United States Supreme Court Holds that the "Maker" of a Statement for Rule 10b-5 Purposes is the Person or Entity with Ultimate Authority Over the Statement


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. In so holding, the Supreme Court further narrowed the scope of potential securities fraud liability and aligned with its prior decision which held that a private right of action under Rule 10b-5 does not include suits against aiders and abettors who merely contribute “substantial assistance” to the making of a statement but do not actually make it. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 180 (1994).

Respondent First Derivative Traders (“First Derivative”), representing a class of investors in petitioner Janus Capital Group, Inc. (“JCG”), filed this securities fraud action. JCG is a publicly traded company that created the Janus family of mutual funds. These mutual funds are organized in a business trust, Janus Investment Fund. Janus Investment Fund retained JCG’s wholly owned subsidiary, Janus Capital Management, LLC, (“JCM”), to be its investment adviser and administrator. Although JCG created Janus Investment Fund, Janus Investment Fund is a separate legal entity owned entirely by mutual fund investors. JCM provides Janus Investment Fund with investment advisory services, but the two entities maintain legal independence.

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