*1 INC., et al. v. FIRST GROUP, CAPITAL JANUS TRADERS DERIVATIVE Argued 2010 Decided June 09-525. No. December *2 Perry argued petitioners. Mark A. the cause for With Hungar. him on the briefs was Thomas G. respondent. argued the cause for Frederick
David C. J. Crimmins Ira Brendan on brief were him the With Press. M. argued for the United the cause States E. Gannon
Curtis respondent. support him on With curiae in as amicus Deputy Katyal, Acting General So were Solicitor the brief Becker, Cahn, D. M. Mark Stewart, David licitor General Avery* Stillman, W. H. and John Jacob opinion of the Court. Thomas delivered Justice Capital requires whether Janus us to determine This case (JCM), Management adviser, investment a mutual fund LLC be action Securities can held hable in (SEC) Exchange 10b-5 for state- Rule Commission *3 prospectuses. mutual funds’ ments included in its client “mak[ing] any prohibits untrue statement of a Rule 10b-5 purchase or of with the sale material fact” in connection Attorneys’ were filed for the curiae urging reversal amici *Briefs of and Kannon K. by John K. Villa Shan- Inc., Liability Society, Assurance of United States of America mugam; for the Chamber Commerce Conrad, Barbash, S. Bernstein, Barry Robin Amar and R Richard D. by Sanoal; Industry Financial Markets Association D. and for the Securities Cohn, McLaughlin, D. A. Eric F. Daniel Phillips, Carter G. Jonathan by Carroll; Brunstad, Jr., by McArthur, G. Erie Kevin for et al. and and Helm, Epstein, Brunstad, se, Ruth S. Collin O’Connor pro W. Robert Mr. Udell, and J. Matthew Delude. by filed AARP et al. curiae urging affirmance were for amici Briefs of Schuster; Jaitj Suoholoky Employees’ E. and Michael R. for the Retirement Isaacson, by Eric Alan System Virgin Mondo Government Menon; Ruby Joseph Daley, D. York State Common Re- for New E'isenhofer; William A. Birdthistle et al. by Jay W. al. tirement Fund et J. Birdthistle, se; P. Freeman et al. Michael by pro by John Mr. and for H. Brickman, Fields. Bradley, C. and Nina James by Quality for Audit Center Briefs of amici curiae were filed for the Russell; Jr., J. Robbins, Roy Englert, and Donald S. T. Lawrence Coleman and Chris- by Gregory S. the Cоuncil of Institutional Investors tian J. Ward. (2010). §240.10b-5
securities. 17 CFR We conclude that cannot held JCM be liable because it did not make the state- prospectuses. ments in the
I (JCG), Capital publicly Group, Janus Inc. is a traded com- pany family created Janus of mutual funds. These organized mutual funds are in a Massachusetts business trust, the Janus Investment Fund. Janus Investment Fund wholly subsidiary, retained JCG’s owned to be in- JCM, vestment adviser and administrator. JCG and are the JCM petitioners here.
Although JCG created Janus Investment In- Fund, Janus legal entity by separate entirely Fund is a vestment owned mutual fund investors. Investment Fund has no apart pro- assets from those owned the investors. JCM advisory vides Janus Investment Fund with investment management services, which “the include and administrative necessary [Janus] operation App. services for the Fun[d],” legal independence. 225a, but the two entities maintain At all times relevant to case, this all the officers of Janus only Investment Fund JCM, werе also officers of but one member of Janus Investment board of trustees Fund’s independence associated with JCM. This more than is required: By up percent statute, to 60 of the board of a mu- composed persons.” tual fund be of “interested See §80a-10(a); Stat. as amended, U. C. see also S. *4 80a-2(a)(19) (2006 IV) (defining Supp. ed. and “interested person”). require,
As the securities laws Investment Fund prospectuses describing strategy issued the investment operations and of its mutual funds to investors. See 80a-29(aHb) §§77b(a)(10), 80a-8(b), 80a-2(a)(31), 77e(b)(2), (2006 ed.). prospectuses represented The for funds several timing that the funds were suitable market and can implement suggest policies be read to would to that JCM Mercury example, Fund practice.1 the Janus the For curb February that the fund prospectus stated 25,2002, dated trading” timing and or excessive “not intended for market request any purchase “may reject if represented ... that it trading аctivity is attrib- believes that combination it poten- timing is excessive to market otherwise utable Although App. tially disruptive mar- 141a. to the Fund.” legal, timing in the mutual investors is harms other ket fund. attorney general September of the State of 2003, the alleging complaint against and JCM JCG
New York filed arrangements permit market entered secret JCG into by complaint’s timing After the run JCM. several funds significant allegations public, withdrew investors became money Fund mutual Janus Investment amounts from the compensated Fund JCM funds.2 Because Janus Investment management on total funds and JCM’s based value the delay timing exploits timo in mutual trading strategy Market is selling of a daily buying shares system. price valuation funds’ (NAV) by net ordinarily fund the next asset value mutual is determined usually hap calculation placed. calculation The NAV after order major U. S. markets. of cer pens day, once a at the of the Because close however, delays, uood in these do not tain time the values calculations underlying For accurately of the assets. always the true value reflect price example, may foreign securities based on the at fund value several market, have occurred hours boforo foreign close which place of the might the calculation. But have taken after the events close foreign price. to affect their If event expected market that could be securities, foreign expected price were market increase artificially low timing buy of mutual fund investor could shares day upward. NAV and sell the next when the NAV corrects itself See and Disclosure Portfolio Regarding Timing Disclosure Market Selective 2003). Holdings, Dec. Reg. (proposed Fed. allegations agreed to reduce 2 In JCG and thoso JCM sottlod penalties $50 million in civil pay their $50 fees million and $125 fund investors. disgorgement million to the mutual
140 significant percentage fees constituted of JCG’s income, Janus Investment loss of value affected value JCG’s Fund’s nearly price percent, as well. JCG’sstock fell from $17.68 25 September September on 2 to on 26. $18.50 Derivative) (First
Respondent First Derivative Traders represents plaintiffs a class of who owned JCG stock as September complaint against 8, 2003. Its asserts claims § JCM JCG and violations Rule 10b-5 and Exchange Securities Act of 1934, 48 amended, Stat. §78j(b). alleges U. S. C. First Derivative JCG and prospectuses JCM “caused mutual to fund be issued for investing Janus mutual funds and made them available to the public, misleading impression [JCG which created the JCM] implement timing and would to curb market measures [mutual funds].” App. to Pet. for Cert. 60a. [mutual funds] “Had the truth been known, Janus would have been consequently, [JCG] less attractive to investors, and would [JCG’s] have revenues, realized lower so stock would prices.” have traded аt lower at Id,, 72a. “materially
First Derivative contends that and JCG JCM investing public” misled the and that members class relied “upon integrity price [JCG] of the market securities relating and [JCG JCM].” market Id., information and complaint alleges 109a. The also should be JCG held “controlling person” liable for the acts JCM as a 78t(a) (2006 IV) (§20(a) Act). Supp. ed., of complaint The District Court dismissed the failure Litigation, state a claim.3 In re Mutual Funds Inv. (D 2007). Supp. F. Appeals 2d 618, 620 Md. The Court holding for the Fourth reversed, Circuit that First Deriva- “(1) elements of a action under Rule 10b-5 are material misrepresentation defendant; (2) (3) scienter; or omission con misrepresentation nection between purchase omission (4) security; salo of a omission; upon misrepresentation reliance (5) loss; (6) economic Stoneridge loss causation.” Investment Part ners, Inc., v. Scientific-Atlanta, LLC (2008). 148, 157 552 U. S. *6 sufficiently by partici- alleged and JCM, that “JCG tive had prospectusеs, writing of pating the and dissemination in the misleading contained in the the docu- made Litigation, 566 Inv. F. 3d 111, ments.” In re Mutual Funds (2009) respect (emphasis original). With to 121 in ele- of found that investors would infer reliance, ment the court approving “played preparing in or con- a JCM role prospectuses,” id., at 127, but that tent of the Janus fund about which JCG, would the same could investors not infer 20(a). § only person” of under be liable a “control JCM as Id., at 128,129-130.
II granted whether can be We address JCM held certiorari private 10b-5 a under Rule for false state liable in action prospectuses. Fund’s in Investment ments included (2010). it 10b-5, is unlawful 561 “any 1024 Rule U. S. Under indirectly, any [t]o person, directly . . make . untrue or purchase with the statement of a material fact” connection 240.10b-5(b).4 § liable, To be sale of securities. 17 CFR the material therefore, have “made” misstate JCM must prospectuses. did not.5 in the We hold ments
A pursuant authority promulgated Rule 10b-5 The SEC 10(b) Exchange § granted 1934, Act of of the Securities under directly any person, indirectly, 4 Rule 10b-5 makes it “unlawful commerce, of instrumentality interstate or of any of by tho ueo moans exchange, . . any facility any national securities . [t]o mails or of of to omit fact or to state untrue of material material mako made, light nocoesary fact to make the statements order made, . .” they misleading . . 17 were circumstances under which §240.10b-5(b). CFR violated 10b-5 that JCG Rule below Although argued First Derivative it now seeks to hold JCG prospectuses, making the statements 20(a). only question § solely of JCM under person liable control answer, the misstatements. therefore, JCM made we must whether against JCG as control a claim has stated Whether First Derivative JCM. against a claim person depends on whether it has stated §78j(b). § Although 15 U. C.S. neither Rule 10b-5 nor expressly private right creates action, this Court has 10(b).” private right implied held that “a оf action is Superintendent Casualty Y.v. Ins. N. Bankers & Life (1971). holding Co., U. S. n. 9 That “remains Stoneridge law,” Partners, Investment LLC v. Scientific- (2008), Atlanta, Inc., “[concerns 148, 165 S.U. but with judicial creation aof cause of action caution against expansion,” analyzing ibid. Thus, in whether purposes JCM “made” the statements for 10b-5, Rule we give are mindful that we must *7 “narrow dimensions a ... to right Congress of action did not authorize when it first expand enacted the statute and not did when revisited the Id., law.” at 167.
1 by stating One “makes” a statement it. When “make” is paired expressing with a noun action of a verb, the the re- sulting phrase “approximately equivalent is in sense” (def. 59) (1933)(here- English Dictionary verb. Oxford OED); inafter accord, Webster’s New International Diction- (def. 43) (2d 1934) (“Make ary by ed. followed a noun nearly equivalent with the indefinite article often is to the noun”). corresponding verb intransitive to that For in- proclamation” “to approximate equiva- stancе, make a the is proclaim,” promise” lent of “to approximates and “to make a 59). (def. promise.” phrase “to See 6 OED 66 at issue “[t]o in Rule 10b-5, make . . . statement,” thus the is approximate equivalent of “to state.” purposes
For 10b-5, Rule the maker of a statement is person entity the authority with ultimate over state- the including ment, its content and whether and how to commu- entity person merely nicate it. Without control, can suggest say, right. what not “make” a statement its own prepares publishes One who on behalf of an- ordinary other is not its maker. case, And attribution implicit surrounding within a statement or from circum- by— strong a statement made is evidence stances by party This rule only it is attributed. to whom —the relationship by exemplified between might be best speechwriter speechwriter speaker. when Even entirely speech, the control of is within drafts a content speaker takes person it is the who delivers it. And ultimately said. blame—for what is credit—or N. A. v. Denver, Bank rule from Central This follows (1994), A., 511 Denver, N. U. S. 164 Interstate Bank First private right of action in which we held that lOb-5's Rule against and abettors. aiders See not include suits does against entities contribute id., 180. Such suits— making of do to the a statement but “substantial assistance” by actually brought see 15 SEC, make be it— 78t(e), by private parties. A broader read- but not U. S. C. ing including persons or entities without ultimate “make,” substantially statement, of a would over the content control persons If or entities without Central Bank. undermine could be considered control of a statement over content primary statement, then aiders violators who “made” nonexistent.6 and abettors would almost be supported interpretation our recent further de- This Stoneridge. who, investors sued “entities There, cision *8 agreed arrange- acting suppliers, to and both as customers company to its au- mislead ments that allowed the investors’ Bank involved secondary, not Central eorroetly that 6 Tho *9 decision unnecessary. point would be Stoneridge’s that analysis suggests they were not.
145 misleading person “provides infor- the false to sue puts person into then the statement.” that another mation 13.8 in Amicus But Curiae Brief United States against Stoneridge, rejected private Rule 10b-5 suit we companies deceptive transactions, even when in- involved in incorporated was later about transactions formation those public S., at 161. seeWe no 552 U. into statements. drafting participating a false state- to treat reason differently engaging deceptive transactions, ment from merely preceding the act deci- when each is an undisclosed entity public independent of an to make statement. sion part, suggests “well- First Derivative For relationship recognized uniquely between mutual close inform our adviser” should decision. fund and its investment suggests Respondent an 21. It investment Brief for generally to be “maker” of should be understood adviser by playwright like a whose fund, mutual its client by decline this invitation lines are delivered an actor. We Although disregard corporate First Derivative form. argue persuasively that investment advisers its amici 8 meaning “make” in Rule 10b-5 to be we do not find the Because assertion that we ambiguous, not the Government’s we need consider the word elsewhere. Brief for interpretation to the SEC's should defer for SEC as Amicus Cu Curiae 13 United States as Amicus (citing Brief LLP, Mayer Brown Mgmt. LLC v. Inv. Co. No. 09-1619 riae Pacific (2000). County, 529 U. S. 576, 588 see Christensen v. Harris (CA2), 7); p. over the expressed skopticiom note, howovor, previously We that we have regarding degree which the deference SEC should receive Inc., Industries, Piper 1, 41, 430 right of action. v. U. S. See Chris-Craft (1977) (noting presumed expertise “is of limited n. 27 that the SEC’s value” implied judicial analyzing of action should be whan “whothor cauoo litigants”). interpretation particular class of This in favor of a also is disagreed the SEC’s broad the first this with view of time Court has Denver, N. A. v. g., Bank First e. Central See, or Rule 10b-5. Denver, (1994); A., Dirks v. 164, Interstate Bank N. U. S. 188-191 511 SEC, Hochfelder, Ernst v. & 646, 666, (1983); Ernst U. n. S. Stores, Drug Chip Stamps v. Manor 185, (1976); 421 U. Blue U. S. S. (1975). n. 10 *10 146 significant
exercise funds, influence over their client see (2010), Jones P., 335, v. Harris Associates L. 338 U. S. undisputed corporate that the were formalities observed legally sepa here. JCM and Janus Investment Fund remain rate entities, and Janus of Investment Fund’s board trustees independent requires. more than the statute 15 U. S. C. (2006ed.).9 § Any reapportionment liability 80a-10 of industry light relationship securities in of the close between properly investment mutual advisers and funds is the re sponsibility Congress of Moreover, and not the courts. just theory, as with the Government’s First Derivative’s liability rejected rule would create thе broad that we in Stoneridge. 20(a)
Congress § liability also has established for “[ejvery person directly any indirectly, per- who, controls §78t(a) son liable” for of violations the securities laws. (2006 IV). Supp. theory liability ed., First Derivative’s relationship liability based aon resembles the influence imposed by Congress adopt for control. To First Deriva- theory theory liability tive’s would read into 10b-5 a Rule post, application similar to—but broader in than, see at 156— Congress already expressly what has created elsewhere.10 We decline to do so.
B any Under rule, this not JCM did “make” the statements prospectuses; in the Janus Investment Janus Fund Invest- Nor does First Derivative contend statements made JCM “public Janus Investment purposes Fund were statements” Levinson, Basic Inc. v. (1988). 485 U. S. 227-228 do address We whether and what qualify “public.” eireumstanecD would post, liability Cf. at 159 160 (citing involving cases for statements mado to Aetna, Litigation, In re Inс. analysts); Securities 617 F. 3d 275-277 (CA3 2010) (involving allegations “publicly that defendants falsi toutfed]” calls). analyst ties on conference 10We do not Congress liability address whether created entities that through 78t(b). act innocent S. intermediaries 15 U. C. See Tr. of Oral Arg. 6, 61. Fund —not JCM— Investment Fund did. Only ment with prospectuses file obligation bears statutory 80a-8(b), 80a-29(a)-(b); see also §§77e(b)(2), the SEC. on com- .§ “investment requirements 230.497
CFR (imposing Investment recorded that Janus has SEC panies”). JIF Groupl See Standalone Fund filed the prospectuses. *11 (Feb. online at 2002), http://www. 25, Prospectuses sec.gov/Archives/edgar/data/277751/000027775102000049/ (as 10, and avail- 2011, June 0000277751-02-000049.txt visited file) the “Filer” of (recording able in case Clerk Court’s as “Janus Investment Fund Mercury prospectus Janus Fund”). JCM in fact filed the There is no allegation them Janus Invest- attributed falsely prospectuses face of the on the prospec- ment Fund. Nor did anything therein came from statements JCM tuses indicate that any legally Fund —a independent rather than Janus Investment its own trustees.11 entity with board both In- JCM and Janus
First Derivative suggests state- have “made” misleading vestment Fund might “indirectly” in may Rule 10b-5 suggests that broaden First Derivative phrase “directly or indi meaning disagree. of “make.” The We make,” just rectly” modifies not “to by off in Rule 10b-5 and is set itself phrase merely engage.” think clari employ” but also “to and “to We made, a is it docs matter whether the long fies that as statement indirectly recipient. directly to the A statement was communicated a “indirectly” would, like broad understanding of definition different “make,” primary the line violators aiders threaten erase between Bank. Central by and abettors established case, procisoly what it moans to communicate wo nood not dofino this pros- indirectly of the statements in the a “made” because none statement attributed, implicitly, explicitly or to JCM. Without attri-
pectuses were bution, quoting Jаnus Fund was is no indication that Investment there by JCM. Cf. Anixter originally “made” repeating otherwise a statement (CA10 1996) Co., 1220, and n. 4 Home-Stake Production v. 77 F. 3d ” “ Basic, prospectus); in a Report’ (quoting signed ‘Auditor’s included by supra, reporting a statement Basic’s item (quoting n. 4 newo entity person made presidont), required bo to find More necessary. indirectly, but attribution meaning ments within Rule 10b-5 because JCM was significantly preparing prospectuses. involved in But subject assistance, this to the ultimate control of Investment does Fund, not mean that “made” JCM prospectuses. Although statements in the JCM, like speechwriter, may have assisted Janus Investment Fund crafting pros- with what Janus Investment Fund said in the pectuses, itself JCM did not “make” those statements for purposes of Rule 10b-5.12
[*] [*] [*] prospec- the Janus Investment Fund by tuses made were Janus Investment Fund, not JCM. Accordingly, against First Derivative has not stated a claim judgment JCM under Rule 10b-5. The of the United States Appеals Court for the Fourth Circuit is reversed.
isIt so ordered. *12 Breyer, Ginsburg, Justice with whom Justice Jus- Kagan Sotomayor, join, tice dissenting. and Justice Exchange This case involves a Securities Com- (SEC) brought by group mission Rule 10b-5 action of in- against Capital Group, vestors Capital Janus Inc., and Janus (Janus Management Management), LLC a firm that acted (col- family as an investment adviser to mutual funds Fund). lectively, the Janus Fund or The investors claim provided JCM That prospectuses access to Janus Investment Fund’s on its liability. Web site also not a Merely hosting basis for a document n on a hosting Web site docs not entity adopts indicate that the docu ment as its own statement or exercises over control its content. Ware, 2009) States v. (CA2 Cf. United 577 F. (involving 3d press issuance false through companies). doing so, releases innocent we do think any not JCM made of the statements in Janus Investment prospectuses Fund’s purposes liability, of Rule 10b 5 just do as wo not think that the SEC many prospectuses “makes” statements on available its Web site. materially knowingly Management made
that Janus prospectuses appeared misleading in is- statements they upon They say relied Fund. the Janus sued resulting they economic suffered statements, and that those harm. closely Management are Fund related. Janus and the
Janus Management employee. a Janus of the Fund's officers is Each (and employees through Management, acting those Janus purchase, redemp- manages employees), sale, of its other investments. Janus Fund’s distribution tion, implements Management prepares, modifies, and Janus Management, long-term strategies. act- And Janus Fund’s daily through employees, ing out the carries Fund’s those activities. relevant, says part is unlawful for
Rule 10b—IS indirectly directly [t]o person, “any . . . make untrue purchase connection with the a material fact” in statemеnt of 240.10b-5(b) (2010) (empha- 17 CFR or sale securities. (2006 IV) added). §78j(b) Supp. ed., 15 U. C. sis (§ See also S. 1934). Exchange spe- The Act Securities Management legal question whether Janus us is cific before having “ma[d]e” responsible the Rule can be held Fund’s activities. about the Janus certain false statements question appear Janus Fund’s The prospectuses. only Fund, Man-
The the Janus Court holds that major- agement, “ma[d]e” have those statements. could ity points board of trustees has that the Janus Fund’s out authority” the statements in “ultimate over the content of only majority’s per- prospectus. view, “the And in the Fund authority entity statement, over the ultimate son with *13 including and how to communicate its content whether terms of Rule 10b~5. it,” can “make” within Ante, at 142. my majority incorrectly has inter- view, however, English
preted the Rule’s “make.” Neither common word scope nor this Court’s earlier cases limit the of that word to authority” those with “ultimate оver a statement's content. contrary, language To the both and case law that, indicate depending upon management company, circumstances, company a board of trustees, individual officers, or others, separately together, might “make” statements contained prospectus in a firm’s aif board directors has ulti- —even responsibility. mate content-related And the circumstances Management here are such that a court find could that Janus question. made the statements in
HH Respondent complaint s sets forth the basic elements of a typical Rule 10b-5 alleges “fraud on the market” claim. It Management that Janus made statements “created the misleading impression implement that” it “would measures trading strategy to curb” a timing.” called “market Second (hereinafter Complaint ¶6 Complaint), Amended App. to complaint Pet. for Cert. 60a. The Manаge- adds Janus timing” ment knew that these “market statements were false; that the statements material; were that the market, securities) pricing (including upon securities related relied the statements; that as result, when the truth came out (that Management permitted timing” indeed “market Fund), price in the Janus of relevant shares fell; thereby respondent signifi- and the false caused Complaint cant economic losses. ¶¶4-10, id., at 60a-63a. Stoneridge Cf. Partners, Investment LLC v. Scientific- (2008) Inc., (identifying Atlanta, S. U. the ele- action”). typical ments “aof majority complaint fatally finds flawed, however, (1) says because “person” “directly Rule 10b-5 that no shall indirectly . . . make untrue statement of a material (2) appeared fact,” the statements at issue in the Janus (3) prospectuses, only Fund’s person entity “the with authority ultimate including over the statement, its content *14 “make” a false it,” can and to communicate whethеr how and at 141-143. Ante, 138-139, statement. support legal majority for the rule find
But where can language English impose does enunciates? The majority upon of the kind the “make” boundaries word Every corporate day, finds officials hosts determinative. that more senior officials or make statements with content authority” to control. have “ultimate the board directors matters that about cabinet officials make statements So do authority places the ultimate within the Constitution perhaps of other em- thousands, millions, So do President. timing, ployees form, or that, content, as to make statements subject to the control of another. are language prevents saying
Nothing English from one in the together, separately or individuals, that several different producing. hand in For statement that each has a “make” say example, English, can that national one as a matter only party рolitical even if the written made a has statement press releases issued in uniform communication consists of say party can that one for- branches; one the name of local eign even when officials has a statement nation made influence) (subject speak about to its of a different nation say has President made matter; and one can press a communication, if officer issues even his statement press name. Practical mat- own officer’s sometimes participation, including context, control, ters related to a statement “makes” help determine audience, relevant may properly be “attributed,” to whom that ordinary English ante, n. as far as see at 11—at least is concerned. prec- majority support in relevant can the find
Neither
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majority
rule “followsfrom
edent. The
that its
Central
Denver,
Bank
Denver,
Bank
N. A. v. First Interstate
(1994),”
A.,N.
in which the Cоurt “held that
Bank concerns different matter. And it no more majority’s rule than air travel for small free children re- quires free air travel for adults. *15 liability, liability secondary Bank a
Central is case about attaching, making not to an a individual false statement, but helping to an individual someone else do so. Central Bank having materially involved bond issuer accused of made property statements, false which overstated the values that backed the bonds. Central Bank also involved de- serving bank, fendant was a as indenture trustee, which supposed was to check the bond issuer’s valuations. The plaintiffs delayed claimed that the bank its valuation checks thereby helped and the issuer make its false statements cred- question The ible. before the Court concerned the bank’s liability secondary liability “aiding abetting” and the —a (оn forth) theory primarily issuer, bond who set was liable. question
The presented made Court this clear. The 10(b) § liability “whether civil extends ... engage who manipulative deceptive those do not practice, but who aid and abet the violation.” S., 511 U. added). (emphasis at 167 “aiding The Court wrote that abetting liability persons and engage reaches who do not proscribed give degree all, activities at but who added). (emphasis aid to those who Id., do.” at 176 “aiding abetting” Court described civil law and as “'know- ting] that duty other’s conduct constitutes a breach giv[ing] encouragement and substantial assistance to (Second) . (quoting . . Id., other at 181 Restatement 876(b) § added). (1977);emphasis of Torts it And reviewed Appeals Court decision that had defined the elements of “(1) aiding § abetting primary 10(b); violation of (2) by recklessness the aider and abettor as existence (3) primary given violation; and substantial assistance primary to the violator the aider and abettor.” 511 added). (emphasis question, S.,U. at 168 Faced with this pro- and Rule 10b-5 not do the Court answered pri- abetting” liability “aiding for this kind of vide suits. vate primary way present about lia-
By case is contrast, allegedly bility themselves “make” who individuals —about help materially who not about those others statements, Management pri- question is whether Janus to do so. The simply marily violating Act, not whether liable helped The Central Bank defendant others violate the Act. question concededly the false did not make (others allegedly did), did make while here the defendants (the rule) majority’s absolv- And a rule those statements. did, ing allegedly false statements does make those who (Central rule) absolving from” Bank’s those “follow a rule concededly not do so. did *16 interpret majority “make” as that to the word The adds including control over the content ultimate “without those “substantially underminе” Central aof statement” would The holding. it? Court Ante, at 143. Would Bank’s holding specifically that its did wrote Bank Central secondary actors securities mar- “not mean that liability always the under securities from kets are free including lawyer, entity, Any person a ac- or Acts. employs manipulative device countant, bank, (or omission) on misstatement makes material purchaser relies be of securities which a or seller assuming primary all Ob-5, as a violator liable liability primary requirements under Rule of the (some emphasis at 191 S., 10b-5 are met.” 511 U. added). depending upon concerned,
Thus, as far as Central Bank officials,offi- members, senior firm circumstances, board large marketing develop inves- document, cials tasked to (taken separately) might together all tors, or others materially subjecting themselves “make” false statements
primary majority’s protect, liability. it The rule does not no-liability holding into extends, Central new terri- Bank’s tory holding. explicitly placed that Central Bank outside by ignoring language so, And in which Central Bank did majority’s Bank. rule itself undermines Central Where legal majority’s “draw[ing] support is the for the a clean seriously ante, with line,” 143, 6, at n. that so conflicts Cen- legal support Bank? Indeed, tral where is the for the ma- jority’s suggestion plaintiffs must show some kind defendant, ante, “attribution” of plaintiffs only n. show, 11—if means must “ma[d]e” something statement, defendant more? but majority Stoneridge, also refers to but that case offers help. Stoneridge, supplied it no firms that electronic equipment company agreed to a cable television with the company series, cable television to enter into a of fraudu- purchases, example, unusually lent sales and a sale at an high price, thereby providing suppliers which the funds buy advertising would use to from the cable television com- pаny. arrangements These the cable enabled television (and company ultimately public) to fool its accountants (for believing example, into that it had more revenue adver- revenue) tising really part agree- than it had. As companies exchanged ment, letters and backdated con- subsequently tracts to conceal the fraud. Investors sued the company, cable television some of its officers, auditors, *17 equipment suppliers, claiming and the well, that all as engaged purchas- them had in a scheme to securities defraud respect defendants, ers. to most of the investors identi- allegedly materially fied false statements contained in the company’s cable television financial statements similar respect equipment suppliers, documents. But in to the in- deceptive vestors claimed that the relevant conduct inwas letters, backdated contracts, and related oral conver- argued sations about the scheme. The investors that the “by suppliers, participating in the equipment transactions,” Stoneridge, § S., 552 U. and Rule 10b-5. violated at 155. suppliers equipment could be not Court held that fraud suit under for
found liable securities 10(b). deny equipment doing that the so, it did not But in suppliers statements contained in the had the false made id., at conversations. See 158-159. letters, contracts, in the case was whether the issue Rather, said Court respondents “any deceptive made not or act was requisite proximate not because it did have actionable Ibid, added). (emphasis to the investors’ harm.” relation deceptive or actions could And it held that these liability provide the investors because could not basis for particular upon prove state- sufficient not reliance suppliers equipment made. had that thе ments suppliers equipment pointed that the “had The Court out deceptive duty not commu- acts were disclose; no to and their public.” And the Court went on Id., to the at 159. nicated say “cannot show reliance result,” to the investors “as “except any” suppliers’ upon equipment actions, in an liability.” for Ibid. we find too remote indirect chain that The Court concluded: deceptive equipment suppliers’] which
“[The were acts, public, investing are too remote disclosed to the not [the satisfy requirement of reliance. It cable company], suppliers], equipment [the that misled its not statements; financial noth- auditor and filed fraudulent necessary ing equipment suppliers] it [the made did company] [the record the transac- cable inevitable Id., did.” at 161. tions suppliers’ issue, equipment conduct was
Insofar as the marketplace “arrangement. place in the . . took fraudulent sphere.” Id., goods investment services, at 166.
156 Stoneridge
It is difficult for me to see how “support[sj” Stoneridge Ante, the majority’s rule. at 143. one in No dis- making of puted the relevant statements, the fraudulent Stoneridge contracts, and the like. And no one contended the makers that the equipment were, fact, suppliers Stoneridge cable Rather, company’s misstatements. separate concerned with whether the equipment suppliers’ were sufficiently disclosed in securities mar- to be so as the basis ketplace for investor They reliance. were not. But this ais different than whether state- inquiry ments to have been acknowledged disclosed the securities for ripe reliance can marketplace be said have been actor. How then does Stone- one or another “ma[d]e” ridge support rule? majority’s new adds that majority necessary rule is avoid “a theory liability similаr in application to—but broader “ §20(a)’s liability, who, '[ejvery person directly than” — or indirectly, controls liable’ for violations of person Ante, the securities laws.” at 146 15 (quoting U. S. C. 78t(a). § But that is not so. This Court has explained of an possibility express remedy under securities Herman & 10(b). laws does not § a claim preclude under Huddleston, MacLean v. (1983). 459 U. 375, S. 20(a) More importantly, § a person who is hable under con- “person” who is “liable” for a securities viola- trols another tion. Morrison v. National Ltd., Australia Bank U. S. (2010) 20(a) n. § is (“Liability under de- obviously rivative under other liability some of the Ex- provision Act”). change We here examine whether person pri- marily not, liable whether they do, do control another they who is liable. That person is to say, here, liability some “other is not at person” issue.
And is at there least one of cases that significant category § may address that derivative forms such as liability, 20(a), cannot, cases in namely, which one actor ex- another ploits as an innocent intermediary its misstate- *19 Fund’s board trust- Here, it well be that the ments. falsity prospectuses. nothing See, of the knew about the ees g., E. 348, No. 93 S. C. Docket Lammert, In re Release e. (2008) (Janus Management was aware market 5676, 5700 timing “[t]his 2002, than but no’ later Janus Fund Board”). knowledge so, with the And if was never shared 20(a) § apply. not would management possibility guilty and innocent board happen to clock. What is
is the 13th stroke of the new rule’s (for board) prospectus guilty management when writes containing materially and fools both board false statements they Apparently public believing and into are true? majority’s no one be rule, in circumstances could such materially “ma[d]e” false statement —even
found to have likely managers though would law the under the common circumstances) (in analogous guilty have been or liable abettors). (and doing principals not as aiders and for so as 13.1(a) § g., Law LaFave, e. 2 Criminal See, (2d W. Substantive (1736); 2003); 617 Per- 1 of the Crown Hale, ed. Pleas M. (1941) 581, kins, L. Rev. Parties to 89 U. Pa. Crime, (one guilty principal uses an innocent when one third (Second) crime); party of Torts to commit a Restatement (1976). §533 Giles, 300 U. 41, v. 48-49 United States S. Cf. (1937). unlikely majority’s that the rule it seems under the
Indeed, authority exercise the could SEC itself in such circumstances primary pursue Congress granted violators who has it to Congress authority has “make” statements or the specifically prosecute and provided aiders abettors to (codified § at 15 109 Stat. 104, securities violations. See 78t(e)) authority prosecute § (granting aiders U. S. C. SEC abettors). managers, having because and That is principals “ma[d]e” liable as would not be the statement, they might primary have violator there would be no other DiBella, 587 F. 3d Ibid.; v. SEC tried to “aid” or “abet.” 2009) (CA2 abetting aiding (prosecution re- quires рrimary gave violation to which offender “substantial (internal omitted)). quotation assistance” marks majority § If the believes, hints, as its footnote provide liability could ante, case, basis this at 146, possible n. then it should remand the case for amendment complaint. authority construing “There is a dearth of 20(b),” thought largely “superfluous Section which has been in 10b-5 Jacobs, cases.” 5B A. Disclosure and Remedies (2011). p. Under spondent, Securities Law 11-72 11-8, Hence re- reasonably thought that it referred to the proper provision, failing securities law is faultless for to men- *20 20(b) § tion as well. nothing sum,
In I can find in in 10b-5, or Rule its language, history, precedent suggesting or in that Con- gress, enacting loophole in laws, securities a intended majority’s may the kind that the rule well create.
I I Rejecting majority’ s rule, not course, does decide question before us. We still determine whether, must light complaint’s in allegations, Management “ma[d]e” could have prоspec- the false in statements my question tuses at issue. In view, to this answer specificrelationships alleged among “Yes.” agement, Janus Man- prospectus Fund, the Janus and the Management warrant the conclusion that Janus did “make” those statements. part, my
In conclusion reflects the fact this Court and corpo- lower courts have made clear that at least sometimes rate officials and others can Rule be held liable under 10b-5 having materially “ma[d]e” false even statement when (or appears that statement in a document is made a third person) legally the officials do not control. In Her- example, pointed man & MacLean, for this Court out that play part preparing regis- “certain individuals who including lawyers, tration corporate statement,” officers, “they primarily may even where are liable be accountants, registration prepared having or certified” not named as already asAnd I have n. 22. S., statement. U. pointed Bank that a “law- Central out, this Court wrote yer, . . makes a material . mis- bank, accountant, omission) (or purchaser or seller on which primary violator be securities relies liable as primary liability assuming requirements 10b-5, all of the (some empha- at 191 S., 511 U. under Rule 10b-5 are met.” added). sis opinions, surprising it is not in our Given tbe statements , liability primary for actors
that lower courts have found authority” issued statements. over One without “ultimate example, that an accountant could be court, for concluded having “ma[d]e” primarily statements, false where liable for repro opinion letters and certification he issued fraudulent corporate reports, prospectuses, and other annual duced ultimately responsible. An he was materials for which Co., 3d 1215, 1225-1227 77 F. ixter v. Home-Stake Production (CA10 1996). Stoneridge, postdating later case primar could be reaffirmed that an outside consultant court ily having “ma[d]e” he statements, where liable for filing quarterly *21 fraudulent and annual statements drafted by auditor, officers, and the firm’s later reviewed certified (CA10 1249, 539 F. 3d 1261 v. Wolfson, and counsel. SEC 2008). corporation’s that a chief And another court found primarily having as liable financial officer could be held appeared “ma[d]e” 10-K. in form that misstatements prepared sign SEC, file. McConville v. but she did not 2006). (CA7 780, 3d 465 F. 787 explaining easily cases
One can also find lower court having “ma[d]e” may corporate false be liable officials persons as con use innocent statements where those officials public through reach the duits which (without attributing to the necessarily false statements officials). Litiga g., Corp. e. Securities See, In re Navarre
160
(CA82002)
(liability
premised
tion,
Given these managers, circumstances,. as as some *22 sometimes, “ma[d]e” can be materially held to have Management held have done so can be statement, Janus relationship alleged between Janus the facts here. on hardly Management have been closer. could the Fund writing preparing Management’s involvement greater. hardly have been could relevant statements suggestion itself knеw that the board serious there is And falsity nothing See of what said. little or about (as adopt rule supra, formal at we 157, 160. Unless arbitrarily done) exclude from majority that would here has manage scope a firm— “make” of the word those through managers perpetrate a an fraud even when those management company intermediary unknowing —the scope. hold the alle- We should falls here within issue respect legally gations complaint sufficient. this respect, I dissent. With disoont notes J.). Breyer, Post, But for Central primary, liability. (opinion of at 158 distinction be some between thoac Bank to any moaning, have must there suite) (and pursued private in may be and primarily aro liable thue (and private may pursued not be thus secondarily those who aro liable suits). person maker is the or the two —the draw clean line We between others not. entity authority are with ultimate over liability is much of limit cоntrast, primary only dissent’s limit on specific rola liability “[t]he whenever primary at all. It would allow for that mean. alleged... conclusion” —whatever tionships [that] warrant Post, at 158. misleading S., ditor issue financial statement.” 552 U. complaint at 152-153. We held that of the dismissal proper public because the could not have relied on enti- deceptive Signifi- Id., ties' undisclosed at acts. 166-167. cantly, reaching emphasized that conclusionwe “noth- necessary [the ing defendants] it did made inevitable for company] [the to Id., the transactions as it did.” at record emphasis suggests today: adopt 161.7 This we the rule entity authority the maker of a statement with over the content of the statement and whether and how to com- “necessary authority, municate it. Without such is not or inevitable” that falsehood will be contained in the statement. holding scope Our also accords with the narrow that we give implied private right must Id., action. at 167. Although private right the existence is now settled, expand beyond liability we person entity will not ultimately authority has over false statement. The Government contends that “make” should be defined as “create.” Brief for United States Amicus Curiae (citing Dictionary 14-15 Webster’s International New (2d 1958) (defining “[t]o ed. appear, exist, “make” as cause occur”)). perhaps although appropriate This definition, object when “make” is directed at an unassociated awith (e.g., chair”), capture verb meaning “to make a fails object expressing when at directed an the action a of verb. Adopting the Government’s definition of “make” would precedent. lead also to results inconsistent with our permit plaintiffs Government’s definition would Stoneridge agree We that "no equipment one contended thal suppliers were, in fact, company's makers of the cable misstatements.” Stonoridgo 166. If equipment whether the euppli- had addrcoood Poots “makers," today’s ero were