Two Faces of Janus in the District Courts: Is Liability for Securities Fraud Under Section 17(a) Limited to Actors with “Ultimate Authority” over Untrue Statements?

BY Andrew P. Arnold

This Recent Development argues that limiting section 17(a) liability for untrue statements to individuals with “ultimate authority” over those statements is not supported by the Supreme Court’s reasoning in Janus. The Court provided three justifications for imposing an ultimate authority requirement. First, the Court pointed to the use of the word “make” in the text of Rule 10b-5, but this word “is absent from the operative language of Section 17(a).” Second, the Janus Court cited the need to interpret the private remedy narrowly to protect business from vexatious, private litigation, but section 17(a) lacks a private remedy. Finally, the Court cited the need to preserve the distinction between primary and secondary actors to provide certainty as to who might be held liable under Rule 10b-5; however, section 17(a) liability is not limited to primary actors.

DOWNLOAD PDF | 91 N.C. L. Rev.1049 (2013)