Client Alert

Fifth Circuit Limits Secondary Liability Under Section 10(b) and Rule 10b-5 While Supreme Court Accepts Review of Eighth Circuit Decision

April 04, 2007

Christopher H. McGrath and Kimberley A. Donohue

Ever since the Supreme Court eliminated aiding and abetting liability in private federal securities fraud actions, Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 168 (1994), federal courts and litigants have continued to debate what alleged conduct by secondary actors will be sufficient to state a claim for primary liability under the securities laws. Given the emerging Circuit split on this issue and the anticipated review of Stoneridge by the United States Supreme Court, a brief discussion of the Circuit decisions might be helpful.

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