Lead Opinion
delivered the opinion of the Court.
We consider the reach of the private right of action the Court has found implied in § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, as amended, 15 U. S. C. § 78j(b), and SEC Rule 10b-5, 17 CFR §240.10b-5 (2007). In this suit investors alleged losses after purchasing common stock. They sought to impose liability on entities who, acting both as customers and suppliers, agreed to arrangements that allowed the investors’ company to mislead its auditor and issue
I
This class-action suit by investors was filed against Charter Communications, Inc., in the United States District Court for the Eastern District of Missouri. Stoneridge Investment Partners, LLC, a limited liability company organized under the laws of Delaware, was the lead plaintiff and is petitioner here.
Charter issued the financial statements and the securities in question. It was a named defendant along with some of its executives and Arthur Andersen LLP, Charter’s independent auditor during the period in question. We are concerned, though, with two other defendants, respondents here. Respondents are Scientific-Atlanta, Inc., and Motorola, Inc. They were suppliers, and later customers, of Charter.
For purposes of this proceeding, we take these facts, alleged by petitioner, to be true. Charter, a cable operator, engaged in a variety of fraudulent practices so its quarterly reports would meet Wall Street expectations for cable subscriber growth and operating cashflow. The fraud included misclassification of its customer base; delayed reporting of terminated customers; improper capitalization of costs that should have been shown as expenses; and manipulation of the company’s billing cutoff dates to inflate reported revenues. In late 2000, Charter executives realized that, despite these efforts, the company would miss projected operating cashflow numbers by $15 to $20 million. To help meet the shortfall, Charter decided to alter its existing arrangements with respondents, Scientific-Atlanta and Motorola. Peti
Respondents supplied Charter with the digital cable converter (set-top) boxes that Charter furnished to its customers. Charter arranged to overpay respondents $20 for each set-top box it purchased until the end of the year, with the understanding that respondents would return the overpayment by purchasing advertising from Charter. The transactions, it is alleged, had no economic substance; but, because Charter would then record the advertising purchases as revenue and capitalize its purchase of the set top boxes, in violation of generally accepted accounting principles, the transactions would enable Charter to fool its auditor into approving a financial statement showing it met projected revenue and operating cashflow numbers. Respondents agreed to the arrangement.
So that Arthur Andersen would not discover the link between Charter’s increased payments for the boxes and the advertising purchases, the companies drafted documents to make it appear the transactions were unrelated and conducted in the ordinary course of business. Following a request from Charter, Scientific-Atlanta sent documents to Charter stating — falsely—that it had increased production costs. It raised the price for set-top boxes for the rest of 2000 by $20 per box. As for Motorola, in a written contract Charter agreed to purchase from Motorola a specific number of set-top boxes and pay liquidated damages of $20 for each unit it did not take. The contract was made with the expectation Charter would fail to purchase all the units and pay Motorola the liquidated damages.
To return the additional money from the set top box sales, Scientific-Atlanta and Motorola signed contracts with Char
Respondents had no role in preparing or disseminating Charter’s financial statements. And their own financial statements booked the transactions as a wash, under generally accepted accounting principles. It is alleged respondents knew or were in reckless disregard of Charter’s intention to use the transactions to inflate its revenues and knew the resulting financial statements issued by Charter would be relied upon by research analysts and investors.
Petitioner filed a securities fraud class action on behalf of purchasers of Charter stock alleging that, by participating in the transactions, respondents violated § 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
The District Court granted respondents’ motion to dismiss for failure to state a claim on which relief can be granted. The United States Court of Appeals for the Eighth Circuit affirmed. In re Charter Communications, Inc., Securities Litigation,
Decisions of the Courts of Appeals are in conflict respecting when, if ever, an injured investor may rely upon § 10(b) to recover from a party that neither makes a public misstatement nor violates a duty to disclose but does participate in a scheme to violate § 10(b). Compare Simpson v. AOL Time Warner Inc.,
II
Section 10(b) of the Securities Exchange Act makes it
“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
“[t]o use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U. S. C. § 78j.
The SEC, pursuant to this section, promulgated Rule 10b-5, which makes it unlawful
“(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
*157 “(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 CFR §240.10b-5.
Rule 10b-5 encompasses only conduct already prohibited by § 10(b). United States v. O’Hagan,
In Central Bank, the Court determined that § 10(b) liability did not extend to aiders and abettors. The Court found the scope of § 10(b) to be delimited by the text, which makes no mention of aiding and abetting liability.
“Were we to allow the aiding and abetting action proposed in this case, the defendant could be liable without any showing that the plaintiff relied upon the aider and abettor’s statements or actions. See also Chiarella [v. United States,445 U. S. 222 , 228 (1980)]. ' Allowing plaintiffs to circumvent the reliance requirement would disregard the careful limits on 10b-5 recovery mandated by our earlier cases.” Ibid.
The § 10(b) implied private right of action does not extend to aiders and abettors. The conduct of a secondary actor must satisfy each of the elements or preconditions for liability; and we consider whether the allegations here are sufficient to do so.
Ill
The Court of Appeals concluded petitioner had not alleged that respondents engaged in a deceptive act within the reach of the § 10(b) private right of action, noting that only misstatements, omissions by one who has a duty to disclose, and manipulative trading practices (where “manipulative” is a term of art, see, e. g., Santa Fe Industries, Inc. v. Green,
A different interpretation of the holding from the Court of Appeals opinion is that the court was stating only that any deceptive statement or act respondents made was not actionable because it did not have the requisite proximate relation
A
Reliance by the plaintiff upon the defendant’s deceptive acts is an essential element of the § 10(b) private cause of action. It ensures that, for liability to arise, the “requisite causal connection between a defendant’s misrepresentation and a plaintiff’s injury” exists as a predicate for liability. Basic Inc. v. Levinson,
Neither presumption applies here. Respondents had no duty to disclose; and their deceptive acts were not communicated to the public. No member of the investing public had knowledge, either actual or presumed, of respondents’ deceptive acts during the relevant times. Petitioner, as a result, cannot show reliance upon any of respondents’ actions except in an indirect chain that we find too remote for liability.
B
Invoking what some courts call “scheme liability,” see, e. g., In re Enron Corp. Securities, Derivative, & “ERISA” Litigation,
Liability is appropriate, petitioner contends, because respondents engaged in conduct with the purpose and effect of creating a false appearance of material fact to further a scheme to misrepresent Charter’s revenue. The argument is that the financial statement Charter released to the public was a natural and expected consequence of respondents’ deceptive acts; had respondents not assisted Charter, Charter’s auditor would not have been fooled, and the financial statement would have been a more accurate reflection of Charter’s financial condition. That causal link is sufficient, petitioner argues, to apply Basic’s presumption of reliance to respondents’ acts. See, e. g., Simpson,
In effect petitioner contends that in an efficient market investors rely not only upon the public statements relating to a security but also upon the transactions those statements reflect. Were this concept of reliance to be adopted, the implied cause of action would reach the whole marketplace in which the issuing company does business; and there is no authority for this rule.
As stated above, reliance is tied to causation, leading to the inquiry whether respondents’ acts were immediate or remote to the injury. In considering petitioner’s arguments, we note § 10(b) provides that the deceptive act must be “in connection with the purchase or sale of any security.” 15 U. S. C. § 78j(b). Though this phrase in part defines the statute’s coverage rather than causation (and so we do not evaluate the “in connection with” requirement of § 10(b) in this case), the emphasis on a purchase or sale of securities does provide some insight into the deceptive acts that concerned the enacting Congress. See Black, Securities Commentary:
Petitioner invokes the private cause of action under § 10(b) and seeks to apply it beyond the securities markets — the realm of financing business — to purchase and supply contracts — the realm of ordinary business operations. The latter realm is governed, for the most part, by state law. It is true that if business operations are used, as alleged here, to affect securities markets, the SEC enforcement power may reach the culpable actors. It is true as well that a dynamic, free economy presupposes a high degree of integrity in all of its parts, an integrity that must be underwritten by rules enforceable in fair, independent, accessible courts. Were the implied cause of action to be extended to the practices described here, however, there would be a risk that the federal power would be used to invite litigation beyond the immediate sphere of securities litigation and in areas already governed by functioning and effective state-law guarantees. Our precedents counsel against this extension. See Marine Bank v. Weaver,
These considerations answer as well the argument that if this were a common-law action for fraud there could be a finding of reliance. Even if the assumption is correct, it is not controlling. Section 10(b) does not incorporate common-law fraud into federal law. See, e. g., SEC v. Zandford,
Petitioner’s theory, moreover, would put an unsupportable interpretation on Congress’ specific response to Central Bank in §104 of the PSLRA. Congress amended the securities laws to provide for limited coverage of aiders and abettors. Aiding and abetting liability is authorized in actions brought by the SEC but not by private parties. See 15 U. S. C. § 78t(e). Petitioner’s view of primary liability makes any aider and abettor liable under § 10(b) if he or she committed a deceptive act in the process of providing assistance. Reply Brief for Petitioner 6, n. 2; Tr. of Oral Arg. 24. Were we to adopt this construction of § 10(b), it would revive in substance the implied cause , of action against all aiders
This is not a case in which Congress has enacted a regulatory statute and then has accepted, over a long period of time, broad judicial authority to define substantive standards of conduct and liability. Cf. Leegin Creative Leather Products, Inc. v. PSKS, Inc.,
The practical consequences of an expansion, which the Court has considered appropriate to examine in circumstances like these, see Virginia Bankshares, Inc. v. Sandberg,
C
The history of the § 10(b) private right and the careful approach the Court has taken before proceeding without congressional direction provide further reasons to find no liability here. The § 10(b) private cause of action is a judicial construct that Congress did not enact in the text of the relevant statutes. See Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson,
“necessarily extends its authority to embrace a dispute Congress has not assigned it to resolve. This runs contrary to the established principle that ‘[t]he jurisdiction of the federal courts is carefully guarded against expansion by judicial interpretation . . . ,’ American Fire & Cas[ualty] Co. v. Finn,341 U. S. 6 , 17 (1951), and con*165 flicts with the authority of Congress under Art. III to set the limits of federal jurisdiction.” Cannon v. University of Chicago,441 U. S. 677 , 746-747 (1979) (Powell, J., dissenting) (citations and footnote omitted).
The determination of who can seek a remedy has significant consequences for the reach of federal power. See Wilder v. Virginia Hospital Assn.,
Concerns with the judicial creation of a private cause of action caution against its expansion. The decision to extend the cause of action is for Congress, not for us. Though it remains the law, the § 10(b) private right should not be extended beyond its present boundaries. See Virginia Bank-shares, supra, at 1102 (“[T]he breadth of the [private right of action] once recognized should not, as a general matter, grow beyond the scope congressionally intended”); see also Central Bank, supra, at 173 (determining that the scope of conduct prohibited is limited by the text of § 10(b)).
This restraint is appropriate in light of the PSLRA, which imposed heightened pleading requirements and a loss causation requirement upon “any private action” arising from the Securities Exchange Act. See 15 U. S. C. § 78u-4(b). It is clear these requirements touch upon the implied right of action, which is now a prominent feature of federal securities regulation. See Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit,
IV
Secondary actors are subject to criminal penalties, see, e. g., 15 U. S. C. § 78ff, and civil enforcement by the SEC, see, e. g., § 78t(e). The enforcement power is not toothless. Since September 30, 2002, SEC enforcement actions have collected over $10 billion in disgorgement and penalties, much of it for distribution to injured investors. See SEC, 2007 Performance and Accountability Report, p. 26, http:// www.sec.gov/about/secpar2007.shtml (as visited Jan. 2, 2008, and available in Clerk of Court’s case file). And in this case both parties agree that criminal penalties are a strong deterrent. See Brief for Respondents 48; Reply Brief for Petitioner 17. In addition some state securities laws permit state authorities to seek fines and restitution from aiders and abettors. See, e. g., Del. Code Ann., Tit. 6, § 7325 (2005). All secondary actors, furthermore, are not necessarily immune from private suit. The securities statutes provide an express private right of action against accountants and underwriters in certain circumstances, see 15 U. S. C. § 77k, and the implied right of action in § 10(b) continues to cover secondary actors who commit primary violations, Central Bank,
Here respondents were acting in concert with Charter in the ordinary course as suppliers and, as matters then evolved in the not so ordinary course, as customers. Unconventional as the arrangement was, it took place in the marketplace for goods and services, not in the investment sphere. Charter was free to do as it chose in preparing its books, conferring with its auditor, and preparing and then issuing its financial statements. In these circumstances the investors cannot be
The judgment of the Court of Appeals is affirmed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
Dissenting Opinion
with whom Justice Souter and Justice Ginsburg join, dissenting.
Charter Communications, Inc., inflated its revenues by $17 million in order to cover up a $15 to $20 million expected cashflow shortfall. It could not have done so absent the knowingly fraudulent actions of Seientific-Atlanta, Inc., and Motorola, Inc. Investors relied on Charter’s revenue statements in deciding whether to invest in Charter and in doing so relied on respondents’ fraud, which was itself a “deceptive device” prohibited by § 10(b) of the Securities Exchange Act of 1934. 15 U. S. C. § 78j(b). This is enough to satisfy the requirements of § 10(b) and enough to distinguish this case from Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A.,
The Court seems to assume that respondents’ alleged conduct could subject them to liability in an enforcement proceeding initiated by the Government, ante, at 166, but nevertheless concludes that they are not subject to liability in a private action brought by injured investors because they are, at most, guilty of aiding and abetting a violation of § 10(b),
The Court’s conclusion that no violation of § 10(b) giving rise to a private right of action has been alleged in this case rests on two faulty premises: (1) the Court’s overly broad reading of Central Bank, and (2) the view that reliance requires a kind of super-causation — a view contrary to both the Securities and Exchange Commission’s (SEC) position in a recent Ninth Circuit case
I
The Court of Appeals incorrectly based its decision on the view that “[a] device or contrivance is not ‘deceptive,’ within the meaning of § 10(b), absent some misstatement or a failure to disclose by one who has a duty to disclose.” In re Charter Communications, Inc., Securities Litigation,
What the Court fails to recognize is that this case is critically different from Central Bank because the bank in that ease did not engage in any deceptive act and, therefore, did not itself violate § 10(b). The Court sweeps aside any distinction, remarking that holding respondents liable would “revive in substance the implied cause of action against all aiders and abettors except those who committed no deceptive act in the process of facilitating the fraud.” Ante, at 162-163. But the fact that Central Bank engaged in no deceptive conduct whatsoever — in other words, that it was at most an aider and abettor — sharply distinguishes Central Bank from cases that do involve allegations of such conduct.
The Central Bank of Denver was the indenture trustee for bonds issued by a public authority and secured by liens on property in Colorado Springs. After default, purchasers of $2.1 million of those bonds sued the underwriters, alleging violations of § 10(b); they also named Central Bank as a defendant, contending that the bank’s delay in reviewing a suspicious appraisal of the value of the security made it liable as an aider and abettor. Id., at 167-168. The facts of this case would parallel those of Central Bank if respondents had, for example, merely delayed sending invoices for set-top boxes to Charter. Conversely, the facts in Central Bank would mirror those in the case before us today if the bank had knowingly purchased real estate in wash transactions at above-market prices in order to facilitate the appraiser’s overvaluation of the security. Central Bank, thus, poses no
II
The Court’s next faulty premise is that petitioner is required to allege that Scientific-Atlanta and Motorola made it “necessary or inevitable for Charter to record the transactions as it did,” ante, at 161, in order to demonstrate reliance. Because the Court of Appeals did not base its holding on reliance grounds, see
In Basic Inc.,
In Basic Inc., we held that the “fraud-on-the-market” theory provides adequate support for a presumption in private securities actions that shareholders (or former shareholders) in publicly traded companies rely on public material misstatements that affect the price of the company’s stock. Id., at 248. The holding in Basic is surely a sufficient response to the argument that a complaint alleging that deceptive acts
The Court is right that a fraud-on-the-market presumption coupled with its view on causation would not support petitioner’s view of reliance. The fraud-on-the-market presumption helps investors who cannot demonstrate that they, themselves, relied on fraud that reached the market. But that presumption says nothing about causation from the other side: what an individual or corporation must do in order to have “caused” the misleading information that reached the market. The Court thus has it backwards when it first addresses the fraud-on-the-market presumption, rather than the causation required. See ante, at 159. The argument is not that the fraud-on-the-market presumption is enough standing alone, but that a correct view of causation coupled with the presumption would allow petitioner to plead reliance.
Lower courts have correctly stated that the causation necessary to demonstrate reliance is not a difficult hurdle to clear in a private right of action under § 10(b). Reliance is often equated with “‘transaction causation.’” Dura Pharmaceuticals, Inc. v. Broudo,
Even if but-for causation, standing alone, is too weak to establish reliance, petitioner has also alleged that respondents proximately caused Charter’s misstatement of income; petitioner has alleged that respondents knew their deceptive
The Court’s view of reliance is unduly stringent and unmoored from authority. The Court first says that if petitioner’s concept of reliance is adopted the implied cause of action “would reach the whole marketplace in which the issuing company does business.” Ante, at 160. The answer to that objection is, of course, that liability only attaches when the company doing business with the issuing company has itself violated § 10(b).
The majority states that “[sjection 10(b) does not incorporate common-law fraud into federal law,” citing SEC v. Zandford,
Finally, the Court relies on the course of action Congress adopted after our decision in Central Bank to argue that siding with petitioner on reliance would run contrary to congressional intent. Senate hearings on Central Bank were held within one month of our decision.
The Court is concerned that such liability would deter overseas firms from doing business in the United States or “shift securities offerings away from domestic capital markets.” Ante, at 164. But liability for those who violate § 10(b) “will not harm American competitiveness; in fact, investor faith in the safety and integrity of our markets is their strength. The fact that our markets are the safest in the world has helped make them the strongest in the world.” Brief for Former SEC Commissioners as Amici Curiae 9.
Accordingly, while I recognize that the Central Bank opinion provides a precedent for judicial policymaking decisions in this area of the law, I respectfully dissent from the Court’s continuing campaign to render the private cause of action under § 10(b) toothless. I would reverse the decision of the Court of Appeals.
Ill
While I would reverse for the reasons stated above, I must also comment on the importance of the private cause of action that Congress implicitly authorized when it enacted the Securities Exchange Act of 1934. A theme that underlies the Court’s analysis is its mistaken hostility toward the § 10(b) private cause of action.
During the first two centuries of this Nation’s history much of our law was developed by judges in the common-law tradition. A basic principle animating our jurisprudence was enshrined in state constitution provisions guaranteeing, in substance, that “every wrong shall have a remedy.”
“A disregard of the command of the statute is a wrongful act, and where it results in damage to one of the class for whose especial benefit the statute was enacted, the right to recover the damages from the party in default is implied, according to a doctrine of the common law expressed in 1 Com. Dig., tit. Action upon Statute (F), in these words: ‘So, in every case, where a statute enacts, or prohibits a thing for the benefit of a person, he shall have a remedy upon the same statute for the thing enacted for his advantage, or for the recompense of a wrong done to him contrary to the said law.’ (Per Holt, C. J., Anon., 6 Mod. 26, 27.)”
Judge Friendly succinctly described the post-Rigsby, pre1975 practice in his opinion in Leist v. Simplot,
“Following Rigsby the Supreme Court recognized implied causes of action on numerous occasions, see, e. g., Wyandotte Transportation Co. v. United States,389 U. S. 191 . . . (1967) (sustaining implied cause of action by United States for damages under Rivers and Harbors Act for removing negligently sunk vessel despite express remedies of in rem action and criminal penalties); United States v. Republic Steel Corp.,362 U. S. 482 . . . (1960) (sustaining implied cause of action by United*178 States for an injunction under the Rivers and Harbors Act); Tunstall v. Locomotive Firemen & Enginemen,323 U. S. 210 . . . (1944) (sustaining implied cause of action by union member against union for discrimination among members despite existence of Board of Mediation); Sullivan v. Little Hunting Park, Inc.,396 U. S. 229 ... (1969) (sustaining implied private cause of action under 42 U. S. C. § 1982); Allen v. State Board of Elections,393 U. S. 544 ... (1969) (sustaining implied private cause of action under §5 of the Voting Rights Act despite the existence of a complex regulatory scheme and explicit rights of action in the Attorney General); and, of course, the aforementioned decisions under the securities laws. As the Supreme Court itself has recognized, the period of the 1960’s and early 1970’s was one in which the ‘Court had consistently found implied remedies.’ Cannon v. University of Chicaqo,441 U. S. 677 , 698 .. . (1979).”
In a law-changing opinion written by Justice Brennan in 1975, the Court decided to modify its approach to private causes of action. Cort v. Ash,
Until Central Bank, the federal courts continued to enforce a broad implied cause of action for the violation of statutes enacted in 1933 and 1934 for the protection of investors. As Judge Friendly explained:
*179 “During the late 1940’s, the 1950’s, the 1960’s and the early 1970’s there was widespread, indeed almost general, recognition of implied causes of action for damages under many provisions of the Securities Exchange Act, including not only the antifraud provisions, §§10 and 15(c)(1), see Kardon v. National Gypsum Co.,69 F. Supp. 512 , 513-14 (E.D.Pa.1946); Fischman v. Raytheon Mfg. Co.,188 F. 2d 783 , 787 (2 Cir. 1951) (Frank, J.); Fratt v. Robinson,203 F. 2d 627 , 631-33 (9 Cir. 1953), but many others. These included the provision, § 6(a)(1), requiring securities exchanges to enforce compliance with the Act and any rule or regulation made thereunder, see Baird v. Franklin,141 F. 2d 238 , 239, 240, 244-45 (2 Cir.), cert. denied,323 U. S. 737 ... (1944), and provisions governing the solicitation of proxies, see J. I. Case Co. v. Borak,377 U. S. 426 , 431-35 . . . (1964). . . . Writing in 1961, Professor Loss remarked with respect to violations of the antifraud provisions that with one exception ‘not a single judge has expressed himself to the contrary.’ 3 Securities Regulation 1763-64. See also Bromberg & Lowenfels, [Securities Fraud & Commodities Fraud] § 2.2 (462) [(1979)] (describing 1946-1974 as the ‘expansion era’ in implied causes of action under the securities laws). When damage actions for violation of § 10(b) and Rule 10b-5 reached the Supreme Court, the existence of an implied cause of action was not deemed worthy of extended discussion. Superintendent of Insurance v. Bankers Life & Casualty Co.,404 U. S. 6 ... (1971).” Leist,638 F. 2d, at 296-297 (footnote omitted).
In light of the history of court-created remedies and specifically the history of implied causes of action under § 10(b), the Court is simply wrong when it states that Congress did not impliedly authorize this private cause of action “when it first enacted the statute.” Ante, at 167. Courts near in
Notes
See ante, at 161 (“[w]ere the implied cause of action to be extended to the practices described here . . . ”); ante, at 163 (“[t]he practical consequences of an expansion”); ante, at 165 (“Concerns with the judicial creation of a private cause of action caution against its expansion. The decision to extend the cause of action is for the Congress, not for us”).
See Brief for SEC as Amicus Curiae in Simpson v. AOL Time Warner Inc., No. 04-55665 (CA9), p. 21 (“The reliance requirement is satisfied where a plaintiff relies on a material deception flowing from a defendant’s deceptive act, even though the conduct of other participants in the fraudulent scheme may have been a subsequent link in the causal chain leading to the plaintiff’s securities transaction”).
Though respondents did argue to the Court of Appeals that reliance was lacking, see Brief for Appellee Motorola, Inc., in No. 05-1974 (CA8), p. 15, that argument was quite short and was based on an erroneously broad reading of Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A.,
Because the kind of sham transactions alleged in this complaint are unquestionably isolated departures from the ordinary course of business in the American marketplace, it is hyperbolic for the Court to conclude that petitioner’s concept of reliance would authorize actions “against the entire marketplace in which the issuing company operates.” Ante, at 162.
See S. Rep. No. 104-98, p. 2 (1995) (hereinafter S. Rep.).
Id., at 1.
The opinion in Central Bank discussed only private remedies, but its rationale — that the text of § 10(b) did not cover aiding and abetting — obviously limited the authority of public enforcement agencies. See 511 U. S.,
PSLRA, § 104, 109 Stat. 757; see also S. Rep., at 19 (“The Committee believes that amending the 1934 Act to provide explicitly for private aiding and abetting liability actions under Section 10(b) would be contrary to S. 240’s goal of reducing meritless securities litigation”).
See id., at 51 (additional views of Sen. Dodd) (“I am pleased that the Committee bill grants the Securities and Exchange Commission explicit authority to bring actions against those who knowingly aid and abet primary violators. However, I remain concerned about liability in private actions and will continue work with other Committee members on this issue as we move to floor consideration”). Senators Sarbanes, Boxer, and Bryan also submitted additional views in which they stated that “[w]hile the provision in the bill is of some help, the deterrent effect of the securities laws would be strengthened if aiding and abetting liability were restored in private actions as well.” Id., at 49.
Id., at 8 (“The success of the U. S. securities markets is largely the result of a high level of investor confidence in the integrity and efficiency of our markets. The SEC enforcement program and the availability of private rights of action together provide a means for defrauded investors to recover damages and a powerful deterrent against violations of the securities laws”); see also Bateman Eichler, Hill Richards, Inc. v. Berner,
The Court does concede that Congress has now ratified the private cause of action in the PSLRA. See ante, at 165.
Today, the guarantee of a remedy for every injury appears in nearly three-quarters of state constitutions. Ala. Const., Art. I, §13; Ark. Const., Art. 2, § 13; Colo. Const., Art. II, § 6; Conn. Const., Art. I, § 10; Del. Const., Art. I, §9; Fla. Const., Art. I, §21; Idaho Const., Art. I, §18; Ill. Const., Art. I, § 12; Ind. Const., Art. I, § 12; Kan. Const., Bill of Rights, § 18; Ky. Const., § 14; La. Const., Art. I, § 22; Me. Const., Art. I, § 19; Md. Const., Declaration of Rights, Art. 19; Mass. Const., pt. I, Art. 11; Minn. Const., Art. 1, §8; Miss. Const., Art. Ill, §24; Mo. Const., Art. I, §14; Mont. Const., Art. II, § 16; Neb. Const., Art. I, § 13; N. H. Const., pt. I, Art. 14; N. C. Const., Art. I, §18; N. D. Const., Art. I, §9; Ohio Const., Art. I, § 16; Okla. Const., Art. 2, § 6; Ore. Const., Art. I, § 10; Pa. Const., Art. I, § 11; R. I. Const., Art. I, § 5; S. C. Const., Art. I, § 9; S. D. Const., Art. VI, §20; Tenn. Const., Art. I, §17; Tex. Const., Art. I, §13; Utah Const., Art. I, § 11; Vt. Const., ch. I, Art. 4; W. Va. Const., Art. III, § 17; Wis. Const., Art. I, § 9; Wyo. Const., Art. I, § 8; see also Phillips, The Constitutional Right to a Remedy, 78 N. Y. U. L. Rev. 1309, 1310, n. 6 (2003) (hereinafter Phillips).
The concept of a remedy for every wrong most clearly emerged from Sir Edward Coke’s scholarship on Magna Carta. See 1 Second Part of the Institutes of the Laws of England (1797). At the time of the ratification of the United States Constitution, Delaware, Massachusetts, Maryland, New Hampshire, and North Carolina had all adopted constitutional provisions reflecting the provision in Coke’s scholarship. Del. Declaration of Rights and Fundamental Rules § 12 (1776), reprinted in 2 W. Swindler, Sources and Documents of United States Constitutions 198 (1973) (hereinafter Swindler); Mass. Const., pt. I, Art. XI (1780), reprinted in 3 Federal and State Constitutions, Colonial Charters, and Other Organic Laws 1891 (F. Thorpe ed. 1909) (reprinted 1993) (hereinafter Thorpe); Md. Const., Declaration of Rights, Art. XVII (1776), in id., at 1688; N. H. Const., Art. XIV (1784), in 4 id., at 2455; N. C. Const., Declaration of Rights, Art. XIII (1776), in 5 id., at 2787, 2788; see also Phillips 1323-1324. Pennsylvania’s Constitution of 1790 contains a guarantee. Pa. Const., Art. IX, § 11, in 5
See, e. g., Slavin v. Germantown Fire Ins. Co.,