New England Legal Foundation
  • Home
  • About
    • Mission & History
    • Annual Reports
    • Board of Directors
    • State Advisory Councils >
      • Connecticut
      • Maine
      • Massachusetts
      • New Hampshire
      • Rhode Island
      • Vermont
    • Trustees
    • Members
    • Staff
    • Job & Internship Opportunities
  • News & Events
  • Docket
  • Briefs
  • Donate
  • Contact

SEC v. TamboneĀ 

6/2/2010

 
Opposing Judicial Expansion of Primary Liability for Securities Fraud

NELF filed a brief in this case supporting a petition for en banc review of a panel decision which held that primary liability for securities fraud under SEC Rule 10b-5(b) may be based on “implied statements” derived from a defendant’s non-verbal conduct.  The case involves an SEC enforcement action against two mutual fund executives who allegedly made knowing use of inaccurate prospectuses to market mutual funds.  Reversing the trial court’s dismissal of the Rule 10b-5(b) claims, a three-judge panel of the First Circuit (in a 2-to-1 split) held that the SEC stated a claim under Rule 10b-5(b) for primary liability for “mak[ing an] untrue statement” in connection with the sale of securities because the defendants allegedly had a duty to ensure the accuracy of the prospectuses and therefore, by merely using the prospectuses, had allegedly made untrue “implied statements” that the prospectuses were accurate.  

NELF’s brief, filed on behalf of both itself and the Associated Industries of Massachusetts, focused largely on a plain-language approach to the regulation, arguing that the panel majority’s opinion was clearly inconsistent with the language of the rule as well as with Supreme Court precedent.  NELF also argued that the opinion dramatically expands the scope of primary liability for securities fraud beyond anything permitted by other circuits and would undermine the distinction between primary liability and liability for aiding and abetting (a highly significant distinction because the SEC’s burden of proof of scienter is lighter in primary liability actions).  NELF explained that, if allowed to stand, the panel majority’s novel view of Rule 10b-5(b) would presumably affect any officer, director, or other executive who has a duty to investigate the accuracy of documents used in the purchase or sale of securities.  

On June 22, 2009 the full Court withdrew the panel majority opinion and granted en banc review.  In response to the Court’s solicitation for supplemental briefs, NELF filed a second brief and developed further its plain-language argument.  On March 10, 2010, the Court issued an en banc decision rejecting the SEC’s theory and affirming the dismissal of the claims.  As NELF had argued, in its 4-2 decision, the Court decided the issue on the basis of the plain language and structure of the rule, in conjunction with an examination of the statutory framework and Supreme Court precedent.



Comments are closed.

    The Docket

    To obtain a copy of any of NELF's briefs, contact us at info@nelfonline.org.

    Categories

    All
    1st Circuit Court Of Appeals
    2nd Circuit Court Of Appeals
    3rd Circuit Court Of Appeals
    Business Litigation Session
    CT
    CT Superior Court
    CT Supreme Court
    Employer Employee Relationships
    February 2018
    February 2019
    Government Regulation/Administration Of Justice
    MA
    MA Appeals Court
    MA Division Of Administrative Law Appeals
    March 2015
    MA Superior Court
    MA Supreme Judicial Court
    MA US District Court
    ME
    ME Supreme Judicial Court
    NH
    NH Supreme Court
    Property Rights
    RI
    RI Supreme Court
    SCOTUS
    United States Supreme Court
    US Court Of Appeals Federal Circuit
    US District Court ME
    VT
    VT Supreme Court

    RSS Feed

    Archives

    August 2020
    June 2020
    January 2020
    June 2019
    April 2019
    October 2018
    June 2018
    February 2018
    October 2017
    October 2016
    June 2016
    February 2016
    October 2015
    June 2015
    March 2015
    October 2014
    June 2014
    February 2014
    October 2013
    June 2013
    February 2013
    October 2012
    June 2012
    February 2012
    October 2011
    June 2011
    February 2011
    October 2010
    June 2010
    February 2010
    October 2009
    February 2009
    October 2008
    June 2008
    February 2008
    October 2007
    June 2007
    October 2006
    June 2006
    February 2006
    October 2005
    June 2005
    February 2005
    October 2004
    June 2004
    February 2004
    October 2003
    May 2003
    February 2003
    September 2002
    May 2002
    February 2002
    May 2001