Full opinion text
MEMORANDUM OPINION AND ORDER DONOVAN W. FRANK, District Judge. INTRODUCTION This matter is before the Court on a Joint Motion for Summary Judgment brought by Defendants Capital Solutions Monthly Income Fund, LP and Transactional Finance Fund Management, LLC (“TFFM”) (Doc. No. 113) and a Motion for Summary Judgment brought by Defendant Todd A. Duckson (“Duckson”) (Doc. No. 117). For the reasons set forth below, Defendants’ motions are granted in part and denied in part. BACKGROUND This matter involves the Securities and Exchange Commission’s (“SEC”) allegations of fraud in the offer and sale of interests in the Capital Solutions Monthly Income Fund, LP, f/k/a Hennessey Financial Monthly Income Fund, LP (the “Fund”), an unregistered investment pool. (Doc. No. 97 (First Am. Compl. (“FAC”)) ¶¶ 1-3, 26.) The SEC alleges that Defendants engaged in written and oral misrepresentations to investors and brokers from March 2008 to December 2009. (FAC ¶¶2-19.) In the First Amended Complaint, the SEC asserts three counts of securities fraud against the Fund, TFFM, and Duckson: primary violations of Section 10(b) of the Exchange Act 15 U.S.C. § 78j(b) and Rule 10b-5 (17 C.F.R. § 240.10b-5); aiding and abetting liability for violations of Section 10(b) of the Exchange Act 15 U.S.C. § 78j(b) and Rule 10b-5 (17 C.F.R. § 240.10b — 5); and violations of Section 17(a)(l)-(3) of the Securities Act 15 U.S.C. § 77q(a)(l)-(3). The SEC seeks permanent injunctive relief enjoining Defendants from future violations of securities laws, an officer-director bar against Duckson, declaratory judgment as to Defendants’ securities violations, disgorgement of ill-gotten gains, civil penalties, and other relief the Court may deem appropriate. (FAC ¶¶ 19, Relief Requested.) In April 2011, the Court denied Defendants True North Finance Corporation (“True North”) and Owen Mark Williams’ (‘Williams”) motions to dismiss, finding that the SEC’s Corrected Complaint (Doc. No. 4) satisfied the pleading requirements of Federal Rule of Civil Procedure 9(b) and that the factual allegations in the Corrected Complaint sufficiently plead scienter. (Doc. No. 62 at 12-13.) In May 2012, the SEC was given leave to file its First Amended Complaint, which the Fund, TFFM, and Duckson answered several weeks later. (Doc. Nos. 95-99.) A. The Parties The Fund was a Delaware limited partnership and TFFM was a Minnesota limited liability company; both were based in Minneapolis, Minnesota. (FAC ¶¶ 26-27.) In 2004, Timothy R. Redpath (“Redpath”) and Michael W. Bozora (“Bozora”) launched the Fund to provide financing to Hennessey Financial, LLC and/or Hennessey Financial Note Holdings, LLC (collectively, “Hennessey”). (Id. ¶¶ 32, 33, 36.) Hennessey, which was owned by Jeffrey Gardner (“Gardner”) generated income for the Fund by making mezzanine loans at annual rates of 18% or greater to real estate developers including Heritage Development (“Heritage”), Argus Homes (“Argus”), Omni Investment Properties (“Omni”), and Assured Financial, LLC (“Assured”) (collectively, “affiliated borrowers”), which were also owned and operated by Gardner. (Doc. No. 141, Phillips Aff. ¶ 2, Ex. 2 (Redpath Dep. I) at 209-11.) Heritage was the largest of Hennessey’s affiliated borrowers, receiving approximately two-thirds of Hennessey’s loans; Omni and Argus received nearly all of Hennessey’s remaining loans. (Phillips Aff. ¶ 9, Ex. 9 (Essen Dep.) at 84-85.) NFP Securities, Inc. (“NFP”) is a brokerage firm that brought in a majority of the Fund’s investors. (Phillips Aff. ¶ 14, Ex. 14 (Woodward Dep.) at 11.) Prior to November 2008, Duckson did not speak with NFP or any of the Fund’s actual or potential brokers or investors. (Doc. No. 121, Duckson Decl. ¶ 3.) The Fund offered its limited .partners (“investors”) a 12% fixed annual return and required them to lock-up their investment in the Fund for four years. (FAC ¶ 36.) The Fund paid its investors .1% per month, which was paid primarily from the interest it received from Hennessey and its affiliated borrowers. (Id.; Phillips Aff. ¶ 1, Ex. 1 (Duckson Dep. I) at 40.) Pursuant to the Fund’s partnership agreement, any profits were maintained within the Fund as capital until the Fund’s dissolution. (Duckson Dep. I at 41.) Until the end of 2008, Duckson was a capital partner at the Minneapolis office of Hinshaw and Culbertson, LLP (“Hinshaw”). (Duckson Decl. ¶ 2.) In 2008, over two-thirds of Duckson’s billable attorney fees were incurred on behalf of Gardner and his affiliates. (Phillips Aff. ¶ 19, Ex. 19 (Hinshaw 30(b)(6) Dep.) at 23-29.) On October 26, 2008, Duckson formed TFFM, which became the Fund’s investment manager. (Duckson Decl. ¶ 11.) Duckson resigned from Hinshaw on December 31, 2008 to manage the Fund through TFFM “because he believed that the value of the Fund’s real estate assets obtained through foreclosure on Hennessey Financial so far exceeded the Fund’s liabilities” that he was sure to make a great deal of money. (Id.) Duckson served as CEO" of True North from June 2009 to the end of 2010 when Duckson resigned and Steven Howard Levenson (“Levenson”) took over as CEO. (FAC at ¶ 94; Phillips Aff. ¶ 84, Ex. 84 (Levenson Dep.) at 9-10.) TFFM, which was owned and controlled by Duckson, served as the investment manager to the Fund beginning in November 2008. (FAC ¶ 27.) As the Fund’s investment manager, TFFM received a 2% annual management fee. (Duckson Dep. I at 41.) Through TFFM, Duckson oversaw the Fund’s operating real estate assets, monitored cash flows, interacted with third parties doing business with the Fund, and evaluated investment opportunities, strategy, and asset management. (Duckson Decl. ¶ 14.) Duckson also served as the “Chief Manager and Governor” of the Fund’s general partner, CS Fund General Partner, LLC. (Field Aff. ¶ 3, Ex. 2 (November 2008 COM) at CAP 0227774.) The Fund’s investment manager, TFFM, was responsible for overseeing “most decisions regarding the acquisition and sale of major investments by the Fund” and the “day-to-day management and operation of the Fund.” (Id.) Duckson also formed Transactional Finance, LLC (“Transactional Finance”) to provide additional investment opportunities for the Fund in the form of third-party promissory notes, which were issued in 2009. (Duckson Decl. ¶ 29.) Transactional Finance was a part owner and holding company for TFFM. (Phillips Aff. ¶ 8, Ex. 8 (Duckson Dep. II) at 16-17.) Though Duckson owned 100% of Transactional Finance as of May 2012, he had other ownership partners until approximately 2007 or 2008. (Id. at 17.) Duckson also created CS Midwest Holdings (“CS Midwest”) and CS Southeast Holdings (“CS Southeast”) as special purpose vehicles (“SPVs”) to which the Fund could sell assets in furtherance of the Fund’s strategic objectives. (November 2008 COM at CAP 0227776.) B. Relevant Facts Prior to Period of Alleged Fraud Prior to July 2007, Jon Essen (“Essen”), Hennessey’s CFO and COO, was aware that Heritage was experiencing financial difficulties as a result of the credit crisis and the downturn in the real estate market. (Essen Dep. at 17-18, 50.) By January 2008, Hennessey lacked the ability to repay its creditors. (Phillips Aff. ¶ 20, Ex. 20 (Dixon Dep.) at 114.) Due to deteriorating real estate market conditions, Argus and Assured also struggléd to meet their financial obligations to Hennessey. (Dixon Dep. at 54; Phillips Aff. ¶ 18, Ex. 18 (Richardson Dep.) at 44.) By September 2007, Gardner had determined that the Fund would need to foreclose on Hennessey’s assets. (Phillips Aff. ¶ 5, Ex. 5 (Gardner Dep.) at 207-08.) In November 2007, Duckson, Redpath, Bozora and several others held due diligence meetings with Gardner in Minneapolis, where they discussed Heritage, Hennessey, and the affiliated borrowers’ financial struggles. (Phillips Aff. ¶ 86, Ex. 86 (Regalia Dep.) at 19-23; Essen Dep. at 139.) In a November 21, 2007 e-mail summarizing one of the due diligence meetings, Andy Regalia (“Regalia”) outlined the group’s three options for dealing with the associated borrowers’ defaults: immediately salvage them, attempt to take-on and manage them, or raise new.funds while limiting liability and waiting for the market to rebound. (Phillips Aff. ¶ 87, Ex. 87 at 2, CAP 0101597.) Regalia also recounted the internal controls Duckson recommended and opined that such changes would be expensive and unlikely to succeed. (Id.) Duckson met with Gardner and Essen in January 2008 and February 2008 to discuss the Fund’s financial status. (Essen Dep. at 143^19.) The meeting minutes reflect that strategies for protecting Hennessey’s collateral were discussed in addition to prospects for raising additional capital. (Id. at 143, 147.) Hennessey’s liquidity problems and inability to make payments to its unsecured creditors based on its cash flow were also discussed. (Id. at 149.) Duckson believed that a short-term liquidation of the Fund was not possible and that “a disorderly liquidation would not have been in the Fund investors’ best interest.” (Duckson Decl. ¶ 9.) C. Relevant Facts During Period of Alleged Fraud In 2008, the global economy experienced an unprecedented downturn that had a profoundly negative effect on the real estate and credit markets. The financial crisis resulted from the sudden drop in housing prices, which had obscured vulnerabilities in the subprinie lending markets. How Did a Private Deal Turn Into a Federal Bailout?: Hearing Before the Subcomm. on Domestic Policy of the H. Comm, on Oversight & G'ov’t Reform, 111th Cong. 19 (2009) (statement of Former Sec. Henry R. Paulson, Dep’t of the Treasury). Regulators and economists were blindsided by the housing market’s severe decline. The Financial Crisis and the Role of Federal Regulators: Hearing Before the H. Comm, on Oversight & Gov’t Reform, 110th Cong. 24 (2008) (statement of Alan Greenspan, Former Chairman, Federal Reserve Board). The market disruption and the subsequent loss of consumer confidence faded into the worst economic climate since the Great Depression. Monetary Policy and the State of the Economy: Hearing Before the H. Comm, on Fin. Servs., 111th Cong. 7 (2009) (statement of Benjamin S. Bernanke, Chairman, Federal Reserve Board). In March 2008, Hennessey voluntarily foreclosed upon several of its affiliated borrowers, including Heritage, which had defaulted on their payment obligations to Hennessey. (Doc. No. 98, Duckson Answer ¶ 6; Field Aff. ¶ 2, Ex. 1 (March 2008 COM) at CAP 0175109). Duckson believed this foreclosure was a positive event for Hennessey and the Fund because it meant an infusion of millions of dollars of equity. (Duckson Deck ¶ 7.) In May 2008, Hennessey defaulted on its payment obligations to the Fund and the Fund “voluntarily foreclosed” on Hennessey’s real estate interests in June 2008. (Duckson Answer ¶ 7; Carlson Aff. ¶ 8, Ex. 7 (Duckson Dep. Ill) at 99.) Duckson, Bozora, and Redpath became aware of the default in approximately May 2008. (Duckson Answer ¶ 43.) Duckson viewed the Fund’s foreclosure on the Hennessey assets ; as beneficial because he believed that Hennessey’s equity in its real estate assets was “worth millions of dollars more than the liabilities on those properties.” (Duckson Deck ¶ 10.) Duckson asserted, “I never would have left Hinshaw if I did not believe that, separate and apart from the fee income, I had an opportunity to make a lot of money.” {Id. ¶ 28.) At meetings in New York and Dallas in late 2008 with approximately 25 brokers who sold the Fund-to their clients, a “major portion” of Duckson’s presentation was dedicated to the Hennessey foreclosure. (Field Aff. ¶48, Ex. 47 (Weisenberger Dep.) at 69-70 (Fish Dep.) at 67.) Additionally, Duckson specifically discussed and explained the Hennessey foreclosure in a February 10, 2009 update letter to brokers. (Field Aff. ¶ 49, Ex. 48 at 1-2.) After mid-November of 2008, seven new investors invested in the Fund. (Field Aff. ¶ 12, Ex. 11.) In December 2008, NFP suspended offering the Fund to its customer pending the outcome of a third-party due diligence evaluation. (Phillips Aff. ¶ 58, Ex. 58 (Aylieff Dep. II) at 320, 323-24.) NFP permanently ceased offering the Fund to its customers in February 2009 after hiring an outside auditor and reviewing the Fund’s financial health. {Id. at 222-23, 377.) A February 2009 letter that NFP provided for use to its brokers recounted the financial status of the'Fund, including the Hennessey foreclosure and stated that NFP was “not participating in the distribution of the [February 2009 Series I] Notes.” (Carlson Aff. ¶ 17, Ex. 16 at NFP 166865-66.) The letter did not, however, forbid brokers from recommending the Fund to their investors and recognized that some brokers might “believe the Notes represent a good investment opportunity” for investors who may be seeking a “distressed loan investment.” {Id. at NFP 166865.) In February 2009, the Fund obtained an independent third-party appraisal of what the Fund perceived to be its most valuable real estate project, the Cape Haze Marina (“the Marina”), which was appraised at $46,000,000. (Carlson Aff. ¶5, Ex. 4 at 11.) In his notes summarizing his April 2009 conversation with Duckson and several others, broker David Dyer (“Dyer”) wrote: Todd has recently started [the] 3rd party appraisal process on all assets in [the] CS Fund____He has received 3rd party appraisal for [the] “best 1/2” of assets and appraisal is $40 Million for assets that had [an] original appraised value of $75 Million. The original appraised values of all of the real estate is about $150 Million. The other half will have 3rd partly] appraisal completed in a few months and he expects appraisal value to be much lower than [the] 1st half group of assets — maybe in [the] $20-$25 Million range. (Carlson Aff. ¶ 18, Ex. 17 at DY 001743.) Several months later, in July 2009, Duck-son sent a letter to the Fund’s investors stating, “Although appraising the value of real estate is not an exact science, we are pleased to report a 2009 consolidated net asset value of approximately $78,000,000 (“NAV”).” (Carlson Aff. ¶ 6, Ex. 5 at 1.) Defendants have not pointed the Court toward any evidence that the $78 million estimate was based on independent third-party appraisals aside from the $46 million attributable to the Marina. In March 2009, the Fund reduced its interest payment distributions to investors from 12% to 6%. (Duckson Dep. II at 233.) In June 2009, the Fund announced that it would cease making interest payments to its investors; the Fund merged with True North in July 2009. {Id. at 237; Duckson Decl. ¶ 20.) True North filed a registration statement with the SEC in October 2009; the SEC’s subsequent correspondence made clear, however, that the SEC would not allow True North’s registration statement to become effective. (Duckson Decl. ¶ 21.) In November 2009, the Fund’s investors stopped receiving interest payments; these payments did not resume. (Doc. No. 140, Saylor Aff. ¶ 13.) D. Confidential Offering Memoranda and Confidential Information Memoranda The SEC has defined the time period of fraud as March 2008 to December 2009. (FAC ¶¶ 2-19.) During this time period, the Fund issued four Confidential Offering Memoranda (“COMs”) in March 2008, November 2008, February 2009 (Series I Note offering), and November 2009. The COMs provided information to the Fund’s investors for use in deciding whether to invest or reinvest in the Fund. See, e.g., November 2008 COM at CAP 0227730. Each COM contained the following warning on its cover page: THE [UNITS] OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK ... PURCHASES OF [UNITS] ARE SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN MAKE A LONG TERM INVESTMENT, CAN BEAR THE RISK OF A COMPLETE LOSS OF THEIR INVESTMENTS IN THE FUND AND HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT. THERE IS NO MARKET FOR THE [UNITS] AND NONE IS EXPECTED TO DEVELOP. THE GENERAL PARTNER RESERVES THE RIGHT TO REJECT THE SUBSCRIPTION OF ANY PROSPECTIVE INVESTOR FOR ANY REASON. (March 2008 COM at CAP 0175083, November 2008 COM at 0227730, Field Aff. ¶ 4, Ex. 3 (February 2009 COM) at 1; Carlson. Aff. ¶ 22, Ex. 22 (November 2009 COM) at CAP 0325564) (emphasis in original). The COMS also contained sections entitled “Risk Factors,” “Investment Objective and Strategy,” and “Business,” the contents of which varied slightly from COM to COM. Each COM was accompanied by a Confidential Information Memorandum (“CIM”), which served as a summary of the information contained in each COM. (Doc. No. 126, Redpath Decl. 117; Duckson Dep. II at 78-79.) During the alleged period of fraud, the Fund issued CIMs in March 2008, November 2008, and February 2009. The SEC contends that these three documents contain fraudulent or misleading statements or omissions. After October 2008, Duckson was the primary drafter of the COMs and CIMs as the principal of TFFM, the Fund’s investment manager and general partner. (Redpath Decl. ¶¶5, 8; Duckson Dep. II at 55-56.) Duekson reminded the other individuals at the Fund participating in the drafting process that the content of these documents needed to be true and not misleading; Duekson asserted he was unaware of any misstatements or material omissions in any of these documents. (Duekson Decl. ¶¶ 3, 5-6, 12-18.) Though Duekson did not sign any of the COMs or CIMs and his name did not appear in the March 2008 COM, he was mentioned repeatedly in the November 2008 and February 2009 COMs. (November 2008 COM at CAP 0227774-75; February 2009 COM at 35-36.) After October 2008, Duekson and TFFM had “ultimate sign-off authority” on the COMs and CIMs before they were issued. ((Redpath Deck ¶¶ 6, 8); see (Duekson Dep. II at 51-54).) The Fund’s auditors, including the accounting firm Virchow Krause & Company (“Virchow”), assisted with the preparation of the March 2008 COM and conducting performance audits. (Duekson Deck ¶ 8.) After Virchow resigned, L.L. Bradford & Company (“Bradford”) was retained as the Fund’s auditor. (Doc. No. 119 (Duekson Mem.) at 6.) The November 2008 COM included a copy of a financial statement Bradford prepared on the Fund’s behalf. (Duekson Deck ¶ 12.) Each individual who invested in the Fund was required to sign a “Subscription Agreement,” which indicated that the investor reviewed and understood the COM’s terms and relied solely on its contents in deciding to invest. (March 2008 COM at CAP 0175176-77.) Specifically, the Subscription Agreement provided that “[t]he Subscriber has relied on nothing other than the Memorandum and the Subseriber Agreements (including all exhibits and appendices thereto) in deciding whether to make an investment in the Partnership.” (Id. at CAP 0175177.) In order to receive accreditation to invest in the Fund, investors had to satisfy the Fund’s “Investor Suitability Standards,” some of which included demonstrating a net worth of over $1 million or earning in excess of $200,000 in the previous two years. (Id. at CAP 0175129.) The Fund’s approximately 450 investors consisted of nurses, retired individuals, teachers, multi-millionaires and real estate developers. Compare (Field Aff. ¶ 10, Ex. 9 (Calton Dep.) at 101-03, (Fish Dep.) at 57, 59-60, (Sidder Dep.) at 186, (Amos Dep.) at 125); with (Doc. No. 124 (SEC Response Mem. to Funds) at 4) and (Phillips Aff. ¶ 29, Ex. 29 at TD0036578) (referring to “Ma and Pa Kettl[e]” investors). E. Marketing Materials: Update Letters and Q & A Sheet In addition to the aforementioned COMs and CIMs, the SEC also alleges that four documents consisting of marketing materials — the May 2008, October 2008, and February 2009 update letters and the February 2009 Question and Answer Sheet (“February 2009 Q & A Sheet”) — contain fraudulent statements or omissions. (Doc. No. 125 (SEC Response Mem. to Duekson) at 21.) Though Gardner signed the May 2008 Update Letter, Bozora signed the October 2008 Update Letter in his capacity as the Fund’s manager. (Carlson Aff. ¶ 31, Ex. 30 (May .2008 Update Letter) at 2; Carlson Aff. ¶ 32, Ex. 31 (October 2008 Update Letter) at 2.) Beginning in October 2008, Duekson “had ultimate sign-off authority on all marketing materials for the Fund.” (Redpath Decl. ¶ 9.) Duckson signed the February 2009 Update Letters; the February 2009 Q & A Sheet was not signed, yet the Fund’s name appeared in the document header and was mentioned throughout. (Carlson Aff. ¶ 34, Ex. 33 at 3, Field Aff. ¶ 49, Ex. 48 at 2 (collectively, February 2009 Update Letters); Carlson Aff. ¶ 35, Ex. 34 (February 2009 Q & A Sheet) at 1.) F. Defendants’ Allegedly Fraudulent Statements The SEC has separated the purportedly fraudulent statements into nine categories. Defendants refute the SEC’s allegations following the same categorization and contend that these statements were true and/or immaterial. For clarity, the Court will lay out the relevant facts based on these nine categories of statements or omissions. To the extent the SEC alleges that Defendants made fraudulent written or oral statements beyond the aforementioned COMs, CIMs, and marketing materials, these allegations are also included below. 1. Risks that Had Already Occurred The “Risk Factors” sections of the March 2008, November 2009, February 2009, and November 2009 COMs contain several forward looking statements regarding the impact of borrower default on the Fund: “[a] default by any one borrower, issuer, or collateral obligor could have a material adverse effect on the Fund’s performance and cause it to suffer substantial losses.” (March COM at CAP 0175097, November 2008 COM at CAP 0227745, February 2009 COM at 7, November 2009 COM at CAP 0325578.) The COMs also warned that under certain circumstances, the Fund may be unable to repurchase defaulted loans: Were there to be a default on numerous Notes, [or Fund loans,] within a short period of time, and the Borrower [or Placement] was unable to purchase such Notes, cure such loan defaults or renew the Irrevocable Letters of Credit, it is possible that the aggregate amount of the Irrevocable Letters of Credit would be insufficient to repurchase ... the defaulted Notes or repay the defaulted loans. (March COM at CAP 0175097; November 2008 COM at CAP 0227745-46; February 2009 COM at 8; November 2009 COM at CAP 0325579.) The February 2009 and November 2009 COMs contain two additional sentences addressing the risk of default: [D]ue to the current state of the economy, the Fund has currently suspended its historical practice of requiring Borrowers to post Irrevocable Letters of Credits as credit enhancements to Notes. Until such time as the practice is restored, if ever, Notes are generally not supported by any credit enhancement. (February 2009 COM at 8; November 2009 COM at CAP 0325579.) Additionally, the COMs state that “[t]o the extent [the Fund’s credit impaired] obligors become insolvent, and the collateral underlying the particular notes is insufficient, the Fund will suffer losses and the Limited Partners may lose some or all of their investment.” (March 2008 COM at CAP 0175103; November 2008 COM at CAP 0227751; February 2009 COM at 13; November 2009 COM at CAP 0325584.) In March 2008 Hennessey voluntarily foreclosed upon several of its affiliated borrowers, including Heritage, which had defaulted on their payment obligations to Hennessey. (Duckson Answer ¶ 6.) In May 2008, Hennessey defaulted on its payment obligations to the Fund and the Fund “voluntarily foreclosed” on Hennessey’s real estate interests in June 2008. (Id. ¶ 7; Duckson Dep. Ill at 99.) None of the COMs’ “Risks Factors” sections stated that Heritage and Hennessey were in “default,” though this was undoubtedly the case when the November 2008, February 2009, and November 2009 COMs were issued. However, the last pages of the “Notes to Financial Statements” sections of the November 2008 and February 2009 COMs under the category “Subsequent Events” state: In May 2008, [Hennessey] failed to meet certain economic covenants and all loans became non-performing. In June 2008, the Partnership foreclosed on all assets of [Hennessey], Through this foreclosure, the Partnership now has ownership to the properties funded by [Hennessey], subject to senior lenders. Management is in the process of reviewing the properties of [Hennessey] obtained through foreclosure. The process includes assessing the values of the related properties, including obtaining appraisals, to determine which assets will be kept or abandoned. If the assets are determined to have adequate value by management, the Partnership will assume any related debt on the properties held by senior lenders. (November 2008 COM at CAP 0227840; February 2009 COM, Notes to Financial Statements, at 10 (emphasis added).) In November 2008, Duckson and the Fund’s then — CFO, Williams, discussed Duckson’s change to Williams’ proposed language describing the Hennessey default. Williams proposed the language, “Hennessey Financial failed to make their monthly interest payment.” (Phillips Aff. ¶ 77, Ex. 77 at TD 0044955-57.) Duckson preferred the language that appeared in the November 2008 and February 2009 COMS indicating that Hennessey had “failed to meet certain economic covenants.” (Duckson Dep. II at 156-160; Phillips Aff. ¶ 77, Ex. 77 at TD 0044955-57; November 2008 COM at CAP 0227840; February 2009 COM, Notes to Financial Statements at 10.) When asked why he made this change, Duckson testified, “I don’t recall specifically but generally maybe they didn’t get an environmental audit on this property or perhaps there was some ratio or covenant out of line.” (Duckson Dep. II at 160.) 2. Fund’s Purportedly Failed Investment Strategy The Fund’s investment strategy was to loan money to Hennessey, a mezzanine real estate lender, which enabled Hennessey to make loans to real estate developers including Heritage. (Carlson Aff. ¶ 2, Ex. 1. Essen Dep. II at 20.) The developers would then use the funds to acquire and develop raw land. (Id.) Upon completing improvements to the land and after obtaining government entitlements, Heritage would sell the land and use the proceeds to repay Hennessey, which would in turn repay the Fund. At all times, the Fund’s ability to pay its investors was contingent upon the sale of the underlying real estate. (Doc. No. 115 (Funds’ Mem.) at 9-10.) In most instances, the Fund’s interest in the real estate assets was subordinate to that of senior lienholders. (March 2008 COM at CAP 0175107.) The “Investment Objective and Strategy” section of the March 2008 COM stated: Management of the Fund believes that the slowing real estate market has deterred competition for mezzanine loans, thereby providing an opportunity for the Fund to make loans with a greater yield, better covenants and at a loan-to-value ratio that will increase when the real estate market recovers.... Management believes that if the Fund waits to make loans or purchase Notes until the real estate market improves, traditional lenders will step in and the Fund will lose the opportunity to finance numerous quality projects. (Id. at CAP 0175105-06.) The November 2008, February 2009, and November 2009 COMs expressed the Fund’s “modified” strategy of taking undervalued real estate as collateral in regions where the investment manager predicted the real estate market would recover quickly. (November 2008 COM at CAP 0227753; February 2009 COM at 16; November 2009 COM at 0325587.) The March 2008, November 2008, and February 2009 CIMs emphasized the benefits and opportunities created by the credit crisis and the downturn in the real estate market and asserted that “the known high quality of management” reduced the Fund’s “risk of default.” (Phillips Aff. ¶ 71, Ex. 71 (March 2008 CIM) at AS 004883; Phillips Aff. ¶ 73, Ex. 73 (November 2008 CIM) at 11; Phillips Aff. ¶ 75, Ex. 75 (February 2009 CIM) at AS 005071.). . The May 2008 Update Letter analyzed the global financial crisis in a positive light: While we believe that the worst is over in the financial/credit market, there will still be some dislocation going forward primarily because [of] the overall U.S. economy, which is clearly slowing.... These changes in the credit markets are creating higher demand for non-traditional lenders like [Hennessey], (Id. at 1.) The October 2008 Update Letter stated that the credit crisis was a “relatively short-lived phenomenon” that “creates an extraordinary opportunity for the Fund to bring fresh capital selectively to markets which are currently underserved.” (October 2008 Update Letter at 2.) Similarly, the February 2009 Q & A Sheet maintained that the credit crisis provided the Fund with “immediate opportunities to assume the role as senior lender (without sacrificing returns) or purchase senior loans at a substantial discount from regional banks.” (February 2009 Q & A Sheet at 1.) The February 2009 Update Letters touted the Fund’s “significant and beneficial changes” that occurred in 2008, including the Fund’s takeover of Hennessey’s assets through “the voluntary foreclosure process,” and stated that the global financial crisis provided the Fund with “unprecedented investing opportunities.” (February 2009 Update Letter at NFP 162189.) In an April 2008 e-mail from Redpath to Bozora that was forwarded to Duckson, Redpath described the Fund’s collateral as in “good shape” and the interest reserves as “where they need to be.” (Phillips Aff. ¶ 29, Ex. 29 at TD0036578-79.) Redpath concluded, “This is a [g]reat story for us to tell [investors] and it’s real.” (Id. at TD 0036578.) In contrast, in a May 14, 2008 letter to Hennessey’s investors, including Duckson, Gardner described the “grave” situation in which Hennessey found itself where it “cannot survive these current [market] conditions or continue to make monthly payments to our investors.” (Phillips Aff. ¶ 37, Ex. 37 at TD 0009149.) Gardner expressed his “deepest regret and dread” in sharing the “dismal news” of the upcoming foreclosure sale of Hennessey’s assets to the Fund. (Id. at TD 0009150.) An October 2009 SEC filing Duckson signed on behalf of True North stated that the Fund “faltered in a bear market.” (Phillips Aff. ¶ 57, Ex. 57 at 2.) He also stated that due to the real estate market collapse, the Fund’s borrower (Hennessey) “defaulted on its obligations to the Fund” and that the Fund’s “legacy investment portfolio” was not providing a “current yield.” (Id.) The Fund’s new investment strategy, including creating “investment pods” to focus on distressed real estate finance was also described. (Id.) 3. Foreclosure Terminology In May 2008, Hennessey defaulted on its payment obligations to the Fund and the Fund foreclosed on Hennessey’s real estate interests in June 2008 through a “Voluntary Surrender Agreement.” (Carlson Aff. ¶ 7, Ex. 6 at 1; Duckson Answer ¶ 7; Duckson Dep. Ill at 99.) The March 2008 COM described the transaction in the last paragraph of a section entitled “Investment Strategy;- Loan Purchase and Servicing Agreement and Loan Security Agreement” as follows: Borrower intends to sell a portion of its interest in the Heritage Loan Agreement to J-WMW, LLC, a Minnesota limited liability company owned and controlled by Jeffrey A. Gardner (“J-WMW”).... The portion of the Heritage Loan Agreement purchased by J-WMW from Borrower grants J-WMW the right to sell the Voluntarily Surrendered Collateral in a public auction. J-WMW intends to bid at such auction in an effort to own and control the Voluntarily Surrendered Collateral. The obligations of the Heritage Borrowers to Borrower, including the Voluntarily Surrendered Collateral entities, will not be impacted nor will any Borrower security interest on real estate be satisfied or forgiven via the sale. (March 2008 COM at CAP 0175109 (emphasis added)). The February 2009 Update Letters provided a similar description of the Hennessey foreclosure, “[i]n May 2008, concerns about affiliated party risk and counter party creditworthiness led the Fund to enter into a voluntary foreclosure process with [Hennessey] to acquire all of its assets.” (February 2009 Update Letter at NFP 162189.) The letters further explained that the Fund assumed Hennessey’s equity in the underlying properties and extinguished Hennessey’s debts to the Fund. (Id.) The letters also predicted, “[i]f real estate valuations rebound, and the Fund projects they will, this project level equity interest may potentially provide substantial upside profit for the Fund.” (Id.) In a summer 2009 conference call between NFP broker Kathy Fish (“Fish”) and the Fund’s Managing Director, M. David Woodward (‘Woodward”), Fish expressed her dismay with not learning of the foreclosures until late 2008: You know, it had to be pulled out, basically at that due diligence meeting, that the fund had been foreclosed upon. You know, you guys weren’t really up front about that until one of us asked a question that sounds like this is a foreclosure or whatever.... I just feel like I have been duped and to not have full disclosure and information when we are suggesting something to our clients.... [W]e didn’t know for six or seven months after the foreclosure occurred that it had even occurred. (Phillips Aff. ¶ 49, Ex. 49 at 1.) Later in the conversation, Woodward acknowledged that the Fund was “upside down” when Redpath and Bozora sold the general partnership to Duckson.” (Id. at 5.) He added, “[s]o there was really no inherent value that [the general partners] could sell and make any gain off of.” (Id.) 4. Fund’s Credit Bid for Hennessey’s Assets In August 2008, the Fund acquired Hennessey’s assets at a public auction where the Fund, the only bidder, made a $55 million credit bid. (Duckson Dep. I at 77-78.) The bid eliminated Hennessey’s outstanding loans to the Fund. (Id. at 77.) The “Business” sections of the November 2008 and February 2009 COMs described this transaction as follows: A significant portion of the current collateral underlying the Notes is derived from the collateral obtained by the Fund’s foreclosure on [Hennessey] and J-WMW, LLC, previous Fund borrowers. The Fund obtained the collateral in August, 2008 via public sale, bidding $55,000,000. (November 2008 COM at CAP 0227764; February 2009 COM at 26.) 5. Fund’s Loans to CS Midwest and CS Southeast Duckson formed CS Midwest and CS Southeast to “compartmentalize” the real estate assets the Fund acquired after foreclosing on Hennessey. (Phillips Aff. ¶ 10, Ex. 10 (Redpath Dep. II) at 118.) The Loan Security Agreement between the Fund and CS Midwest and CS Southeast required these SPVs to pay interest on any money they borrowed from the Fund. (Phillips Aff. ¶ 90, Ex. 90 at TD 0001642.) Though the Fund transferred money to CS Midwest and CS Southeast in November 2008, no interest payments or transfers back were made to the Fund until September 2009. (Saylor Aff. ¶ 24.) The November 2008 COM identified CS Midwest and CS Southeast as borrowers of the Fund. (November 2008 COM at 227745.) The “Risk Factors” sections of the November 2008, February 2009, and November 2009 COMs contained three paragraphs under the heading “Dependence on Jaguar Financial, Midwest Holdings and , Southeast Holdings,” which stated that the Fund’s investment manager sought to pursue its investment objectives “by making loans to Midwest Holdings, Southeast Holdings, and Jaguar Financial” and that the Fund’s success was dependent upon “the abilities of these entities to initiate eligible financing transactions.” (November 2008 COM at CAP 227746; February 2009 COM at 8; November 2009 COM at CAP 0325579.) Similarly, the November 2008 CIM stated that “the Fund will receive Fund Secured Notes from Jaguar Financial Corporation, CS Midwest Holdings, LLC, CS Southeast Holdings, LLC, or other third-party entities (collectively “SPV”).” (November 2008 CIM at 3.) The COMs did not include any statements about the effect of the Hennessey foreclosure on the Fund’s ability to make loans to CS Midwest and CS Southeast. 6. Using New Investors’ Funds to Pay Expenses and Existing Investors The COMs state that “[t]he Fund’s sole source of liquidity is the Notes or Fund loans.” (March COM at CAP 0175099; November 2008 COM at CAP 0227747; February 2009 COM at 9; November 2009 COM at CAP 0325580.) The “Custodian Agreements” sections of November 2008, February 2009, and November 2009 COMs contain a list of nine categories of expenses or obligations that could be paid from Fund’s Cash Account including: i. the Collateral Account for Note funding or Real Estate investments; ii. the Fund to pay any return of a Capital Accounts, or any portion thereof, to Limited Partners, iii. out of pocket cost reimbursement to the General Partner or Investment Manager, viii. other operating expenses of the Fund, such as servicing fees and costs paid to the Borrowers, approved by the Investment Manager or General Partner; ix. Priority Distributions (November 2008 COM at 0227765-66; February 2009 COM at 27-28; November 2009 COM at CAP 0325599.) The COMs do not specify what percentage of the Fund’s operating cash flows would be dedicated to paying expenses on the real estate acquired from Hennessey or interest payments to its existing investors. After the Fund foreclosed on Hennessey, nearly all of the Fund’s resources were put towards paying the expenses associated with maintaining the real estate assets it acquired from Hennessey and its obligations to senior debt holders and limited partners. (Gardner Dep. at 340-44; Saylor Aff. ¶¶ 21-22.) Through 2009, the Fund raised $74 million from its investors. (Saylor Aff. ¶ 16.) 7. First Commercial Bank Lawsuit In June 2008, First Commercial Bank (“FCB”), a Minnesota state bank in Bloomington, Minnesota, filed a seven-count complaint against Hennessey, Gardner, and several other related entities seeking a $788,385 judgment, an injunction against any further transfers from Hennessey to the Fund, and several other requests for relief. (Phillips Aff. ¶ 45, Ex. 45 at 10-11.) FCB contended that it had a senior possessory security interest in Hennessey’s assets. (Id.) The Fund filed a counterclaim to collect on the letters of credit that FCB had issued to the Fund. (Duckson Dep. II at 226-27.) The November 2008 and February 2009 COMs described the lawsuit as follows: “The Fund is currently in litigation to collect certain Irrevocable Letters of Credit issued to it in the approximate amount of $1,300,000. While outcomes in litigation are uncertain, [t]he Fund and its legal counsel expect a favorable result.” (November 2008 COM at CAP 0227770; February 2009 COM at 32.) The November 2009 COM did not appear to mention the FCB lawsuit in the section on legal actions pending against the Fund. See November 2009 COM at CAP 0325598. Without citing FCB’s claims to the underlying collateral, the February 2009 Update Letters asserted that the Hennessey foreclosure enabled the Fund to “take ownership of not only mezzanine level notes themselves but also the equity interest held by the developer in each real estate project.” (February 2009 Update Letter at NFP 162189.) ■ When asked why these documents did not contain information regarding FCB’s claims against the Fund, Duckson testified that he believed that FCB’s claims were “frivolous [and] immaterial.” (Duckson Dep. II at 227.) The case settled in December 2010 for an undisclosed amount. (Phillips Aff. ¶ 46, Ex. 46 (Schomack Dep.) at 22.) 8. Interest Reserve Account Amount The November 2008 COM and CIM asserted that the Fund’s interest and redemption reserve had a current balance of “approximately $8,000,000” consisting of “cash and other assets with short term liquidity.” (November 2008 COM at CAP 0227763; November 2008 CIM at 10.) When the November 2008 COM and CIM were issued, the Fund asserted that the $8 million figure consisted of $2.9 million in cash balances in two bank accounts, approximately $2.3 million in available letters of credit, approximately $500,000 of cash in escrow accounts, and approximately $2.3 million in receivables. (Phillips Aff. ¶ 78, Ex. 78 at 2-3; Phillips Aff. ¶ 44, Ex. 44 (Engstrom Dep.) at 52-56.) In November 2008, Duckson directed the Fund to close several interest reserve accounts and redirect funds to the SPVs. (Phillips Aff. ¶ 51, Ex. 51 at TD0005884; Phillips Aff. ¶52, Ex. 52 at TD0012416.) Fish testified that the amount of interest in the Fund’s cash escrow was important to her because it could provide a “cushion for my clients if something happened, they had money there to continue paying dividends.” (Phillips Aff. ¶ 12, Ex. 12 (Fish Dep. II) at 152.) Fish recalled being informed in December 2008 that the interest reserve had sufficient funds to pay investors more than one year of interest. (Id. at 152-53.) 9. Gardner’s Background The March 2008 COM and CIM and the February 2009 CIM summarized Gardner’s thirty years of experience as a real estate developer and financier. (March 2008 COM at CAP 0175123; March 2008 CIM at AS 004906; February 2009 CIM at AS 005078.) Though these documents cited Gardner’s position as President of Heritage and founder and CEO of Assured and Omni, they did not mention that these entities went out of business in 2008. (Id.) Defendants do not dispute that these Gardner entities were no longer going concerns as of late 2008. G. Investors and Brokers’ Understanding of Events Affecting the Fund From 2007 to 2009, the Fund’s brokers and investors had varying levels of awareness of the financial troubles the Fund faced. Thirteen investors asserted that they were unaware that the Heritage or Hennessey defaults and foreclosures had taken place until they ceased receiving interest payments from the Fund. (Doc. No. 127, Bredesen Decl. ¶¶ 8-9; Doc. No. 128, Dorman Decl. ¶¶ 6, 13-14; Doc. No. 129, Feblowitz Decl. ¶¶ 8-9; Doc. No. 130, Greif Decl. ¶¶ 7-8; Doe. No. 131, Johnston Decl. ¶¶ 6 — 7; Doc. No. 132, Kleinke Decl. ¶¶ 12-13; Doc. No. 133, Lefkove Decl. ¶¶ 7, 9; Doc. No. 134, Meier Decl. ¶ 7; Doc. No. 135, Mitchell Decl. ¶¶ 5-6; Doc. No. 136, Nourse Decl. ¶¶ 6, 11-12; Doc. No. 137, Prewitt Decl. ¶¶ 7-8; Doc. No. 138, Shoor Decl. ¶¶ 5,10-11; Doc. No. 139, Stabile Decl. ¶¶ 6, 7, 9.) Though these investors acknowledged reading some of the COMs and update letters, they were not aware that the Fund was not receiving income from its affiliated borrowers. (Id.) They also asserted that this information would have been relevant to their decision to continue investing in the Fund. (Id.) Five brokers who sold the Fund to their clients testified that despite reviewing the Fund’s various COMs and update letters, they were unaware of the defaults in 2008 until many months later and would have considered this information relevant to the recommendations they made to their clients regarding the Fund. (Phillips Aff. ¶ 12, Ex. 12 (Fish Dep.); Phillips Aff. ¶ 92, Ex. 92 (Amos Dep.); Phillips Aff. ¶ 93, Ex. 93 (Horowitz Dep.); Phillips Aff. ¶ 94, Ex. 94 (Westerman Dep.); Phillips Aff. ¶ 95, Ex. 95 (Sidder Dep.).) In several emails to her clients in December 2008, Fish stated that after attending a due diligence meeting earlier that month, she believed that the Fund was “well positioned to take advantage of the current market conditions” and that her clients could obtain additional income by investing further in the Fund. (Phillips Aff. ¶ 59, Ex. 59 at NFP 043312; Phillips Aff. ¶ 60, Ex. 60 at NFP 043280.) In an October 2008 conference call, Red-path, Bozora, and Weisenberger informed NFP brokers Kenny Miller (“Miller”), Paula Benyei (“Benyei”), Andrew Brief (“Brief’), and Bhavin Mehta (“Mehta”) that though the Fund had “foreclosed” on Hennessey’s assets, it held collateral in excess of its liabilities. (Carlson Deel. ¶ 13; Carlson Aff. ¶ 27, Ex. 26 at 5.) Several brokers, including Brief and Mehta, asked follow-up questions regarding the Hennessey foreclosure. (Carlson Aff. ¶ 27, Ex. 26 at 7-8, 11-12.) In response to a question from Brief as to whether Bozora felt “pretty secure with the prospects of the [F]und” in the next six to twelve months, Bozora responded, “Absolutely ____[w]e feel quite good about it. We feel very good about our collateral.” (Id. at 9.) Three NFP brokers testified that they thought that the Fund’s material risks and financial status were adequately disclosed. NFP broker Karen Joy Bean (“Bean”) testified that she believed that all of the material risks, terms, and conditions of the Hennessey foreclosure were disclosed in writing and that the Fund’s downfall was a result of the recession. (Carlson Aff. ¶ 16, Ex. 15 (Bean Dep.) at 356-57.) Andrew Rosenberg (“Rosenberg”) also acknowledged knowing the inherent risks of the Fund’s real estate investment strategy and testified that he knew of the Hennessey foreclosure when it took place and that (Carlson Aff. ¶ 14, Ex. 13 (Rosenberg Dep.) at 359-61, 450.) Similarly, broker Brian Aylieff (“Aylieff’) recognized the risks based on the Fund’s investment strategy, acknowledged being informed of these risks in writing, and believed that the Fund’s downfall was a result of the recession. (Carlson Aff. ¶ 15, Ex. 14 (Aylieff Dep. Yol. 1) at 413, 417-19, 441-42.) In April 2009, Duckson told brokers Ellen, Marsh, and Dyer that the Fund was contemplating abandoning its interest in up to half of its real estate parcels and that the assets in the Fund were not providing interest income or cash flow. (Field Aff. ¶ 50, Ex. 49 at DY001743.) Dyer wrote in his notes following the conversation: [Duckson] plans to generate cash [flow] by selling off the assets to pay the interest payments to [the] 10% holders and to provide liquidation payments for people who roll out after 4 years.... He plans to keep the fund open for 4 more years, then sell off all assets over that time frame and liquidate the fund. (Id.) Dyer testified that Duckson did not conceal that the Fund’s assets were not providing income or cash flow and that he found Duckson’s communication on this issue to be “very transparent.” (Field Aff. ¶ 50, Ex. 49 (Dyer Dep.) at 188.) Additionally, in a March 2010 letter to two of his clients, former NFP broker Lawrence Adamo (“Adamo”) explained the contents of one of the February 2009 Update Letters and the February 2009 Series I Notes offering, opined that the Fund’s financial deterioration was a result of the global recession, and stated his “cautiously optimistic” belief that the Fund (at that time True North) would be financially sound after the SEC approved their bond offering. (Doc. No. 148, Second Carlson Aff. ¶ 2, Ex. 37 at SEC-MH 0000229.) H. Duckson’s Activities After Leaving True North Since resigning from True North, Duck-son has not worked for or provided advice to any publicly traded companies, nor has he sought to become an officer of any publicly traded companies in the United States. (Duckson Decl. ¶¶ 22, 23.) Duck-son has not previously been found to be in violation of securities laws, nor have securities regulators charged him with any misconduct prior to this case. (Id. ¶ 24.) Duckson further asserts that in the future, he will not violate securities laws. (Id. ¶ 25.) None of the Fund’s investors have sued him for misconduct arising out of any of the Fund’s offering or marketing documents or any other conduct relating to the Fund. (Id. ¶24.) Duckson contends that as a result of this case and the downfall of True North, he has incurred significant economic losses and his reputation and future prospects have been irreparably damaged. (Id. ¶¶ 30-33.) TFFM earned approximately $6 million in management fees under the management agreement between the Fund and True North, $3 million of which were actually paid to TFFM and Duckson. (Id. ¶ 26.) I. Duckson’s Defamation Lawsuit Against Clouser In June 2011, Duckson filed a lawsuit in Scott County District Court asserting a defamation claim against Christopher E. Clouser (“Clouser”), who became CEO of True North after Duckson resigned, seeking judgment “in an amount in excess of $50,000.” (Ilcvl647 Doc. No. 1, Ex. A (Compl.) at 4.) The complaint alleged that, “[o]n or about February 22, 2011 through May 24, 2011, Defendant Clouser published a series of defamatory e-mails [about Plaintiff] to numerous associates of Plaintiff.” (Comply 12.) On June 24, 2011, Clouser removed the action to this Court, citing diversity of citizenship between the parties and “an amount in controversy greater than $75,000.00.” (Doc. No. 1 at 1.) This Court granted Duckson’s motion for remand in November 2011; the action is no longer pending before the Court. (Civil No. 11-1647, Doc. Nos. 26, 29.) DISCUSSION I. Summary Judgment Standard Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank of Mo., 92 F.3d 743, 747 (8th Cir.1996). However, as the Supreme Court has stated, “[sjummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed ‘to secure the just, speedy, and inexpensive determination of every action.’ ” Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed. R.Civ.P. 1). The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank, 92 F.3d at 747. The nonmoving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Krenik v. Cnty. of Le Sueur, 47 F.3d 953, 957 (8th Cir.1995). A party opposing a properly supported motion for summary judgment “may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). II. Scope of Fraud Claims A. Effect of Subscription Agreements Defendants argue that because all of the Fund’s investors signed Subscription Agreements explicitly stating that they did not rely on any statements beyond the materials contained in the COMs (non-reliance clause), the statements beyond those contained in the COMs are immaterial as a matter of law. In support of this proposition, Defendants rely on several private securities cases in which the courts of appeals for the First Circuit, Second Circuit, Seventh Circuit, District of Columbia Circuit, and the district court for the Southern District of New York held that non-reliance clauses precluded recovery for alleged oral misrepresentations made prior to the signing of a non-reliance clause. Rissman v. Rissman, 213 F.3d 381, 384 (7th Cir.2000) (“[A] written anti-reliance clause precludes any claim of deceit by prior representations.”); Harsco Corp. v. Segui, 91 F.3d 337, 342-43 (2d Cir.1996) (affirming district court’s determination that non-reliance warranty clause precluded finding of plaintiffs reliance on additional statements); Jackvony v. RIHT Fin. Corp., 873 F.2d 411, 416 (1st Cir.1989) (holding that merger clause prevented plaintiff from proving reliance on “preAgreement statements”); One-O-One Enter., Inc. v. Caruso, 848 F.2d 1283, 1285-86 (D.C.Cir.1988); Frati v. Saltzstein, No. 10-3255, 2011 WL 1002417, at *3 (S.D.N.Y. Mar. 14, 2011); San Diego Cnty. Emps. Ret. Ass’n v. Maounis, 749 F.Supp.2d 104, 120-21 (S.D.N.Y.2010). The SEC contends that Defendants’ arguments based on the aforementioned private securities cases are misplaced because reliance is not an element of the SEC’s claims, which are brought on the public’s behalf. The SEC argues that the Subscription Agreements are inadmissible hearsay and do not prevent the Court from considering statements relevant to its fraud claims beyond those contained in the COMs. The Court finds Defendants’ arguments limiting the scope of the SEC’s claims to the COMs based on the non-reliance clauses of the Subscription Agreements unavailing. Aside from the fact that none of the cases the Defendants cite are mandatory authority, they are distinguishable because these private securities actions involved reliance on primarily oral representations or statements that were made prior to the signing of a non-reliance clause. In contrast, this case involves claims brought by the SEC for which reliance is not a required element. See SEC v. Shanahan, 646 F.3d 536, 541 (8th Cir. 2011) (Shanahan I) (explaining that to prevail on § 10(b), Rule 10b-5, or § 17(a) claim, the SEC must prove that Defendant “made a material misstatement or omission in connection with the offer, sale, or purchase of a security by means of interstate commerce” with the requisite intent) (citing SEC v. Phan, 500 F.3d 895, 907-08 (9th Cir.2007)). As the Eighth Circuit explained in In re K-tel Int’l, Inc. Sec. Litig., 300 F.3d 881, 888 (8th Cir.2002), in a private action for securities fraud, causation is “often analyzed in terms of materiality and reliance.” In a private securities case where a plaintiff signed a subscription agreement, non-reliance clause, or integration clause, limiting fraud claims to those contained in offering documents may be appropriate. However, the Court declines to do so here because reliance is not a required element of any of the SEC’s claims against Defendants. Cf. Pinnacle Commc’ns Int’l, Inc. v. Am. Family Mortg. Corp., 417 F.Supp.2d 1073, 1089 (D.Minn.2006). Moreover, most of the additional alleged misstatements or omissions are written statements that are also contained in CIMs or marketing materials that were issued simultaneously to or shortly after the COMs. In contrast, nearly all of the statements at issue in the eases Defendants cite were oral. Further, the First Amended Complaint contained specific allegations as to misstatements or omissions beyond those found in the COMs. Although the Court notes that these Subscription Agreements could conceivably be considered hearsay depending on the purpose for which they were being offered into evidence, and, therefore, could be inadmissible, the Court lacks a sufficient basis to make such a finding or ruling prior to trial. Cf. Pink Supply Corp. v. Hiebert, Inc., 788 F.2d 1313, 1319 (8th Cir.1986) (“[Without a showing that admissible evidence will be available at trial, a party may not rely on inadmissible hearsay in opposing a motion for summary judgment”.). Thus, in the Court’s materiality analysis, the Subscription Agreements will be considered as part of the “ ‘total mix’ of information made available [to reasonable investors].” Matrixx Initiatives v. Siracusano, — U.S.-, 131 S.Ct. 1309, 1318, 179 L.Ed.2d 398 (2011) (quoting Basic, Inc. v. Levinson, 485 U.S. 224, 238, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)). Additionally, because many genuine issues of material fact exist with respect to the truthfulness and materiality of statements contained in the COMs, CIMs, and marketing materials, limiting the Defendants’ liability to statements contained in the COMs would be premature. The Court, therefore, reserves the right to decide at trial issues as to the impact and admissibility of the investors’ signing of the Subscription Agreements. B. November 2009 COM Defendants argue that the Court should not find the November 2009 COM to be within the scope of the SEC’s claims because the First Amended Complaint does not specifically mention this document. Defendants allege that the SEC merely added claims based on the November 2009 COM after Defendants pointed out in their memoranda that the SEC did not previously make specific claims about this COM. Defendants further contend that to allow the SEC to assert claims based on the November 2009 COM would violate the heightened pleading requirements of Rule 9(b) and would unduly prejudice Defendants. The SEC argues that the November 2009 COM may be considered because it was issued during the period of fraud alleged in this ease — March 2008 to December 2009. The SEC also asserts that it may refine its theories of fraud in discovery and that the cases Defendants cite in support of limiting the scope of the SEC’s claims to the COMs are distinguishable because the complaints in those cases did not contain specific allegations of fraud. When the SEC asserts a violation of § 10(b), Rule 10b-5, or § 17(a), the complaint must satisfy the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. See, e.g., Fl. State Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 645, 654-55 (8th Cir.2001) (explaining the applicability of 9(b) to securities fraud cases with the caveat that some circuits “apply a special standard” with regard to pleading scienter). Rule 9(b) states, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.R.Civ.P. 9(b). Counts I — III of the SEC’s First Amended Complaint are subject to Rule 9(b)'s heightened pleading requirements. The purpose of Rule 9(b) is to provide defendants with sufficient notice of the allegations so that they may be able to formulate a response. Abels v. Farmers Commodities Corp., 259 F.3d 910, 920 (8th Cir.2001). The Rule must be read in harmony with the principles of notice pleading. BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir.2007). Though the Court agrees with Defendants that the First Amended Complaint does not specifically mention the November 2009 COM, its inclusion in the Court’s analysis does not alter its ultimate conclusions on the instant motions. Further, this COM was issued during the time period of alleged fraud as outlined in the SEC’s First Amended Complaint. (FAC ¶¶ 2-19.) Additionally, the November 2009 COM was produced in discovery as evidenced by the Bates numbers on the version attached to the first Carlson Affidavit. For completeness, the Court will consider the November 2009 COM as it relates to the categories of purportedly material misleading statements that the SEC alleges constitute actionable conduct. C. “Sham Affidavit” Doctrine Defendants contend that the Bredesen Declaration should be disregarded under the sham affidavit doctrine because Bredesen’s signing of the Subscription Agreement that accompanied the February 2009 COM contradicted statements contained in his Declaration. (Doc. No. 127, Bredesen Decl.) Defendants also argue that the SEC’s allegations of oral misrepresentations were asserted for the first time in its brief in opposition to summary judgment and that none of these statements are attributable to him. (Doc. No. 146 (Duck-son Reply Mem.) at 8-9; SEC Response Mem. to Duckson at 44.) The Eighth Circuit Court of Appeals has addressed the issue of “sham affidavits,” stating: Parties to a motion for summary judgment cannot create sham issues of fact in an effort to defeat summary judgment. ... While district courts must exercise extreme care not to take genuine issues of fact away from juries, a party should not be allowed to create issues of credibility by contradicting his own earlier testimony. Ambiguities and even conflicts in a deponent’s testimony are generally matters for the jury to sort out, but a district court may grant summary judgment where a party’s sudden and unexplained revision of testimony creates an issue of fact where none existed before. Otherwise, any party could head off a summary judgment motion by supplanting previous depositions ad hoc with a new affidavit, and no case would ever be appropriate for summary judgment. Am. Airlines, Inc. v. ELM Royal Dutch Airlines, Inc., 114 F.3d 108, 111 (8th Cir. 1997) (citations omitted). “[A] properly supported motion for summary judgment is not defeated by self-serving affidavits.” Conolly v.