511 U.S. 164 (1994)
Petitioner served as an indenture trustee for bonds issued to finance public improvements for the local public building authority. Petitioner had become aware that the appraisals on the land securing the bonds may have been optimistic. Petitioner ordered an independent review but postponed it. Thereafter, the authority defaulted on the bonds. Respondents sued petitioner for being secondarily liable under the Securities Exchange Act of 1934, 15 U.S.C.S. § 78j, for its conduct in aiding and abetting the authority's fraud.
The district court dismissed the complaint, but the appellate court reinstated it. Petitioner appealed.
- The court held that a private action for aiding and abetting could not be maintained under 17 C.F.R. § 240.10b-5 (1993) for acts prohibited by 15 U.S.C.S. § 78j.
- Only primary violators were liable under § 78j.
- Respondents' complaint did not allege that petitioner was a primary violator.
- Therefore, the court reversed the appellate court's decision.
The court reversed the judgment because respondents could not maintain a private action against petitioner for aiding and abetting another's use of a manipulative device or material misstatement where petitioner had not been the primary violator of the statutory prohibition and had not committed any manipulative or deceptive acts.
Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials