Abstract

http://ssrn.com/abstract=1942558
 
 

Footnotes (289)



 


 



To Make or to Mar: The Supreme Court Turns Away Another Securities Law Plaintiff


James D. Redwood


Albany Law School

October 11, 2011

University of Pennsylvania Journal of Business Law, Vol. 14, No. 2, 2012
Albany Law School Research Paper No. 24 of 2011-2012

Abstract:     
The United States Supreme Court, in Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (2011), once again denied a remedy to securities law plaintiffs and further restricted the implied private right of action under Securities Exchange Act Section 10(b) and SEC Rule 10b-5. In Janus, the Court held that one, and only one, person or entity can “make” a material misstatement under Rule 10b-5(b), namely that person or entity with “ultimate authority over the statement, including its content and whether and how to communicate it.” 131 S. Ct. at 2302. As a result, an investment adviser to mutual funds that issued misleading statements in investor prospectuses could not be held liable as a “maker” of those misstatements, notwithstanding substantial evidence indicating that the adviser made almost all management decisions for the funds and controlled almost every aspect of their work.

This article takes issue with the restricted meaning given by the Court to the word “make” and argues that the Court’s reading of the term was justified neither as a linguistic nor as a legal matter. Utilizing the dictionaries cited by the Court, the article plumbs the myriad meanings of “make” and reasons that the Court was not justified in substituting a “test” for a “definition.” The article also questions the Court’s holding that the funds and the adviser enjoyed separate corporate existences. Although such a “veil-piercing” analysis might be relevant had the plaintiffs proceeded on the theory that the defendants operated as a “single economic entity,” such an approach is inappropriate where, as here, the plaintiff’s claim sounds in fraud. Finally, the article suggests a “test” of its own for who is a “maker” and urges the Court to examine the benefit to the defendant from prospectus misstatements, rather than focusing on the artificial issue of who exercises “ultimate authority” over those misstatements.

Number of Pages in PDF File: 67

Accepted Paper Series


Download This Paper

Date posted: October 13, 2011  

Suggested Citation

Redwood, James D., To Make or to Mar: The Supreme Court Turns Away Another Securities Law Plaintiff (October 11, 2011). University of Pennsylvania Journal of Business Law, Vol. 14, No. 2, 2012; Albany Law School Research Paper No. 24 of 2011-2012. Available at SSRN: http://ssrn.com/abstract=1942558

Contact Information

James D. Redwood (Contact Author)
Albany Law School ( email )
80 New Scotland Avenue
Albany, NY 12208
United States
518-472-5839 (Phone)
HOME PAGE: http://www.als.edu

Feedback to SSRN


Paper statistics
Abstract Views: 387
Downloads: 49
Footnotes:  289

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.312 seconds