'Make' Means 'Make': Rejecting the Fourth Circuit's Two-Headed Interpretation of Janus Capital

Abstract

In Janus Capital, the Supreme Court held that a defendant “makes” a statement for purposes of Rule 10b-5(b) only if the defendant has “ultimate authority over the statement, including its content and whether and how to communicate it.” Other people involved in the drafting and dissemination of a fraudulent statement are not liable. However, in Prousalis v. Moore, the Fourth Circuit held that Janus does not apply in criminal cases; defendants can be criminally liable under Rule 10b-5(b) even if they do not fall within the Janus definition of maker.

This article argues that Prousalis is wrong. Janus was based primarily on the text of the rule, and the word “make” does not magically morph depending on who is bringing the claim. Janus applies to all actions under Rule 10b-5(b)-private actions, SEC enforcement actions, and criminal actions.

Keywords: Rule 10b-5, securities fraud, Janus, Prousalis