233 Conn. 304 | Conn. | 1995
Lead Opinion
The primary issue in this appeal is whether a person who “aids and abets” another person’s fraudulent conduct in connection with a securities transaction has violated General Statutes (Rev. to 1993) § 36-472 of the Connecticut Uniform Securities Act (CUSA).
We are unpersuaded that § 36-472 includes within its prohibitions the aiding and abetting of another’s fraudulent conduct and, therefore, we reverse the trial court’s judgment for the defendants. Because the trial court did not consider other possible defenses raised by the defendants, and the record contains no findings of fact in that regard, we remand the case to the trial court for further proceedings with respect to such defenses.
In order to raise money to finance the Great Rings development, Zak and the general partners planned that “investors were to borrow the entire purchase price of their shares ($50,000 each) from a bank. Their notes would be directly payable to the bank. The partnership would guarantee a return at 8 percent per annum to the investors, to offset the interest on the notes to the bank. It was contemplated that in two years there would be sufficient funds to pay off the principal. Thus . . . the partners would raise millions, and the investors would never pay a dime out of their own pockets.” This scheme “contained a substantial Ponzi element from the very beginning” because the “only conceivable source” of the 8 percent per annum return to the investors before the raw acreage could be developed was the original contributions of the investors themselves.
Zak approached employees of CNB to provide the financing to investors. In 1989, Zak met with Neal Fitz-
Great Rings retained Attorney D. Robert Morris of Pullman, Comley, Bradley and Reeves for its legal work, including the preparation of documentation such as the certificate of limited partnership, a private placement memorandum dated May 1,1988, and filings with the Securities and Exchange Commission and other agencies. Because Great Rings intended to make its venture exempt from the registration requirements of the federal Securities Act of 1933, it wanted to show that the venture involved not more than thirty-five purchasers of securities. To ease the fulfillment of that requirement, Great Rings was able to exclude from the thirty-five person limit each “accredited investor,” a person with “a net worth . . . exceeding $1,000,000 or with an income exceeding $200,000 a year in each of the two most recent years. 17 C.F.R. § 230.501 (a) (5) & (6).” Also, Great Rings had to show that non-accredited investors had “such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.” 17 C.F.R. § 230.506 (b) (ii). The Great
The trial court also made extensive findings about how particular individuals helped to solicit investors and facilitate the sale of Great Rings units.
Regarding the sale of Great Rings units to the particular defendants in this case, the trial court painstakingly detailed the deceptive practices and misrepresentations of fact by the Zak brothers. This factual backdrop is largely undisputed. Additionally, the trial court made findings about CNB’s involvement, primarily through Truelove, with the selling and financing of these defend
Robert Rosa testified that he had learned about Great Rings through William Zak, with whom Rosa was familiar from prior investments in Colonial. William Zak told him that CNB had endorsed the investment and would provide financing for the venture. Although it is unclear whether Rosa provided CNB with a personal financial statement, Truelove gave Rosa a note to sign without discussing its terms. Prior to this transaction, Rosa had never met Truelove nor conducted business with CNB, but told Truelove that he was confident in the investment because CNB had fully endorsed it. Truelove responded to Rosa’s comments without speaking, but only by putting the signed note away. Rosa understood Truelove’s silence to mean that Truelove endorsed his investment in Great Rings.
Robert Giacomi learned of the investment opportunity in Great Rings on a boat trip with the Zak brothers and Donnarumma, who had invited Giacomi on the trip. After Donnarumma later urged him to invest and informed him that financing had been arranged, Gia-comi, along with his brother, Jack Giacomi, then Mayor Santopietro and Joseph Tramuta, signed in the office
After learning of Great Rings on the boat trip, Jack Giacomi submitted a completed loan application to Truelove as instructed by Donnarumma. About a week later Jack Giacomi learned from Truelove, whom he had never met, that the loan had been approved, and Truelove stated to him of Kenneth Zak that “[t]his guy’s been doing this for a long time. He’s a pro. This is a pretty good project, and everyone should make some money.” Jack Giacomi later signed a promissory note with Freddie.
Although neither Santopietro nor John DePastino had testified at trial, the trial court further found that Santopietro signed two $50,000 notes with CNB, only one of which is at issue in this case. Santopietro was solicited to invest in Great Rings by Donnarumma, and the trial court made no findings about the extent of the relationship between Santopietro and Truelove. As to DePastino, the trial court concluded that he had signed an otherwise blank promissory note with CNB and induced his wife Valerie to sign it as a comaker by falsely representing to her that it was merely a credit application. The trial court determined that the Zaks
Soon after escrow was broken in September, 1988, the investors’ money quickly disappeared. The trial court rejected the notion that this resulted from a downturn in the real estate market, and instead concluded that “the investors’ money was simply stolen.” In 1991, CNB sued the defendants on their promissory notes and for unjust enrichment after these individuals failed to fulfill their financial obligations to CNB on the notes. The defendants, other than Valerie DePastino, answered CNB’s complaint by denying liability and asserting identical special defenses and counterclaims.
In light of its factual findings, the trial court concluded that the defendants had satisfied their burden of proof on a combination of two of their affirmative defenses: (1) that CNB had “aided and abetted” the primary CUSA violations of the Great Rings partners; and (2) accordingly, that § 36-498 (g) precluded CNB from enforcing its promissory notes with the defendants. More specifically, the trial court determined that “aiding and abetting a securities fraud forms an independent basis for the imposition of liability under CUSA,” and found that such liability constitutes a violation of CUSA within the meaning of § 36-498 (g). The trial court applied a three-pronged test to determine that the defendants had established CNB’s liability as an aider and abettor in this case. It stated that “[i]n general ... a party must prove three elements in order to impose aiding and abetting liability. ‘(1) the existence of a securities law violation by the primary (as opposed to the aiding and abetting) party; (2) “knowledge” of this violation on the part of the aider and abettor; and (3) “substantial assistance” by the aider and abettor in the achievement of the primary violation.’ [International Investment Trust] v. Cornfeld, 619 F.2d 909, 922 (2d Cir. 1980).”
In applying the test to the facts of the case, the trial court first noted that there had been various “primary
CNB principally claims on appeal that CUSA contains no implied, or “judge-made,” doctrine of aiding and abetting liability to support the trial court’s conclusion
Because the trial court did not expressly identify the provision in CUSA under which, in its view, CNB qualified as an “aider and abettor,” the defendants posit various theories in support of the trial court’s decision.
We conclude that § 36-472 does not provide for any implied form of aider and abettor liability. Because we also conclude that the trial court did not find CNB liable under any of the other provisions of CUSA, including § 36-498, we reject the trial court’s legal conclusion that the defendants have proved their affirmative defenses under § 36-498 (g).
I
We first consider whether § 36-472 includes within its proscriptions the aiding and abetting of another’s securities violation. At the outset, we note that this court has never previously had occasion to construe the language of § 36-472, or consider the scope of its prohibitions. In determining whether § 36-472 provides for aider and abettor liability of any form, our primary inquiry must be whether § 36-472 “can fairly be interpreted to encompass such [secondary liability] in the first instance.” Russell v. Dean Witter Reynolds, Inc., 200 Conn. 172, 178, 510 A.2d 972 (1986). “We approach this question according to well established principles of statutory construction designed to further our fundamental objective of ascertaining and giving effect to the apparent intent of the legislature. State v. Kozlowski, 199 Conn. 667, 673, 509 A.2d 20 (1986); Hayes v. Smith, 194 Conn. 52, 57, 480 A.2d 425 (1984). In seeking to discern that intent, we look to the words of the statute itself, to the legislative history and circumstances surrounding its enactment, to the legislative policy it was designed to implement, and to its
We consider first the express language of the statute. Section 36-472 of CUSA provides: “No person shall, in connection with the offer, sale or purchase of any security, directly or indirectly: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.” This language does not expressly include aiders and abettors. Consequently, we must determine whether the legislature nevertheless intended to include such persons.
In 1977, the Connecticut legislature formally adopted the Uniform Securities Act (Uniform Act). This included § 36-472, which corresponded to § 101 of the Uniform Act.
Although the legislative history reveals nothing regarding whether the legislature, when it adopted § 101 of the Uniform Act, intended to include aiders and abettors, we may be assisted in ascertaining that intent by looking to commentaries on the meaning of § 101. See Elliot v. Sears, Roebuck & Co., 229 Conn. 500, 509, 642 A.2d 709 (1994); Maloney v. Pac, 183
Nonetheless, the defendants argue that the trial court correctly relied upon a line of rule 10b-5 cases to conclude that the legislature intended to include aiders and abettors within § 36-472. To be sure, beginning in 1966,
These subsequent cases construing rule 10b-5 clearly would be relevant if we were attempting to ascertain the known meaning of rule 10b-5 in 1977. As we discussed previously, however, especially in the absence of other indicators of legislative intent, we look instead to the meaning of the Uniform Act, which began to be adopted by states shortly after it was approved in 1956. Indeed, if § 101 of the Uniform Act were meant always to be interpreted by courts in light of the interpretations of rule 10b-5 in existence at the time of each particular state’s enactment of § 101, then states that had adopted the Uniform Act prior to the Brennan line of cases would accord a meaning to the language of § 101 different than those states, such as Connecticut, that have adopted § 101 more recently. Such an outcome would undermine the uniformity among states that underlies the very existence of the Uniform Act. See L. Loss & E. Cowett, supra, p. 238 (“state administration will benefit from an act which is reasonably coordinated with the federal legislation, os well as uniform from state to state” [emphasis added]). Thus, these subsequent cases are of lesser value to our interpretation of § 36-472.
Moreover, our interpretation that § 36-472 does not include aiders and abettors makes sense in light of its relationship with the rest of CUSA and the common law. See Lauer v. Zoning Commission, supra, 220 Conn. 460. This interpretation respects the legislature’s decision to enact express provisions for secondary forms of securities fraud liability. In contrast to § 36-472, § 36-498 (c) provides that “[e]very person who directly or indirectly controls a person liable under subsections (a) and (b) of this section, every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee of such a person who materially aids in the act or transaction constituting the violation and every broker-dealer or agent who materially aids
It is noteworthy that the language of § 36-498 (c) is based on and parallels that of § 410 (b) of the Uniform Act, which is “a detailed specification of those prima facie liable under § 410 (b)” and is not found in the federal securities laws. L. Loss, Fundamentals of Securities Regulation (1983) p. 1013. Professor Loss has stated that the language of this subsection, like other provisions of § 410, was incorporated “in light of the experience under the state statutes and § 12” of the Securities Act of 1933. Id.
We also may find guidance in precedent from other states that have adopted these relevant provisions of the Uniform Act. See, e.g., Jacobs v. Healey Ford-Subaru, Inc., 231 Conn. 707, 719, 652 A.2d 496 (1995) (looking to interpretations of other states regarding their analogous provisions of article 9 of the Uniform Commercial Code). Such courts have likewise looked to the provisions of § 410 (b), as enacted in those jurisdictions, as an express source of various forms of secondary liability, including aiding and abetting liability. The Supreme Court of Alabama has recognized that Alabama’s version of § 410 (b) is “substantially different and . . . considerably broader than § 12 of the
Moreover, we note that we have found only one precedent specifically considering whether § 101 of the Uniform Act, as adopted in other jurisdictions, provides for aider and abettor liability. In a recent, post-Central Bank decision of a federal District Court, the court first
In sum, we conclude that § 36-472 does not include implied aider and abettor liability. Nonetheless, the defendants contend that the judgment in their behalf should be sustained because their affirmative defense under § 36-498 (g) depends not on the existence of an affirmative private cause of action for aider and abettor liability under § 36-472, but on their ability to use aider and abettor liability only as a defense to liability on their promissory notes. Although we may agree with the defendants that their special defenses do not depend on the existence of a private cause of action for aider and abettor liability under § 36-472, this distinction does not benefit them in this case. We conclude that § 36-472 only prohibits individuals from personally committing the fraudulent acts listed thereunder and, accordingly, that aggrieved investors must rely on other sources to seek redress from third parties who may otherwise facilitate such “primary” violations. This conclusion harmonizes with the United States Supreme Court’s recent rejection of aider and abettor liability under
Despite the defendants’ contentions that such implied aider and abettor liability is necessary to effectuate the broad protective purposes underlying CUSA, we are confident that our interpretation of § 36-472 does not unduly limit the avenues of recourse available to aggrieved investors.
II
Because we reject the defendants’ affirmative defenses to the extent that they are based on § 36-472, we must address the alternative arguments of some of the defendants that the trial court based, or could have based, its determination, either exclusively or partially, on the provisions of § 36-498. Essentially, some of the defendants first contend that the trial court’s decision relied not only on its conclusion that CNB violated § 36-472, but also on its determination that CNB had violated one or more of the subsections of § 36-498. As a further alternative, some of the defendants seem to
Although the trial court did not expressly identify § 36-472 as the provision in CUSA under which, in its view, CNB qualified as an aider and abettor, we construe the trial court’s decision as having relied on only an implied theory of aider and abettor liability under § 36-472. As we discussed previously, the language of § 36-472 parallels that of rule 10b-5, and the trial court analyzed the defendants’ aider and abettor claims exclusively on the basis of federal precedents construing the scope of pre-Central Bank rule 10b-5 implied aider and abettor liability.
Additionally, some of the defendants seem to argue alternatively that the trial court did make findings based on violations of § 36-498 (a) or (c), sufficient to support its determination that CNB violated CUSA within the meaning of the affirmative defense under § 36-498 (g). We must reject this proposed alternative ground for affirmance of the trial court’s decision. Although we do not dismiss the argument that, in a proper case, § 36-498 (a) or (c) might provide a sufficient legal basis for sustaining aider and abettor liability, the trial court did not articulate a factual basis sufficient for this court, sua sponte, to find CNB liable under either § 36-498 (a) or (c).
A
The defendants first claim that “§ 36-498 (a) echoes the language of § 12 of the Securities Act of 1933 . . . as well as § 10 (b) of the Securities Exchange Act of 1934 .... Cases construing § 12, and comparable provisions under the Uniform Securities Act, demonstrate both that [CNB] could be primarily liable under that section, and aiding and abetting liability is well recognized thereunder.” General Statutes (Rev. to 1993) § 36-498 (a) provided in relevant part: “Any person who ... (2) offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, the buyer not knowing of the untruth or omission, and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the untruth or omission, is liable to the person buying the security from him, who may sue either at law or in equity to recover the consideration paid for the security, together with interest at eight per cent per year from the date of payment, costs and reasonable attorneys’ fees, less the amount of any income
In 1993, however, the legislature amended § 36-498 (a) to extend liability, inter alia, to a party who “offers or sells or materially assists any person who offers or sells a security . . . .” (Emphasis added.) Public Acts 1993, No. 93-169. The trial court noted that this amendment did not affect its analysis of the case because “[No. 93-169 of the 1993 Public Acts] merely clarifies a liability that was, in fact, in existence long before CUSA was originally enacted in 1977.” The defendants concur in this assessment, arguing that the amendment does not affect the validity of their affirmative defenses under § 36-498 (g) because the amendment clarified the existence of, rather than created, aider and abettor liability under CUSA. CNB asserts, on the contrary, that the amendment created aider and abettor liability and, therefore, that the defendants’ pre-1993 promissory notes may not be avoided on the basis of § 36-498 (a).
Subsection (a) of § 36-498 does not provide us with a basis upon which to affirm the trial court’s decision. Although both CNB and the defendants argue that the effect of the 1993 amendment is important to this case, we need not decide the amendment’s effect because the defendants’ claims must fail regardless of whether this subsection provided for aider and abettor liability prior to 1993. In particular, on the basis of the factual record now before us, we cannot determine whether CNB is liable on the basis of the provisions of § 36-498 (a), which might then provide an alternative basis for affirming the trial court’s conclusion that CNB violated CUSA within the meaning of § 36-498 (g), because the trial court analyzed the case only under the three-pronged test previously utilized in rule 10b-5 cases and,
As described previously, § 36-498 (a) expressly provides that a person who “offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact ... the buyer not knowing of the untruth or omission,” is liable for damages. (Emphasis added.) Unlike § 36-472, this provision expressly requires a buyer to show no knowledge of the untruth or omission otherwise constituting the violation. See L. Loss, Commentary on the Uniform Securities Act, supra, draftsmen’s commentary to § 410 (a), p. 146 (buyer must show that he did not know of untruth or omission). In this case, the trial court’s inquiry focused almost exclusively on the conduct of CNB and the Great Rings general partners. The only discussion in the decision even somewhat related to the defendants’ knowledge was within the section concerning the primary violation prong of the three-pronged test. The trial court stated that “there were significant misstatements in the [private placement memorandum] itself, notably its false statement that the general partners would not receive commissions and its equally false statement about the existing sales price of comparable lots in Newtown. These misstatements pale beside the fact that, at least as far as the evidence in this case reveals, the [private placement memorandum] simply was not given out to most investors in the first place. Thus, as far as most investors were concerned, the real problem was a complete omission to provide the necessary material facts in order to make the various statements made by the promoters not misleading.”
We cannot conclude from this passage that the trial court found that the defendants, in fact, did not know of the misstatements or omissions in question. In reach
Moreover, various other passages in the trial court’s decision suggest that it did not consider the actual knowledge of the investors and that, had it undertaken such consideration, it might have concluded that the investors had some level of awareness of the misstatements or omissions in the Great Rings offering. For example, before describing the conduct of the Great Rings general partners and CNB, the trial court indicated that “some (but by no means all) of the investors are themselves convicted criminals, see United States v. Santopietro, 996 F.2d 17 (2d Cir. 1993) [cert. denied, 510 U.S. 1092, 114 S. Ct. 921, 127 L. Ed. 2d 215 (1994)], and acted out of a greed every bit as ravenous as that which possessed the promoters and the bank.” Also, the trial court noted that it had “not overlooked the fact that the defendants (other than Valerie DePastino, who was simply duped), were sufficiently eager to make money that they neglected to make inquiries that, with hindsight, should have been made.” We do not mean to suggest that we believe that these observations of the trial court are a sufficient basis upon which to conclude that the defendants did have “knowledge” within the meaning of § 36-498 (a), but only emphasize that the trial court did not find that the
B
Finally, some of the defendants contend that the trial court found, or could have found, that their affirmative defenses under § 36-498 (g) are supported by CNB’s liability under § 36-498 (c). Section 36-498 (c) provides: “Every person who directly or indirectly controls a person liable under subsections (a) and (b) of this section, every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee of such a person who materially aids in the act or transaction constituting the violation and every broker-dealer or agent who materially aids in the act or transaction constituting the violation are also liable jointly and severally with and to the same extent as such person, unless the person who is so liable sustains the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There shall be contribution as in cases of contract among the several persons so liable.” These defendants contend, as they did in their pleadings, trial memoranda and closing trial argument, that CNB’s relationship to Great Rings and the investors made it liable for the fraud of the Great Rings partners under this subsection as a
This claim requires little discussion. Because § 36-498 (c) establishes liability for certain categories of parties, the burden is on the buyer to prove that the third party falls within one of these categories. In this case, the trial court made no factual findings concerning whether CNB, acting through Truelove or others, was a “control person,” “person occupying a similar status or performing similar functions,” or an “agent” of Great Rings within the meaning of the provision. Consequently, in the absence of these essential findings of fact, we are in no position to find, sua sponte, that CNB is liable under any one or all of these categories. See Rosenfield v. Metals Selling Corp., supra, 229 Conn. 788.
In sum, we conclude that a person who aids and abets another person’s fraudulent conduct in connection with a securities transaction has not violated § 36-472. The defendants’ affirmative defenses to their promissory notes therefore fail to the extent that they are based on that section of CUSA. Further, we reject the defendants’ claim that they established, as a matter of fact, the affirmative defenses based on CNB’s violations of § 36-498 (a) or (c). Consequently, because we reject the basis of the trial court’s conclusion that CNB violated CUSA within the meaning of § 36-498 (g), we remand the case to the trial court to consider the defendants’ argument that § 36-498 (a) and (c) provide for a form of aider and abettor liability and to decide the merits of the defendants’ other special defenses.
In this opinion Peters, C. J., and Berdon and Nor-cott, Js., concurred.
General Statutes (Rev. to 1993) § 36-472 provides: "prohibited activities EE THE OFFER, SALE OR PURCHASE OF ANY SECURITY. No person shall, in connection with the offer, sale or purchase of any security, directly or indirectly: (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.”
In 1995, the entirety of CUSA was transferred from chapter 662 to chapter 672a and renumbered. Due to this transfer, the above provision is now codified in similar language at General Statutes § 36b-4. To prevent confusion we will refer to relevant provisions of CUSA according to their designations in effect during the period of time at issue in this case, but we will indicate their current designations and any amendments as needed.
Although CNB now operates under the name Shawmut Bank, N.A., we refer to it under its previous name, which it used during the period of time at issue in this case.
The defendants were Robert A. Giacomi, Jack R. Giacomi, former mayor of Waterbury Joseph J. Santopietro, John J. DePastino, Valerie DePastino, Joseph A. Santoro, Hope Santoro and Robert R. Rosa.
General Statutes (Rev. to 1993) § 36-498 (g) provides: “No person who has made or engaged in the performance of any contract in violation of any provision of this chapter or any regulation or order hereunder, or who has acquired any purported right under any such contract with knowledge of the facts by reason of which its making or performance was in violation, may base any cause of action on the contract.” This subsection is now codified in substantially similar language at General Statutes § 36b-29 (h).
Valerie DePastino did not assert any CUSA special defenses. Because the trial court treated her as having raised such a defense, however, our discussion regarding the other defendants’ CUSA claims applies equally to her.
Because the defendants in this case interacted with CNB through its Waterbury office, we need only focus on facts relating to those relationships. See generally Connecticut National Bank v. Voog, 233 Conn. 352, 659 A.2d 172 (1995); Connecticut National Bank v. Gerace, Superior Court, judicial district of Hartford-New Britain at New Britain, Docket No. 90-00442832 (October 15, 1992).
Although the trial court did not specifically define “promoter” in its memorandum of decision, it is clear that it used that term not to refer to those individuals who actually committed the deceptive or fraudulent acts, but only to designate those individuals who had actively helped facilitate the purchase of the Great Rings investment units. Thus, it is clear that the trial court did not find CNB, through Truelove or otherwise, to be a “primary” violator of CUSA, and the defendants do not dispute this finding on appeal.
The trial court found that Kenneth Zak: (1) was not a registered broker-dealer even though he actively sold the securities; (2) distributed to investors a private placement memorandum that contained serious misrepresentations; (3) failed to update that memorandum when he became a general partner of Great Rings in 1988; (4) misrepresented to investors that they
The trial court found that there is a May, 1989 memorandum in which Truelove states that Donnarumma “ ‘is an excellent referral source and key to our relationship with the City of Waterbury.’ ” Again, it appears that the trial court found this memorandum relevant to show Truelove’s desire to provide financing to Great Rings investors.
The trial court reached this conclusion based on the following syllogism. First, it found that the investor questionnaire that was supposed to have been completed by Donnarumma, who apparently was both an investor and a “promoter” of Great Rings, contained financial information that had not been entered by Donnarumma. The court attributed these forgeries to the Zak brothers, who themselves filled in Donnarumma’s entire balance sheet and financial statement. Second, the court noted that these forged entries included accurate information in addition to wholly contrived figures. The court noted that this interspersion of accurate information made the questionnaire look more genuine and helped the Zaks conceal their fraud. Third, the court, based on Donnarumma’s testimony, found that Donnarumma had given this personal financial information only to Truelove and Colonial. Because the trial court concluded that it made no sense for Kenneth Zak to have obtained this information from Colonial, the court concluded that Zak must have received it from ’Truelove.
Santoro also testified that he never heard from CNB about his loan until Kenneth Zak told him that it had been approved and brought him the check for endorsement.
Each defendant claimed the following special defenses to liability on the promissory notes: (1) that CNB acted as an agent of Great Rings, knew or should have known that the sales of interests in Great Rings violated CUSA and knew or should have known of the affirmative acts of fraud perpetrated by the general partners of Great Rings; (2) that CNB aided and abetted the fraud of the general partners; (3) that the promissory note was procured by fraud; (4) that CNB’s conduct renders the promissory note rescindable; (5) that CNB’s conduct violated General Statutes § 36-485 of CUSA; (6) that CNB’s conduct violated General Statutes § 36-498 (b) of CUSA; (7) that CNB’s claim is barred by General Statutes § 52-588; (8) that CNB’s claim is void and unenforceable because CNB violated CUSA, and violated principles of fraud, misrepresentation, unconscionability and good faith and fair dealing; (9) that CNB’s conduct renders the promissory note void and unenforceable under § 36-498; (10) that CNB’s conduct renders its claim unenforceable under § 36-498 (g); (11) that CNB is liable under § 36-498 (c); and (12) that the defendant is entitled to attorney’s fees under General Statutes § 42-150bb.
Each of these defendants also made the following counterclaim: (1) that CNB is liable for its “unfair and/or deceptive acts and/or practices” in violation of General Statutes § 42-110a et seq. (the Connecticut Unfair Trade Practices Act); (2) that CNB’s conduct constituted a “course and pattern of unconscionable practices” in violation of General Statutes § 42a-2-302 and aided and abetted the general partners of Great Rings; and (3) that CNB breached its fiduciary duties and obligations to the defendant.
Subsequently, these defendants amended their answers, special defenses and counterclaims to include the following: (1) that CNB was negligent in allowing Great Rings to use it as an inducement; (2) that CNB is estopped from collecting on the note because it violated its internal credit policies
Valerie DePastino claimed the following special defenses: (1) that her husband, John DePastino, acted as the agent for CNB to secure her signature on a blank promissory note, and she did not authorize the insertion in the note of any specific terms; and (2) that the note was an “incomplete instrument” within the meaning of General Statutes § 42a-3-115 (1), the subsequent completion was “unauthorized” within the meaning of § 42a-3-115 (2), and she therefore is discharged from liability on the note under General Statutes § 42a-3-407.
In applying this three-pronged standard, the trial court did not specifically mention or discuss the specific provision or provisions of CUSA to which, in its view, this standard applied.
CNB argues that a finding of such liability is particularly inappropriate in its case because its promissory notes with the defendants, although contracts, were not “contracts in violation of” CUSA within the meaning of § 36-498 (g).
CNB argues that: (1) “reckless” conduct does not satisfy the scienter prong of aider and abettor liability where it did not know of the fraud;
(2) “ ‘recklessness’ cannot be shown by describing ‘atypical’ or unusual behavior, when that behavior does not show reckless disregard of the fraud’ ’;
(3) “substantial assistance” is not shown by a “but for” causal connection to the buyer’s purchase of the security; and (4) there was no “loss causation” connecting its conduct to the buyers’ damages.
Valerie DePastino did not file an appellate brief or participate at oral argument.
Because of our disposition of the case, we need not address CNB’s other arguments.
Section 101 of the Uniform Act provides: “[Sales and Purchases.] It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly
“(1) to employ any device, scheme, or artifice to defraud,
“(2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or
“(3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.”
We note that prior to the 1977 amendment, the antifraud provision in the Connecticut securities laws contained language similar to that which was adopted in 1977. Nonetheless, we have not uncovered any other legislative history that sheds light on the present issue.
Rule 10b-5 of the SEC provides: “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
“(a) To employ any device, scheme, or artifice to defraud,
“(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or “(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5 (1994).
Section 17 (a) of the federal Securities Act of 1933 provides: “Use of interstate commerce for purpose of fraud or deceit
“It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly— “(1) to employ any device, scheme, or artifice to defraud, or “(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or “(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.” 15 U.S.C. § 77q (a) (1988).
Section 10 of the federal Securities Exchange Act of 1934 provides in relevant part: “It shall be unlawful for any person, directly or indirectly,
Section 876 of the Restatement of Torts (1939) provides: “For harm resulting to a third person from the tortious conduct of another, a person is liable if he
“(a) orders or induces such conduct, knowing of the conditions under which the act is done or intending the consequences which ensue, or “(b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or
“(c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person.”
Therefore, we reject the dissent’s view that the known interpretation of rule 10b-5 in 1977 should control our determination of legislative intent because the language of rule 10b-5 and § 36-472 is identical and because “it is more likely that the legislature intended § 36-472 to have the meaning that had been accorded the language of rule 10b-5 and § 10 (b) of the Securities Exchange Act of 1934 by all seven of the federal Circuit Courts of Appeals that had addressed the issue.”
“We reach the uncontroversial conclusion, accepted even by those courts recognizing a § 10 (b) aiding and abetting cause of action, that the text of the 1934 Act does not itself reach those who aid and abet a § 10 (b) violation. Unlike those courts, however, we think that conclusion resolves the case. It is inconsistent with settled methodology in § 10 (b) cases to extend liability beyond the scope of conduct prohibited by the statutory text. To be sure, aiding and abetting a wrongdoer ought to be actionable in certain instances. Cf. Restatement (Second) of Torts § 876 (b) (1977). The issue, however, is not whether imposing private civil liability on aiders and abettors is good policy but whether aiding and abetting is covered by the statute.” Central Bank, supra, 511 U.S. 177. The United States Supreme Court’s rejection, in Central Bank, of implied aider and abettor liability under § 10 (b) and rule 10b-5 is relevant to our present inquiry to the extent that § 101 of the Uniform Act was based on the understood scope of rule 10b-5 prior to the Brennan line of cases. The Central Bank decision suggests that, because the language of § 10 (b) never permitted rule 10b-5 to include aiding and abetting liability, Professor Loss would not have believed that use of rule 10b-5’s language in § 101 would create such liability.
Although the District Court in Broadview Financial, Inc. v. Entech Management Services Corp., supra, 859 F. Sup. 453, broadly concluded that “no aider and abettor liability exists” under Colorado securities law and it did not specifically mention Colorado’s equivalent to § 36-472, the court’s reference to Central Bank, in the context of the rest of the opinion, makes it clear that it was rejecting only implied aider and abettor liability under Colorado’s equivalent to § 36-472.
We also emphasize that this decision will not excessively restrict the ability of the commissioner of banking to enforce CUSA. See, e.g., General Statutes (Rev. to 1993) § 36-496 (authorizing commissioner to grant injunction, restitution or other appropriate remedy for securities fraud); see also Regs., Conn. State Agencies §§ 36-500-484a through 36-500-484d (listing prohibited conduct of broker-dealers, agents and investment advisers).
Unlike pre-Central Bank courts that had to find implied aider and abettor liability under rule 10b-5 in order to incorporate into federal securities law the tort principles of § 876 of the Restatement (Second); see, e.g., Brennan v. Midwestern United Life Ins. Co., supra, 259 F. Sup. 680; we need not look to the language of § 36-472 for such liability. On the contrary, tort principles of aider and abettor liability already exist under state
Nevertheless, the dissent argues, on the basis of our decision in Fahy v. Fahy, 227 Conn. 505, 513-14,630 A.2d 1328 (1993), that our prior recognition of § 876 of the Restatement (Second) of Torts compels us, in order to maintain a “coherent and consistent” body of law, to read § 36-472 as including aiders and abettors. This reliance on Fahy is inappropriate, however, because that case involved a fundamentally different issue of adjudication. In that case, we determined, as a matter of statutory interpretation, that an amendment to the statute governing the modification of alimony or child support orders applied only to child support orders. Fahy v. Fahy, supra, 513; see Public Acts 1990, No. 90-213, § 46 (“[a]fter the date of judgment, modification of any child support order issued before or after the effective date of this act may be made upon a showing of such substantial change of circumstances, whether or not such change of circumstances was contemplated at the time of dissolution”). Despite this conclusion, we determined, as a matter of common law adjudication, that “it is appropriate to extend elimination of the noncontemplation of the circumstances requirement to alimony” orders. Fahy v. Fahy, supra, 516. Concluding that the same substantive principle should guide the modification of both alimony orders and support orders made sense in Fahy because “[ajlimony and support have historically been treated ... as entirely interwoven. The rendering of a judgment in a complicated dissolution case is a carefully crafted mosaic, each element of which may be dependent on the other.” (Internal quotation marks omitted.) Id., 515. CUSA and general principles of tort law, on the other hand, have no such history of mutual dependence or interconnection such that today’s decision will render our law “inconsistent.”
Indeed, the dissent’s view misconstrues the scope of the Uniform Act by suggesting that § 36-472 automatically includes all common law causes of action or forms of liability. As suggested by Professor Loss’ commentary to § 101, the Uniform Act was drafted not to include or to preempt all state law on the subject, but to provide uniform securities legislation that complemented state remedies already available outside the specific context of securities law. L. Loss, Commentary on the Uniform Securities Act, supra, draftsmen’s commentary to § 101, p. 6. Professor Loss illustrated this distinction in addressing why the Uniform Act did not need to provide for civil liability against buyers. “[TJhere is no clear need to create [in the Uniform Act] any civil liability against buyers as distinct from sellers. Although the lower federal courts have uniformly implied a civil cause of
The state already can criminally prosecute “willful” violations of § 36-472. General Statutes (Rev. to 1993) § 36-497. The dissent contends that, because General Statutes § 53a-8 makes criminally liable a person who aids and abets another’s crime, including a criminal violation under § 36-497, we should interpret § 36-472 as also including aiders and abettors. In the dissent’s view, “it is an anomaly that an aider and abettor could be convicted of a felony and imprisoned for his actions, yet could, notwithstanding the protections of CUSA, successfully bring an action against the victim of the fraud on a contract entered into as part of the fraudulent scheme. Where the underlying circumstances are so offensive as to warrant criminal culpability, we should read the protection from contract actions accorded the victim of fraud by § 36-498 (g) to apply.” This view underestimates the extent of recourse available to aggrieved parties. We need not find aider and abettor liability in § 36-472 to avoid such an “anomaly” because such parties often may find relief through other means such as: (1) provisions of CUSA other than § 36-472; see, e.g., General Statutes § 36-498 (a) and (c); (2) common law remedies or defenses; see, e.g., footnote 28 of this opinion; or (3) other applicable statutes, including—as suggested by the facts of this particular case—the Connecticut Unfair Trade Practices Act (CUTPA); see Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 518-21, 646 A.2d 1289 (1994) (CUTPA applies to banks, but not to securities industry).
Further, in its rectification dated July 7,1994, the trial court explained that “the statutory provision in question before me was Conn. Gen. Stat. § 36-472. . . . [T]he following rectification in no way changes the basis of my decision, as the evidence before me amply established the numerous [primary] violations of § 36-472 set forth in my opinion.”
Section 12 (2) of the Securities Exchange Act of 1934 provides: “Any person who ... (2) 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,
Because we reject the defendants’ attempted reliance on § 36-498 (a) and (c), we need not discuss the exact parameters of the conduct forming the basis of liability under, and scope of persons included within, those provisions. The contours of these particular provisions, like § 36-472, have never
Because there is no indication that the trial court even considered the issue of the investors’ knowledge of the misstatements or omissions, we need not discuss what showing is required to prove that a buyer was “not knowing” of the untruth or omission.
Because the trial court rejected the defendants’ counterclaims and they did not cross appeal on this aspect of the trial court’s decision, the remand
Dissenting Opinion
dissenting. The majority concludes that General Statutes (Rev. to 1993) § 36-472 does not allow for implied aider and abettor liability. I conclude, however, that the legislature did intend that § 36-472 encompass aider and abettor liability. I therefore dissent.
I believe that the majority’s analysis is flawed in three principal ways. First, the majority’s reliance on the meaning ascribed to rule 10b-5 of the Securities and Exchange Commission (SEC) at the time the Uniform Securities Act (Uniform Act) was drafted is misplaced and is not persuasive evidence of the meaning accorded the language by our legislature when it enacted § 36-472 in 1977.1 am convinced, moreover, that the language of rule 10b-5 at the time of our enactment of § 36-472 was understood to encompass aider and abettor liability. Second, I am persuaded that the common law tort principles recognizing liability of aiders and abettors, which provided the basis for the long line of cases under federal law that recognized such liability under rule 10b-5, and our statutory provision for criminal accessorial liability, inform our interpretation of § 36-472. Third, in light of this consistent common and statutory law and in the absence of any contrary interpretation by any other state’s courts, the majority’s concern regarding disparate interpretations of the Uniform Act is misplaced.
I agree with the majority that, because § 36-472 was modeled on § 101 of the Uniform Act, which, in turn, was modeled on rule 10b-5 of the SEC, the interpretation afforded the language of rule 10b-5 is relevant to understanding whether § 36-472 provides for aider and abettor liability. I think, however, that, in its search for the meaning of § 36-472, the majority’s reliance on the interpretation accorded rule 10b-5 when the Uniform Act was drafted in 1956 is misplaced.
The majority concludes that because “the legislative history reveals nothing regarding whether the legislature, when it adopted § 101 of the Uniform Act, intended to include aiders and abettors,” we should be guided by the meaning accorded the language by its drafter in 1956, Professor Louis Loss, which, the majority argues, would be the meaning accorded rule 10b-5 at that time. Implicit in this conclusion is the determination, with which I agree, that the judicial interpretation of rule 10b-5 informs our interpretation of § 36-472.1 am convinced, however, that the intent of the legislature is best served by looking to the meaning accorded the language of rule 10b-5 at the time Connecticut adopted the Uniform Act, rather than at the time the Uniform Act was drafted.
I do not dispute that, in interpreting a provision based on a model or uniform act, it is appropriate to “look for guidance to commentaries on the draft act.” Elliot v. Sears, Roebuck & Co., 229 Conn. 500, 509, 642 A.2d 709 (1994). I find nothing in the commentary to the Uniform Act, however, that convinces me that its drafter intended § 101 to be accorded the meaning of Rule 10b-5 at the moment of its drafting, frozen in time and impervious to the continuing development of rule 10b-5 jurisprudence in the federal courts. The majority con-
I am convinced that our legislature intended that § 36-472 encompass aider and abettor liability when it enacted the provision in 1977.
I agree with the majority that the legislative history is silent on the issue of aider and abettor liability. In the absence of evidence to the contrary, when the legislature adopts language mirroring a federal statute or regulation, the intent of the legislature is ordinarily that such language be accorded its meaning as understood in the federal courts at the time the state provision is adopted.
The majority argues, however, that the intent of the legislature in enacting § 36-472 was to provide a narrower scope of liability than that which was provided by the federal courts to rule 10b-5 in 1977.1 disagree that our legislative silence on the issue leads to the conclusion that the legislature intended the language of § 36-472 to mean something that no federal court had ever read the substantively identical language of rule 10b-5 to mean, simply because no court had yet had occasion to interpret the language prior to the time of the drafting of the Uniform Act. The majority’s conclusion that rule 10b-5 did not encompass aider and abettor liability in 1956 confuses the fact that no court had yet addressed the issue with a conclusion that such liability did not exist. Such a conclusion is misguided,
I am also unconvinced that the United States Supreme Court’s recent holding in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S. Ct. 1439, 128 L. Ed. 2d 119 (1994) (Central Bank), sheds light on whether § 36-472 encompasses aider and abettor liability. To the extent that our understanding of § 36-472 is informed by the federal courts’ interpretation of rule 10b-5,1 think the better view is that we can best discern the intent of our legislature in enacting § 36-472 by looking to the meaning generally accorded the language upon which it was based, namely, rule 10b-5, at the time of its enactment, not by looking at its current contemporary interpretation. There are no doubt instances where the legislature has adopted language mirroring a federal provision for which no definitive interpretation had been accorded. In such cases, resort to the understood meaning at the time of enactment of such a provision would be fruitless, and perhaps federal interpretation of the analogous federal provision subsequent to our legislature’s enactment of our state provision would be useful in interpreting our law. That situation, however, is not presented in this case. In my view, it is more likely that the legislature intended § 36-472 to have the meaning that had been accorded the language of rule 10b-5 and § 10 (b) of the Securities Exchange Act of 1934, by all seven of the federal Circuit Courts of Appeals that had addressed the issue, rather than the interpretation that the Supreme Court accorded the provision seventeen years after our enactment, an interpretation, moreover, that reversed twenty-eight years of federal precedent.
Moreover, although we have looked to the commentary to uniform laws where they are helpful in interpreting analogous enactments of our legislature, in those cases we have also conducted an independent analysis of our law. See, e.g., Elliot v. Sears, Roebuck & Co., supra, 229 Conn. 510-13; Maloney v. Pac, 183 Conn. 313, 325-26, 439 A.2d 349 (1981). Such an independent reading of § 36-472, apart from the meaning ascribed to rule 10b-5, leads me to conclude that § 36-472 includes liability for aiders and abettors of securities fraud. I reach this conclusion because, in light of our state’s general tort principles and our criminal law, to read § 36-472 to preclude such liability would render it an anomaly, and there is no indication that the legislature so intended.
The fundamental tort principles that underlay the federal courts’ long recognized implied liability for aiding and abetting securities fraud are well grounded in our state law. In what is considered to be the foundational case for aider and abettor liability under rule 10b-5, the United States District Court for the Northern District of Indiana looked to the Restatement of Torts for guidance as to the scope of liability under the rule. Brennan v. Midwestern United Life Ins. Co., supra, 259 F. Sup. 680.
It is true that the United States Supreme Court has now concluded, to the contrary, that “ ‘[t]he ascertainment of congressional intent with respect to the scope of the liability created by a particular section of the Securities Act must rest primarily on the language of that section.’ ” Central Bank, supra, 511 U.S. 175. We, however, are not so constrained. Although it is now “inconsistent with settled methodology in § 10 (b) cases to extend liability beyond the scope of conduct prohibited by the statutory text”; id., 177; it would be inconsistent with our state statutory interpretation methodology, tort principles and criminal law not to do so in this case.
We have frequently stated that in our search for the intent of the legislature, we will look to a statute’s “relationship to existing legislation and common law principles governing the same general subject matter. Dart & Bogue Co. v. Slosberg, 202 Conn. 566, 572, 522 A.2d 763 (1987) .... Texaco Refining & Marketing Co. v. Commissioner, 202 Conn. 583, 589, 522 A.2d 771
We have long recognized the tort principle, embodied in 4 Restatement, Torts § 876 (1939), and 4 Restatement (Second), Torts § 876 (b) (1977), that a person who aids and abets a tortfeasor is himself liable for the resulting harm to a third person. See Slicer v. Quigley, 180 Conn. 252, 259, 429 A.2d 855 (1980); Carney v. DeWees, 136 Conn. 256, 262, 70 A.2d 142 (1949). I disagree with the majority’s rejection of this fundamental element of tort liability. To the extent that it is simply to follow the lead of the federal courts, I do not see why we must follow a method of statutory interpretation more constrained than that which we have applied in the past, nor do I think the constraints on interpretation of federal statutes are applicable in this instance.
It is axiomatic that “[tjhere is no federal general common law”; Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817, 82 L. Ed. 1188 (1938); and, therefore, courts are constrained from applying such principles when interpreting federal statutes. Such constraints, however, are inapplicable in the interpretation of state statutes, which fit within a system of law comprised of interconnected statutory and common law. “Just as the legislature is presumed to enact legislation that renders the body of the law coherent and consistent, rather than contradictory and inconsistent . . . courts must discharge their responsibility, in case-by-case adjudication, to assure that the body of the law—both common and statutory—remains coherent and consistent.” (Citations omitted.) Fahy v. Fahy, 227 Conn. 505, 513-14, 630 A.2d 1328 (1993).
In my view, it is an anomaly that an aider and abettor could be convicted of a felony and imprisoned for his actions, yet could, notwithstanding the protections of CUSA, successfully bring an action against the victim of the fraud on a contract entered into as part of the fraudulent scheme. Where the underlying circumstances are so offensive as to warrant criminal culpability, we should read the protection from contract actions accorded the victim of fraud by § 36-498 (h) to apply.
The majority also concludes that it is “confident that [its] interpretation of § 36-472 does not unduly limit the avenues of recourse available to aggrieved investors.” I disagree. Common law fraud supplies a remedy when a person makes false statements, but, absent a request or an occasion or a circumstance that imposes a duty
Ill
The majority concludes that consideration of the meaning accorded rule 10b-5 when our legislature enacted our analogous provision “would undermine the uniformity among states that underlies the very existence of the Uniform Act.” I agree that resort solely to the understood meaning of rule 10b-5 at the time each state enacted Uniform Act § 101 hypothetically, under some circumstances, could result in different interpretations being accorded the provision, depending on the date of enactment in each state. Absent, however, a clear indication that the drafters of the Uniform Act specifically considered and rejected the notion of aider and abettor liability, and absent other persuasive state authority construing the Uniform Act to preclude aider and abettor liability, such a hypothetical concern should not control our reading of § 36-472 to the exclusion of an inquiry regarding the meaning of § 36-472 within the scheme of our common and statutory law. Thus, given the scheme of aider and abettor liability in our common law and statutory criminal law, the same conclusion might well be reached had our legislature enacted the provision in 1956.
Accordingly, because I conclude that aider and abettor liability is implicit in § 36-472, I dissent. I would, therefore, reach the other issues
I realize that the General Statutes contained a provision similar to § 36-472, which had been enacted in 1967. See General Statutes (Rev. to 1977) § 36-338. This provision was repealed in 1977 by the same act that codified § 36-472. Had the legislature simply retained § 36-338, analysis of the legislative history and circumstances surrounding its enactment would be relevant to this discussion. Because that provision was expressly repealed with the rest of the then existing Connecticut Securities Act at the same time the legislature adopted the Connecticut Uniform Securities Act (CUSA), however, only the legislative history and circumstances surrounding the enactment of CUSA, and specifically § 36-472, are at issue in this case.
Moreover, the court in Central Bank did not interpret rule 10b-5. The entire opinion is concerned with the meaning of § 10 (b) of the Securities Exchange Act of 1934. Rule 10b-5 had been promulgated by the SEC pur
That does not mean, however, that rule 10b-5 was not intended to bring within its prohibition the aiding and abetting of securities fraud, and I do not read Central Bank to suggest that this was the case. Rather, I read Central Bank’s holding, at least so far as rule 10b-5 is concerned, to be that, to the extent that rule 10b-5 does sweep aiding and abetting securities fraud within its prohibitions, it goes beyond the authority granted to the SEC under § 10 (b), and, therefore, enforcement of such a prohibition pursuant the rule would be ultra vires. I am convinced, therefore, that Central Bank did not address the meaning of rule 10b-5, nor does it persuasively inform our reading of § 36-472.
General Statutes § 53a-24 defines the term offense to include “any crime or violation which constitutes a breach of any law of this state ... for which a sentence to a term of imprisonment or to a fine, or both, may be imposed . . . (Emphasis added.)'
In Broadview Financial, Inc. v. Entech Management Services Corp., 859 F. Sup. 444, 453 (D. Colo. 1994), cited by the majority, the United States District Court for the District of Colorado dismissed an aiding and abetting claim that had been brought under both federal and Colorado securities law. After concluding that Central Bank, which had recently been decided, disposed of the federal claim, in light of the plaintiffs failure to provide a basis for imposing such liability in state law, the court summarily concluded that no aider and abettor liability existed under the Colorado act. With no analysis or even citation to any provision of the Colorado act, this case cannot be considered a definitive resolution as to whether the provision of the Colorado act that was based on Uniform Act § 101 creates liability for aiders and abettors of securities fraud.
The plaintiff also raises the following issues, which are predicated on a determination that § 36-472 encompasses aider and abettor liability: (1) whether recklessness satisfies the scienter requirement for aider and abettor liability; (2) whether a finding of “atypical” conduct is sufficient to conclude that the plaintiff was reckless; (3) whether “substantial assistance” in the fraud is established by a finding that the conduct was a “but for” link in the defendants’ decisions to purchase securities; and (4) whether the plaintiff could be held liable for aiding and abetting a securities fraud where the defendants’ losses were not proximately related to the fraud allegedly aided and abetted.
