In Janus Capital Group, Inc. v. First Derivative Traders, No. 09-525, 2011 WL 2297762 (U.S. Jun. 13, 2011) (Thomas, J.), the United States Supreme Court held that purposes of a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. 78j(b), and Rule 10b-5 , 17 C.F.R. 240.10b-5, promulgated thereunder, the “maker” of an allegedly false or misleading statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.
The U.S. Supreme Court has found that a party that assists in the drafting and dissemination of a misleading statement related to the sale of a security - but that is not the legal entity ultimately responsible for the statement - will not be subject to liability for securities fraud under Securities and Exchange Commission Rule 10b-5.
The Supreme Court’s June 13, 2011, decision in Janus Capital Group, Inc. v. First Derivative Traders may provide defendants with additional ammunition in securities class action lawsuits by limiting the scope of persons who can be primarily liable for securities fraud under SEC Rule 10b-5.
In Janus Capital Group, Inc. and Janus Capital Management LLC v. First Derivative Traders, decided June 13, 2011, the Supreme Court held that Janus Capital Management LLC (JCM), a subsidiary of Janus Capital Group, Inc. (JCG) and investment advisor for JCG on a group of its mutual funds, cannot be held primarily liable in a private action by JCG shareholders for alleged false statements in a prospectus under Section 10(b) of the Securities Exchange Act of 1934 and SEC’s Rule 10b-5.
On June 13, 2011, the Supreme Court decided Janus Capital Group, Inc. v. First Derivative Traders, No. 09-525, holding that Rule 10b-5 provides a private right of action for securities fraud only against the person or entity with ultimate authority over the alleged false statement in a prospectus, and thus a mutual fund manager who influenced the content in a prospectus could not be held liable under the rule.