Supreme Court Hears Arguments on Expanding Securities Fraud Liability to Secondary Actors Based on Allegedly Fraudulent, Arm's Length Business Transactions
In yesterday's argument in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., No. 06-43 (U.S.), a number of Justices were skeptical of exposing secondary actors to private liability under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 based on allegedly fraudulent, arm's length business transactions. These Justices appeared concerned that Petitioner's proposed test for liability of secondary actors had no limitation, and would allow secondary actors not subject to liability to prove their innocence only after a costly trial. Furthermore, Chief Justice Roberts expressed reservation at further expanding the implied right of action under the securities laws when Congress is aware of the relevant issues and actively legislating.
Click on the button below to download a memorandum regarding the Stoneridge case and yesterday's arguments before the Supreme Court.
Click here for a copy of the official transcript of the arguments.