Supreme Court Limits Primary Liability Under Rule 10(b)(5)

A divided United States Supreme Court issued its highly anticipated ruling yesterday in Janus Capital Group, Inc. v. First Derivative Traders, Case No. 09-525, holding that Janus Capital Management ("JCM"), the investment advisor to a series of mutual funds known as the Janus Investment Fund (the "Fund"), did not "make" the misstatements contained in the Fund's prospectuses it helped to prepare and, therefore, cannot be held primarily liable under Section 10(b) of the Securities Exchange Act of 1934 (the "Act") and Securities and Exchange Commission Rule 10(b)(5). In so holding, the Court narrowly defined the "maker" of a statement as "the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it." Because the Fund-not JCM-retained ultimate authority over the content and dissemination of its prospectuses, the Court held that the Fund-not JCM-made the misstatements at issue.