White Paper Out on Supreme Court Scheme Liability Ruling

I have prepared a white paper on the Supreme Court’s decision in Stoneridge rejecting scheme liability under Rule 10b-5. Click here for white paper.

• The opinion has broad implications for the business community and for securities professionals.
• The opinion is primarily based on the reliance element of Rule 10b-5, which is an essential element of the private right of action under the antifraud rule.
• The opinion strongly reaffirms the Court’s earlier Central Bank ruling that there is no private right of action under Rule 10b-5 for those who aid and abet securities fraud.
• The opinion is partially based on the broad policy of not expanding an implied federal private right of action in the face of a congressional refusal to do so
• The opinion is based on a fear that expanding securities fraud liability to secondary actors could harm the competitiveness of US markets at a critical time.
• The Court reiterated that, since the SEC can bring an enforcement action, against aiders and abetters, there is a remedy to right a wrong.
• The Court admitted that conduct by secondary actors can itself be deceptive.
• The Court said that the Rule 10b-5 securities fraud is not congruent with common law fraud.