• The Supreme Court Adds Clarity to Who May Be Sued in Private Securities Litigation
  • June 27, 2011 | Authors: Lawrence N. Barshay; Israel David; David B. Hennes; Dixie L. Johnson; William G. McGuinness; David Marc Morris; Peter L. Simmons
  • Law Firms: Fried, Frank, Harris, Shriver & Jacobson LLP - New York Office ; Fried, Frank, Harris, Shriver & Jacobson LLP - Washington Office ; Fried, Frank, Harris, Shriver & Jacobson LLP - New York Office
  • The Supreme Court on Monday, in Janus Corp., Inc. v. First Derivative Traders (“Janus”), drew a bright line on an important question concerning who may be liable under the federal securities laws for “making” a false or misleading statement. In a 5-4 decision, the Court ruled that only those individuals and/or entities that actually “state” or issue the challenged statement may be liable under Rule 10b-5 for securities fraud, and that Rule 10b-5 liability does not extend to others involved in drafting the statement behind the scenes unless they possessed “ultimate authority” regarding whether and how the statement would be issued. As the Court put it: