Article by: David G. Keyko, Amy Gross
DISTRICT COURT TAKES MIDDLE GROUND
The Supreme Court sharply limited secondary actor liability in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1993). The Court there noted that neither the Securities Act of 1933 nor the Securities Exchange Act of 1934 expressly provided for a private cause of action against those who aid and abet primary violators of those statutes. Accordingly, the Court held that there was no basis for aiding and abetting liability for securities fraud claims under §10(b) of the 1934 Act.
Since Central Bank, the question of primary liability for secondary actors has become more significant, but courts have diverged over the appropriate standard. The Second Circuit follows a "bright line" rule: (i) a secondary actor must make material misrepresentations regarding a securities purchase or sale, (ii) the statements must be publicly attributed to the secondary actor, and (iii) the
