US Supreme Court Declines to Expand Liability to Secondary Actors in Securities Cases
In December 2010, the U.S. Supreme Court heard oral arguments in Janus Capital Group, Inc. v. First Derivative Traders. The Court considered whether Janus Capital Group (“JCG”), as an investment adviser to Janus Investment Fund, may be sued as a primary violator of Section 10(b) and Rule 10b-5. Last week, the Court issued a 5-4 decision and declined to expand 10b-5 liability to JCG. The Court held that JCG could not be sued as a primary violator of federal securities laws because it did not have the “ultimate authority” to make the allegedly misleading statement issued by the Janus Investment Fund. The Court’s decision rejects a significant expansion of potential federal securities law liability for a broad range of secondary actors and advisers who do not control the content of the issuer’s allegedly misleading statement, including attorneys, accountants and others.
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