Two principal questions have emerged as courts have endeavored to apply the U.S. Supreme Court’s decision a year ago in Janus Capital Group, Inc. v. First Derivative Traders, which held that primary liability based on Rule 10b-5 under the Securities Exchange Act is limited to those with ultimate authority over alleged misstatements.

First, courts have struggled over the Court’s holding that liability, in a private suit based on Rule 10b-5(b), falls on the “maker” of a defective statement – whom the Supreme Court identified as the person with ultimate authority over the statement. For example, can an individual officer or director, as distinguished from that person’s company, be a “maker” of a statement and can there be more than one maker of the same statement? Courts have answered Yes to both questions. In one instance, a court found ultimate authority based on share ownership and in another fact situation a court did not.

Another significant question has been how the Janus holding applies to enforcement actions brought by the SEC. Although there is consensus that the holding applies to SEC actions brought under Rule 10b-5(b) based on “statements,” it is less certain that the SEC has latitude to bring suits based on so-called “scheme” or “course of conduct” liability under Rule 10b-5(a) and (c), respectively.

An administrative law judge, quoting a 2011 decision in the Southern District of New York, has ruled that the SEC does not have that latitude “[w]here the primary purpose and effect of a purported scheme is to make a public misrepresentation or omission.” But the SEC has refused to affirm that ruling without further consideration, explaining that “this is a case of first impression” that “raises important legal and policy issues.”