities qualify for a Section 4(2) exemption. Likewise, in Swenson, the court discussed the four factors in the context of a Section 12(a)(1) claim. Swenson, 626 F.2d 421. Regulation D had not yet been promulgated. In a case that was decided after Regulation D’s promulgation, the court suggested, based on case law from the former Fifth Circuit, that compliance with either the four factors or Regulation D gives an offering Section 4(2) exempt status. Weprin v. Peterson, 736 F.Supp. 1124 (N.D.Ga.1988). Weprin addressed the Swenson factors in the context of a 12(a)(1) claim. Id. Section 12(a)(2) was not involved. Id. After the court determined based on the Swenson factors that the offering was private, the court stated, “Although Regulation D can be considered as a statement clarifying and unifying the requirements for exemption under Section 4(2) ... the failure to qualify under Regulation D does not create the presumption that an exemption under Section 4(2) is not available.” Id. at 1130, citing Mary S. Krech Trust v. Lakes Apartments, 642 F.2d 98, 102 (5th Cir.1981) (“[A] failure to satisfy all conditions of the Rule does not raise the presumption that the offering cannot be exempt.”). Weprin and Mary S. Krech Trust indicate that there is more than one method of obtaining exempt status for an offering under Section 4(2). Weprin further suggests that if a court cannot use the “clarifying and unifying” Regulation D (see Weprin, 736 F.Supp. at 1130) in determining whether an offering is exempt, an alternate route to obtaining Section 4(2) exempt status is meeting the four factors. Despite the fact that Regulation D does provide guidance in this case, Plaintiffs rely on cases that do not involve the Regulation. In Maldonado v. Dominguez, 137 F.3d 1 (1st Cir.1998), the plaintiffs sought to amend their complaint’s allegations of Section 12(a)(2) liability since Gustafson was decided after the complaint was filed. Id. at 8. Specifically, they sought to add allegations regarding the public nature of the offering. Id. The court denied the request because it determined, based on Swenson-like factors, that the offering was private. Id. Thus, it affirmed the lower court’s dismissal of the case. Id. The court did not have the option of examining Regulation D because the offerors were not claiming that they were exempt under it. Thus, the court had no choice but to examine other factors in determining whether the offering was private. In this case, if Plaintiffs had brought a Section 12(a)(1) claim alleging that the offering violated registration requirements, based on the reasoning of Mary S. Kreeh Trust and Weprin, I could have first examined Regulation D to determine whether the offering is exempt. Plaintiffs’ final argument for applying Swenson factors rather than Regulation D is that offerors cannot rely on Regulation D to insulate them from Section 12(a)(2) liability because the Regulation was not meant to alter the anti-fraud provisions of the Act. Indeed, the Preliminary Notes to Regulation D reads, “Such transactions are not exempt from the antifraud, civil liability, or other provisions of the federal securities laws.” 17 C.F.R. §§ 230.501-230.508. Further, Landreth Timber v. Landreth, 471 U.S. 681, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985) states that “although § 4(2) of the 1933 Act, 15 U.S.C. § 77d(2), exempts transactions not involving any public offering from the Act’s registration provisions, there is no comparable exemption from the antifraud provisions.” Id. at 692, 105 S.Ct. 2297. This language simply means that Regulation D relates to exemptions from registration, not to exemptions from fraud. My reading of Regulation D does not alter fraud liability; rather, it clarifies a registration exemption. In its entirety, Section 4(2) reads, “The provisions of section 77e of this title shall not apply to — (2) transactions by an issuer not involving a public offering.” 15 U.S.C. § 77d(2). Regulation D was promulgated under that Section, not to create a new class of exemptions, but to provide clarity, just as the Swenson factors were not articulated to create a new exemption, but to provide a workable formula to determine whether an offering is private. Neither Regulation D nor Stven-son have altered or eliminated fraud liability. A plaintiff seeking recourse against an offeror who makes false statements in an offering that is exempt from registration pursuant to Regulation D can still bring an action under Section 10(b) of the Securities Exchange Act. (3) Registration Violations Subject an Offeror or a Seller to Section 12(a)(1) Liability, not Section 12(a)(2) Liability. Section 12(a)(2) relates to liability for fraud, while Section 12(a)(1) concerns liability for violating registration requirements. UBS states that if Plaintiffs seek to argue that the offering did not actually comply with Regulation D, they should have brought a claim under Section 12(a)(1), not under Section 12(a)(2). Plaintiffs never refute this point. Interestingly, they discuss the structure of Section 12 as follows: Section 12(a)(1) and Section 12(a)(2) are not redundant. Section 12(a)(1) provides liability in the event someone sells unregistered securities that were required to be registered under Section 5. The typical defense to a claim under section 12(a)(1) is that registration was not required because either the securities or the transaction was exempt from registration under sections 3 and 4. Section 12(a)(1) does not concern itself with whether any false or misleading statements were made. On the other hand, Section 12(a)(2) provides liability in the event that someone makes false or misleading statements in the prospectus. Nothing redundant is found in that statutory scheme .... (Opposition at 47-48). I agree. The statute clearly creates liability for registration violations under Section 12(a)(1) and liability for fraud under Section 12(a)(2). Again, courts have disagreed on this issue, and there is no controlling Supreme Court or Eleventh Circuit case law on point. In In re JWP Sec. Litig., as in this case, the plaintiffs were not able to sustain a Section 12(a)(2) claim for misrepresentations in and relating to the offering because the offering was made via a private placement memorandum. In re JWP Sec. Litig., 928 F.Supp. 1239. Further, the court rejected the plaintiffs’ “attempt to resurrect their § 12(a)(2) claim by contending that JWP’s private placement memoranda were so permeated by fraud that the exemption to registration under § 4(2) did not apply and the notes should have been sold in a registered offering.” Id. at 1259. The court stated that if the plaintiffs wanted to argue that the offering should have been registered, they should have brought a claim under Section 12(a)(1). Id.; see also Vannest v. Sage & Rutty, 960 F.Supp. at 655 (stating that the plaintiffs had never asserted a Section 12(a)(1) claim, and thus their argument that the offering was not truly private was not compelling). Other cases suggest that defendants have the burden of proving that an exemption takes them out of the realm of Section 12(a)(2) fraud. See, e.g., Fisk, 927 F.Supp. at 731; Premier Capital Management, 2003 WL 21960357 at *11, 2003 U.S. Dist. LEXIS 14137 at *37. These cases, however, do not address the argument that Section 12(a)(1) is the proper statute pursuant to which plaintiffs can bring claims of registration violations and force defendants to prove an exemption applies. Nor do they state that Plaintiffs can bring a claim for a registration violation under Section 12(a)(2). In any event, I conclude that UBS has shown that it did comply with Regulation D. (4) There Is No Material Dispute that the Offering Complied with Regulation D. I conclude based on the record that the offering of interests in the PW Aspen Fund was properly exempt from registration requirements pursuant to SEC Regulation D. The specific exemption that applies is 17 C.F.R. § 230.506, which is titled “exemption for limited offers and sales without regard to dollar amount of offering.” It provides as follows: (a) Exemption. Offers and sales of securities by an issuer that satisfy the conditions in paragraph (b) of this section shall be deemed to be transactions not involving any public offering within the meaning of section 4(2) of the Act. (b) Conditions to be met — (1) General conditions. To qualify for an exemption under this section, offers and sales must satisfy all the terms and conditions of §§ 230.501 and 230.502. (2) Specific Conditions — (I) Limitation on number of purchasers. There are no more than or the issuer reasonably believes that there are no more than 35 purchasers of securities from the issuer in any offering under this section... (ii) Nature of purchasers. Each purchaser who is not an accredited investor either alone or with his purchaser representative(s) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes immediately prior to making any sale that such purchaser comes within this description. 17 C.F.R. § 230.506. Further, Section 230.508 provides that an issuer will not lose exempt status when there is a “good faith and reasonable attempt” to comply with the “accredited investor” provisions of Regulation D. Defendant states that this Regulation D exemption applies here because (1) there is no limit on the dollar amount of the offering and