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09-525 Janus Capital Group, Inc., v. First Derivative Traders

By: WISCONSIN LAW JOURNAL STAFF//June 13, 2011//

09-525 Janus Capital Group, Inc., v. First Derivative Traders

By: WISCONSIN LAW JOURNAL STAFF//June 13, 2011//

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United States Supreme Court

CIVIL OPINIONS

Securities

Securities fraud

Only a party who makes a false statement in a prospectus can be held liable in a private action under Rule 10b-5.

The Court rejects the Government’s contention that “make” should be defined as “create,” thereby allowing private plaintiffs to sue a person who provides the false or misleading information that another person puts into a statement. Adopting that definition would be inconsistent with Stoneridge, supra , at 161, which rejected a private Rule 10b–5 suit against companies involved in deceptive transactions, even when information about those transactions was later incorporated into false public statements. First Derivative notes the uniquely close relationship between a mutual fund and its investment adviser, but the corporate formalities were observed, and reapportionment of liability in light of this close relationship is properly the responsibility of Congress, not the courts. Furthermore, First Derivative’s rule would read into Rule 10b–5 a theory of liability similar to—but broader than—control-person liability under §20(a).

566 F. 3d 111, reversed.

09-525 Janus Capital Group, Inc., v. First Derivative Traders

Thomas, J.; Breyer, J., dissenting.

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