The majority opinion in the case established that liability did not extend to "aiders or abettors" that participate in misstatements or omissions in connection with the sale of securities. The Supreme Court held that "private civil liability under Rule 10b-5 does not extend to those who do not engage in a manipulative or deceptive practice but who aid and abet such a violation of 10(b)." This distinguished between the primary liability of violators of Rule 10b-5 and non-primary defendants, who had not directly deceived investors. This was a more literal reading than hitherto of Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission's Rule 10b-5, which prohibit fraud or deceit in connection with the purchase or sale of securities.
The Supreme Court's ruling reversed a long history of court decisions and SEC enforcement actions where aiders and abettors, often banks, accountants, trustees, and attorneys, were found liable under Rule 10b-5. The case makes the distinction between primary violators, who directly misstate or omit material facts that are relied upon by investors, and aiders and abettors. According to the court: "A plaintiff must show reliance on the defendant's misstatement or omission to recover under 10b-5. Basic Inc. v. Levinson, supra, at 243. Were we to allow the aiding and abetting action proposed in this case, the defendant could be liable without any showing that the plaintiff relied upon the aider and abettor's statement or actions. . . .". When investors relied on such statements or actions, the court extends Rule 10b-5 liability to these secondary participants. The Court stated that "any person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under 10b-5. . .."
Blackman, S. G. (1994). "An Analysis of Aider and Abettor Liability Under Section 10(b) of the Securities Exchange Act of 1934: Central Bank of Denver v. First Interstate Bank of Denver". Connecticut Law Review. 27: 1323. ISSN 0010-6151.
Hanson, Randall K.; Rockness, Joanne W. (1994). "Gaining a New Balance in the Courts: Some of the Liability Burden Has Disappeared – But a Heavy Weight Remains". Journal of Accountancy. 178 (2): 40–44. ISSN 0021-8448.
External links
Text of Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511U.S. 164 (1994) is available from:Google ScholarJustiaLibrary of CongressOyez (oral argument audio)
central, bank, denver, first, interstate, bank, denver, central, bank, denver, first, interstate, bank, denver, 1994, decision, united, states, supreme, court, which, held, private, plaintiffs, maintain, aiding, abetting, suits, under, securities, exchange, ce. Central Bank of Denver v First Interstate Bank of Denver 511 U S 164 1994 was a decision by the United States Supreme Court which held private plaintiffs may not maintain aiding and abetting suits under Securities Exchange Act 10 b Central Bank v First Interstate BankSupreme Court of the United StatesArgued November 30 1993Decided April 19 1994Full case nameCentral Bank of Denver N A Petitioner v First Interstate Bank of Denver N A and Jack K NaberCitations511 U S 164 more 114 S Ct 1439 128 L Ed 2d 119 62 U S L W 4230Case historyPriorCertiorari to the United States Court of Appeals for the Tenth CircuitHoldingA private plaintiff may not maintain an aiding and abetting suit under Section 10 b of the Securities Exchange Act Tenth Circuit reversed Court membershipChief Justice William Rehnquist Associate Justices Harry Blackmun John P StevensSandra Day O Connor Antonin ScaliaAnthony Kennedy David SouterClarence Thomas Ruth Bader GinsburgCase opinionsMajorityKennedy joined by Rehnquist O Connor Scalia ThomasDissentStevens joined by Blackmun Souter GinsburgLaws appliedSection 10 b of Securities Exchange Act The majority opinion in the case established that liability did not extend to aiders or abettors that participate in misstatements or omissions in connection with the sale of securities The Supreme Court held that private civil liability under Rule 10b 5 does not extend to those who do not engage in a manipulative or deceptive practice but who aid and abet such a violation of 10 b This distinguished between the primary liability of violators of Rule 10b 5 and non primary defendants who had not directly deceived investors This was a more literal reading than hitherto of Section 10 b of the Securities Exchange Act of 1934 and the Securities and Exchange Commission s Rule 10b 5 which prohibit fraud or deceit in connection with the purchase or sale of securities The Supreme Court s ruling reversed a long history of court decisions and SEC enforcement actions where aiders and abettors often banks accountants trustees and attorneys were found liable under Rule 10b 5 The case makes the distinction between primary violators who directly misstate or omit material facts that are relied upon by investors and aiders and abettors According to the court A plaintiff must show reliance on the defendant s misstatement or omission to recover under 10b 5 Basic Inc v Levinson supra at 243 Were we to allow the aiding and abetting action proposed in this case the defendant could be liable without any showing that the plaintiff relied upon the aider and abettor s statement or actions When investors relied on such statements or actions the court extends Rule 10b 5 liability to these secondary participants The Court stated that any person or entity including a lawyer accountant or bank who employs a manipulative device or makes a material misstatement or omission on which a purchaser or seller of securities relies may be liable as a primary violator under 10b 5 See also EditList of United States Supreme Court cases volume 511 List of United States Supreme Court cases Lists of United States Supreme Court cases by volume List of United States Supreme Court cases by the Rehnquist Court Stoneridge Investment Partners v Scientific Atlanta 2008 Further reading EditBlackman S G 1994 An Analysis of Aider and Abettor Liability Under Section 10 b of the Securities Exchange Act of 1934 Central Bank of Denver v First Interstate Bank of Denver Connecticut Law Review 27 1323 ISSN 0010 6151 Hanson Randall K Rockness Joanne W 1994 Gaining a New Balance in the Courts Some of the Liability Burden Has Disappeared But a Heavy Weight Remains Journal of Accountancy 178 2 40 44 ISSN 0021 8448 External links EditText of Central Bank of Denver N A v First Interstate Bank of Denver N A 511 U S 164 1994 is available from Google Scholar Justia Library of Congress Oyez oral argument audio This article related to the Supreme Court of the United States is a stub You can help Wikipedia by expanding it vte Retrieved from https en wikipedia org w index php title Central Bank of Denver N A v First Interstate Bank of Denver N A amp oldid 1168629145, wikipedia, wiki, book, books, library,
