On July 21, 2011, the GAO published a study on securities fraud liability of secondary actors. The ability of investors to sue for aiding and abetting securities fraud (as distinct from a direct suit for securities fraud) changed in 1994 when the Supreme Court clarified that section 10(b) of the Securities Exchange Act of 1934 does not establish a private cause of action for aiding and abetting securities law violations.

Since that Supreme Court decision, legislation has been introduced in the U.S. Senate and House of Representatives to create a private right of action to permit investors to pursue claims against secondary actors for aiding and abetting securities fraud. The proposed legislation would amend section 20(e) of the Exchange Act to include an express private right of action for aiding and abetting a violation of the securities laws. The legislation would make individuals and firms that knowingly or recklessly provide substantial assistance to primary actors in a securities fraud liable to investors.

The Dodd-Frank Act required the GAO to analyze the impact of creating such a private right of action. The published GAO study responds to that mandate by describing the factual and legal background against which creation of such authority would be considered and providing an overview of the policy arguments for and against creation of such authority, without advocating a position.