Contributions

Determining the Scope of Primary Liability in Securities Fraud Litigation

by Charles Bloom1

Fraud is fun­da­men­tal­ly about decep­tion. Decep­tion can­not hap­pen with­out com­mu­ni­ca­tion, so there must always be some­one who “makes”2 a decep­tive state­ment. This propo­si­tion is sim­ple enough in straight­for­ward busi­ness trans­ac­tions, but in the secu­ri­ties law con­text, this idea alone fails to cap­ture the “count­less and vari­able schemes devised by those who seek the … mon­ey of oth­ers on the promise of prof­its.”3

In 1934, Con­gress broad­ly pro­scribed the use of “any manip­u­la­tive device or con­trivance” in secu­ri­ties trans­ac­tions and empow­ered the new­ly-formed Secu­ri­ties and Exchange Com­mis­sion (“SEC” or “the Com­mis­sion”) to define and enforce this expan­sive pro­hi­bi­tion.4 The SEC, in turn, pro­mul­gat­ed Rule 10b‑5 (“the Rule”), which sets out in expan­sive lan­guage the “device[s] or contrivance[s]” that are unlaw­ful under the Act.5 The Rule’s capa­cious lan­guage sup­ports the Commission’s broad author­i­ty, but it also rais­es ques­tions con­cern­ing pre­cise­ly what con­duct vio­lates the Rule, and who may bring an action against a vio­la­tor. All secu­ri­ties trans­ac­tions require par­tic­i­pa­tion from numer­ous indi­vid­u­als, so ques­tions of which par­ties may be liable for fraud—and relat­ed­ly who may impose that liability—are par­tic­u­lar­ly significant.

This Con­tri­bu­tion will argue that an indi­vid­ual may be pri­mar­i­ly liable under Rule 10b‑5(a) or (c) for insert­ing false or mis­lead­ing state­ments into investor mate­ri­als, even if that indi­vid­ual is not con­sid­ered the “mak­er” of those state­ments as required for pri­ma­ry lia­bil­i­ty under Rule 10b‑5(b).

* * * * *

Courts have con­sis­tent­ly rec­og­nized a pri­vate right of action with­in Rule 10b‑5.6 How­ev­er, the Supreme Court has been unwill­ing to expand pri­vate lia­bil­i­ty for sec­ondary actors—such as lawyers or accountants—who play a role in a fraud­u­lent trans­ac­tion7 but do not make a “pub­lic state­ment” on which the plain­tiff could rely.8 This rea­son­ing fore­closed var­i­ous the­o­ries of scheme lia­bil­i­ty, and effec­tive­ly cast sub­sec­tion (b), which con­cerns only the “mak­ing” of a false state­ment, as the cor­ner­stone of Rule 10b‑5. Com­bined with the nar­row def­i­n­i­tion of “make” set forth in Janus Cap­i­tal Group Inc. v. First Deriv­a­tive Traders,9 the via­bil­i­ty of pri­vate actions under sub­sec­tions (a) or (c) appeared dubi­ous until recent­ly in Loren­zo v. Secu­ri­ties and Exchange Com­mis­sion, where the Court held that one who dis­sem­i­nates false state­ments may be liable even if they did not “make” the state­ment as defined in Janus.10 Since the Court in Loren­zo specif­i­cal­ly addressed dis­sem­i­na­tion, the cen­tral ques­tion is whether it should be read as a broad affir­ma­tion of expan­sive scheme lia­bil­i­ty, or a nar­row pro­scrip­tion on fraud­u­lent dis­sem­i­na­tion alone. Since pri­vate plain­tiffs can­not impose sec­ondary lia­bil­i­ty, the ques­tion of how far Loren­zo reach­es direct­ly affects the scope of the pri­vate right of action for secu­ri­ties fraud.

Since Cen­tral Bank of Den­ver, N.A. v. First Inter­state Bank of Den­ver, N.A.,11 courts have diverged in their appli­ca­tion of Rule 10b‑5(a) and (c) in pri­vate secu­ri­ties lit­i­ga­tion.12 Sub­sec­tion (a) broad­ly con­tem­plates “any device, scheme or arti­fice to defraud,” and like­wise, sub­sec­tion (c) cov­ers “any act, prac­tice or course of busi­ness which oper­ates … as a fraud or deceit.”13 Indeed, the Supreme Court has described the repeat­ed use of the word “any” as evinc­ing clear con­gres­sion­al intent of the law’s breadth.14 Secu­ri­ties trans­ac­tions are nec­es­sar­i­ly mul­ti­fac­eted, requir­ing vary­ing lev­els of input from a wide range of indi­vid­u­als and enti­ties. Many of these actors, while sec­ondary to the ulti­mate trans­ac­tion, could arguably employ a “device, scheme or arti­fice” under sub­sec­tion (a), or engage in an “act, prac­tice or course of busi­ness” under sub­sec­tion (c). As men­tioned pre­vi­ous­ly, the pro­hi­bi­tion of pri­vate aid­ing-and-abet­ting claims15 is meant to curb the the­o­ret­i­cal­ly lim­it­less lia­bil­i­ty that such a read­ing would pro­duce.16 How­ev­er, this pro­hi­bi­tion mere­ly shifts the ques­tion from whether a pri­vate indi­vid­ual may bring a sec­ondary claim, to what one must demon­strate to make out a pri­ma­ry claim. Look­ing exclu­sive­ly at the broad lan­guage of sub­sec­tions (a) and (c), the answer is any­thing but clear.

The most straight­for­ward con­cern is that a per­mis­sive read­ing of sub­sec­tions (a) and (c) swal­lows sub­sec­tion (b) by allow­ing plain­tiffs to repack­age a sec­ondary claim as a pri­ma­ry one.17 Courts are under­stand­ably con­cerned by the prospect of friv­o­lous lit­i­ga­tion under Rule 10b‑5,18 and that con­cern has spurred judi­cial efforts to lim­it the mean­ing of sub­sec­tions (a) and (c) with­out ren­der­ing them toothless.

Con­cern­ing sub­sec­tion (a), the Court has not­ed that its terms have his­tor­i­cal­ly con­not­ed both “know­ing or inten­tion­al prac­tices.”19 Inten­tion­al­i­ty as a require­ment here is straight­for­ward and tracks with the ele­ment of sci­en­ter required to make out any claim under Rule 10b‑5.20 Relat­ed­ly, “prac­tice” is typ­i­cal­ly under­stood to mean either an act that is per­formed habit­u­al­ly, or is a cus­tom­ary occur­rence with­in an indus­try.21 While the inten­tion­al­i­ty idea is intu­itive due to its implic­it inclu­sion in the terms of the statute, the con­cept of “prac­tice” requires read­ing addi­tion­al his­tor­i­cal mean­ing into the words of sub­sec­tion (a). Addi­tion­al­ly, such an under­stand­ing may undu­ly nar­row the subsection’s reach by para­dox­i­cal­ly requir­ing that the fraud be part of some accept­ed busi­ness prac­tice.22 Although judi­cial guid­ance on the terms of sub­sec­tion (a) can be help­ful, this should not sup­plant the plain mean­ing of the terms themselves.

Courts rely on canons of statu­to­ry inter­pre­ta­tion in apply­ing the lan­guage of these sub­sec­tions.23 First, the rule against sur­plusage, which the Supreme Court has described as “the car­di­nal rule” of statu­to­ry inter­pre­ta­tion, states that “if pos­si­ble, effect shall be giv­en to every clause and part of a statute.”24 As applied to Rule 10b‑5(c), this canon cau­tions against read­ing terms such as “any … course of busi­ness”25 in such a way as to ren­der the pro­hi­bi­tion on false state­ments in sub­sec­tion (b) mean­ing­less. Inverse­ly, the general/specific canon instructs that spe­cif­ic terms in a rule, such as the “untrue state­ment” of sub­sec­tion (b), nar­row the scope of gen­er­al ones, such as the “course of busi­ness” of sub­sec­tion (c).26

Applied to Loren­zo, where the peti­tion­er had dis­sem­i­nat­ed untrue state­ments he had not made, the argu­ment fol­lows that he could not be liable under Rule 10b‑5(a) or (c).27 The the­o­ret­i­cal under­pin­ning of this argu­ment, as set forth by the Sec­ond, Eighth and Ninth Cir­cuit Courts pri­or to Loren­zo, is that pri­ma­ry lia­bil­i­ty will only lie under sub­sec­tions (a) or (c) if sub­sec­tion (b) does not ful­ly cov­er the alleged con­duct.28 If this rea­son­ing is per­sua­sive, then the import of the major­i­ty opin­ion in Loren­zo is clear: pri­ma­ry lia­bil­i­ty imposed under a broad pro­vi­sion that oth­er­wise fails under a rel­e­vant nar­row­er pro­vi­sion “evis­cer­ates” the “clear line between pri­ma­ry and sec­ondary lia­bil­i­ty in fraud­u­lent-mis­state­ment cas­es.”29 More specif­i­cal­ly, this argu­ment also impli­cates Janus, where the court defined the nar­row scope of “mak­er lia­bil­i­ty” under Rule 10b‑5(b).30 As Jus­tice Thomas not­ed in dis­sent in Loren­zo, the Court’s def­i­n­i­tion of mak­er lia­bil­i­ty stemmed from a desire to avoid impos­ing pri­ma­ry lia­bil­i­ty on indi­vid­u­als with ancil­lary roles in the cre­ation of a false state­ment.31 Accept­ing this argu­ment, it the­o­ret­i­cal­ly fol­lows that under Loren­zo, those ancil­lary indi­vid­u­als could still be pri­mar­i­ly liable, albeit under a dif­fer­ent subsection.

* * * * *

Loren­zo unques­tion­ably set­tles the issue of whether a par­ty who dis­sem­i­nates but does not “make” false state­ments is liable under Rule 10b‑5, but it leaves open the inverse: whether an indi­vid­ual can be liable for draft­ing false state­ments that they did not dis­sem­i­nate.32 Nat­u­ral­ly, this fact-rever­sal begs two dis­tinct ques­tions: whether the Court decid­ed Loren­zo cor­rect­ly on its own terms, and if so, whether its rea­son­ing extends to draft­ing false state­ments. Look­ing at the plain mean­ing of the Rule, as well as the Court’s secu­ri­ties fraud prece­dents, the answer to both ques­tions must be yes.

First, the Loren­zo deci­sion rests on a strong foun­da­tion of plain mean­ing tex­tu­al analy­sis. The ordi­nary mean­ings of terms such as “scheme” in sub­sec­tion (a) or “course of busi­ness” in sub­sec­tion (c) “cap­ture a wide range of con­duct.”33 As a sim­ple mat­ter of apply­ing the law to facts, know­ing­ly dis­sem­i­nat­ing a false state­ment is cer­tain­ly a “scheme”—which com­mon­ly includes any “plan or pro­gram of action”34—under sub­sec­tion (a) or a “course of busi­ness” under sub­sec­tion (c).35

Sec­ond, the appli­ca­tion of inter­pre­tive canons to nar­row sub­sec­tions (a) and (c) is unper­sua­sive. As a thresh­old mat­ter, the canons are for resolv­ing ambi­gu­i­ty, and when a rule’s lan­guage is unam­bigu­ous, “judi­cial inquiry is com­plete.”36 Even assum­ing the over­lap­ping terms here cre­ate ambi­gu­i­ty, apply­ing the canons is still inap­pro­pri­ate. The sur­plusage canon should only apply where the over­lap is so severe that “one sub­sec­tion ren­ders anoth­er mean­ing­less.”37 Here, there are cer­tain­ly some false state­ments “cov­ered by sub­sec­tion (b) [that] remain out­side the grasp of … sub­sec­tions (a) and (c).”38 Like­wise, the general/specific canon should only apply where the rel­e­vant pro­vi­sions are com­pa­ra­ble in terms of scope. A “scheme” is no more gen­er­al or spe­cif­ic than a “mis­state­ment;” they are sim­ply dif­fer­ent types of con­duct.39 Indeed, Jus­tice Thomas’s dis­sent in Loren­zo sup­port­ed apply­ing the general/specific canon with only a cita­tion to a case con­cern­ing a nar­row bank­rupt­cy pro­vi­sion that does not cause this issue.40

The major­i­ty in Loren­zo was unper­suad­ed both by Jus­tice Thomas’s con­struc­tion of the Rule and his asser­tion that the Court had blurred the crit­i­cal dis­tinc­tion between pri­ma­ry and sec­ondary lia­bil­i­ty.41 Instead, the Court pro­ceed­ed from their long­stand­ing recog­ni­tion of the “con­sid­er­able over­lap” of the sub­sec­tions, not­ing that “[t]he idea that each sub­sec­tion of Rule 10b–5 gov­erns a sep­a­rate type of con­duct is … dif­fi­cult to rec­on­cile with the lan­guage of sub­sec­tions (a) and (c).”42 Fur­ther, the Court found that apply­ing the canons used in dis­sent did not tru­ly help rec­on­cile the super­fluity con­cerns that moti­vat­ed its analy­sis.43 A more straight­for­ward read­ing must allow for over­lap. In turn, that over­lap will nec­es­sar­i­ly impli­cate sit­u­a­tions like Loren­zo, where there can be mul­ti­ple ways to frame decep­tive con­duct.44

Anoth­er way to view Loren­zo is as a sim­ple affir­ma­tion of what the Court has said all along con­cern­ing secu­ri­ties fraud: the line between pri­ma­ry and sec­ondary lia­bil­i­ty should be drawn with regard to the over­all weight of a decep­tive act with­in a fraud, rather than just the nar­row role of the actor.45 Even before Janus solid­i­fied the def­i­n­i­tion of “make,” courts were hes­i­tant to find drafters of false state­ments pri­mar­i­ly liable under sub­sec­tion (b).46 Nonethe­less, courts were com­fort­able impos­ing lia­bil­i­ty under sub­sec­tion (a) or (c) as long as they were sat­is­fied that the con­duct con­sti­tut­ed “sub­stan­tial par­tic­i­pa­tion or intri­cate involve­ment in the prepa­ra­tion of fraud­u­lent state­ments.”47

This “sub­stan­tial par­tic­i­pa­tion” stan­dard strikes the right bal­ance by look­ing at the over­all cul­pa­bil­i­ty of an act. More­over, it com­plete­ly obvi­ates the com­mon con­cern that a sec­re­tary or mail­room clerk who is “tan­gen­tial­ly involved” in some fraud will be unjus­ti­fi­ably hauled into court by a jilt­ed investor.48 Admit­ted­ly, the notions of “sub­stan­tial par­tic­i­pa­tion” or “intri­cate involve­ment” are not well-defined, but this con­cern is some­what over­stat­ed. For a plain­tiff to pre­vail under any sub­sec­tion of Rule 10b‑5, they must not only prove ele­ments like sci­en­ter and reliance,49 but must also over­come sig­nif­i­cant pro­ce­dur­al hur­dles imposed by Con­gress to curb friv­o­lous lit­i­ga­tion.50 The hypo­thet­i­cal mail­room clerk or sec­re­tary will rarely, if ever, sat­is­fy these elements.

A lawyer or accoun­tant, on the oth­er hand, is a dif­fer­ent sto­ry. Where a lawyer or accoun­tant drafts false state­ments that implic­it­ly car­ry the weight of their author­i­ty, the fact that they did not “make” those state­ments under Janus should not excuse them from lia­bil­i­ty. Nar­row inter­pre­ta­tion of Rule 10b‑5 comes at the cost of allow­ing a gap­ing loop­hole where one who is intri­cate­ly involved in cre­at­ing false state­ments can escape lia­bil­i­ty as long as they nei­ther made a state­ment for pur­pos­es of sub­sec­tion (b), nor dis­sem­i­nat­ed one for the pur­pos­es of sub­sec­tions (a) or (c).51 Fur­ther, this neg­a­tive effect is even more egre­gious in the SEC enforce­ment con­text, where a drafter of false state­ments would escape pri­ma­ry lia­bil­i­ty, but could still be sub­ject to sec­ondary aid­ing-and-abet­ting lia­bil­i­ty. Because sec­ondary lia­bil­i­ty must anchor to a pri­ma­ry vio­la­tion,52 a drafter of false state­ments would escape sec­ondary lia­bil­i­ty when­ev­er the SEC fails to prove all the ele­ments of the  pri­ma­ry vio­la­tion.53 Fail­ure to impose lia­bil­i­ty in these kinds of sit­u­a­tions is plain­ly con­trary to the text and pur­pose of the secu­ri­ties laws.54

* * * * *

The ten­sion between the diver­gent inter­pre­ta­tions of Rule 10b‑5 stems from a fun­da­men­tal dis­agree­ment about how its sub­sec­tions should appro­pri­ate­ly inter­act. In gen­er­al, inter­pret­ing rules to avoid over­lap and super­fluity is an admirable goal, but it should nev­er be the only goal. As such, it is vital to care­ful­ly con­sid­er whether such an inter­pre­ta­tion is war­rant­ed in the first instance; and sec­ond, whether the result com­ports with the pri­ma­ry pur­pose of the Rule itself. Loren­zo appro­pri­ate­ly reminds us that these laws are meant to “root out all man­ner of secu­ri­ties fraud.”55 Read­ing Rule 10b‑5 in a way that elim­i­nates lia­bil­i­ty for those who dis­sem­i­nate or draft fraud­u­lent state­ments is plain­ly con­trary to that mandate.

1. Charles Bloom is a J.D. Can­di­date (2021) at New York Uni­ver­si­ty School of Law. This piece is a com­men­tary on the 2020 prob­lem from the Irv­ing R. Kauf­man Memo­r­i­al Secu­ri­ties Law Moot Court Com­pe­ti­tion in New York, NY, host­ed by Ford­ham Uni­ver­si­ty School of Law. Oral argu­ments for the com­pe­ti­tion were can­celed due to ongo­ing efforts to stem the spread of COVID-19. Instead, the com­pe­ti­tion was judged sole­ly on the con­tent of com­peti­tors’ briefs. The ques­tion pre­sent­ed asked whether an employ­ee who inserts a false or mis­lead­ing state­ment into investor mate­ri­als is sub­ject to pri­ma­ry lia­bil­i­ty under Rule 10b‑5(a) or (c), even if that indi­vid­ual is not the “mak­er” of the state­ment for pur­pos­es of Rule 10b‑5(b). The views expressed in this arti­cle do not nec­es­sar­i­ly rep­re­sent the views of the author. Rather, they are a dis­til­la­tion of argu­ments that would like­ly have been pre­sent­ed on the author’s side at the Kauf­man Secu­ri­ties Law Competition.

2. See Loren­zo v. SEC, 139 S. Ct. 1094, 1108 (2019) (Thomas, J., dis­sent­ing) (not­ing that defen­dant who mere­ly trans­mit­ted a mes­sage writ­ten by his supe­ri­ors, did not “make” a fraud­u­lent state­ment with­in the mean­ing of Rule 10b‑5).

3. SEC v. W.J. Howey Co., 328 U.S. 293, 299 (1946).

4. Secu­ri­ties Exchange Act of 1934, 15 U.S.C. § 78j.

5. 17 C.F.R. 240.10b‑5 states:

It shall be unlaw­ful for any per­son, direct­ly or indirectly …

(a) To employ any device, scheme, or arti­fice to defraud,

(b) To make any untrue state­ment of a mate­r­i­al fact or to omit to state a mate­r­i­al fact nec­es­sary in order to make the state­ments made, in the light of the cir­cum­stances under which they were made, not mis­lead­ing, or

(c) To engage in any act, prac­tice, or course of busi­ness which oper­ates or would oper­ate as a fraud or deceit upon any per­son, in con­nec­tion with the pur­chase or sale of any security.

6. Kar­don v. Nat’l Gyp­sum Co., 69 F. Supp. 512, 514 (E.D. Pa. 1946); see also, e.g., Hal­libur­ton Co. v. Eri­ca P. John Fund, Inc., 573 U.S. 258, 267 (2014) (cit­ing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730 (1975)).

7. See Cen­tral Bank of Den­ver, N.A., v. First Inter­state Bank of Den­ver, N.A., 511 U.S. 164, 191 (1994) (hold­ing there is no pri­vate aid­ing and abet­ting lia­bil­i­ty under § 10(b)).

8. Stoner­idge Inv. Part­ners, LLC v. Sci­en­tif­ic-Atlanta, 552 U.S. 148, 149 (2008) (hold­ing no lia­bil­i­ty under § 10(b) where the respon­dent did not com­mu­ni­cate a decep­tive state­ment to investors).

9. 564 U.S. 135, 142 (2011) (defin­ing the mak­er of a state­ment for pur­pos­es of Rule 10b‑5 as one who has “ulti­mate author­i­ty” over it).

10. 139 S. Ct. 1094, 1100-01 (2019).

11. 511 U.S. 164 (1994).

12. See In re Longfin Corp. Sec Class Action Lit­ig., No. 18cv2933 (DLC), 2019 WL 1569792 at *1 (S.D.N.Y. April 11, 2019) (find­ing that a co-defen­dant “may be liable regard­less of whether it ‘made’ any mis­rep­re­sen­ta­tions or omis­sions” where it know­ing­ly facil­i­tat­ed anoth­er co-defendant’s fraud­u­lent offer­ing); Mal­ouf v. SEC, 933 F.3d 1248, 1259 (10th Cir. 2019) (find­ing that Rule 10b‑5(a) and (c) encom­pass invest­ment adviser’s fail­ure to cor­rect firm’s false or mis­lead­ing state­ments); cf. Pub. Pen­sion Fund Grp. v. KV Pharm. Co., 679 F.3d 972, 987 (8th Cir. 2012) (find­ing that company’s indi­vid­ual offi­cers were not sub­ject to scheme lia­bil­i­ty where plain­tiffs only alleged that they had knowl­edge of company’s mis­rep­re­sen­ta­tions). See also The Pri­vate Secu­ri­ties Lit­i­ga­tion Reform Act, 15 U.S.C. § 78u–4 et seq. (1995), (cod­i­fy­ing the thresh­old require­ments for pri­vate secu­ri­ties lit­i­ga­tion under Sec­tion 10(b)).

13. 17 C.F.R. 240.10b‑5.

14. Affil­i­at­ed Ute Cit­i­zens of Utah v. Unit­ed States, 406 U.S. 128, 151 (1972).

15. See Cen­tral Bank, 511 U.S. at 191.

16. See, e.g., Stoner­idge, 552 U.S. at 149–50,

17. See, e.g., Loren­zo, 139 S. Ct. at 1107 (Thomas, J., dis­sent­ing) (express­ing con­cern that the Court had found con­duct typ­i­cal­ly char­ac­ter­ized as aid­ing and abet­ting to con­sti­tute a pri­ma­ry violation).

18. See Jonathan Stem­pel, A Law­suit a Day: U.S. Secu­ri­ties Class Actions Soar, Reuters (Jan. 29, 2018), https://www.reuters. com/ar­ti­cle/us-stocks-clas­s­ac­tion/a‑law­suit-a-day-u-s-secu­ri­ties-class-actions-soar-idUSKB­N1­FI2FM.

19. Aaron v. SEC, 446 U.S. 680, 696 (1980) (not­ing that the terms of the statute evince an intent requirement).

20. See, e.g., Ernst & Ernst v. Hochfelder, 425 U.S. 185, 186 (1976); In re Int’l Bus. Machines Corp. Sec. Lit­ig., 163 F.3d 102, 106 (2d Cir. 1998).

21. Prac­tice, The Mer­ri­am-Web­ster Dic­tio­nary, https://www.merriam-webster.com/dictionary/practice (last vis­it­ed June 21, 2020).

22. See SEC v. Cap­i­tal Gains Research Bureau, 375 U.S. 180, 195 (1963) (not­ing that Con­gress intend­ed secu­ri­ties fraud leg­is­la­tion to be con­strued “flex­i­bly to effec­tu­ate its reme­di­al pur­pos­es”); but see Unit­ed States v. Naf­tal­in, 441 U.S. 768, 769 (1979) (not­ing that these terms con­tem­plate “fraud­u­lent scheme[s],” mean­ing busi­ness practices—such as short-selling—that are con­duct­ed fraud­u­lent­ly (empha­sis added)).

23. See, e.g., SEC v. Fami­lant, 910 F. Supp. 2d 83, 95 (D.D.C. 2012).

24. D. Gins­berg & Sons v. Pop­kin, 285 U.S. 204, 208 (1932) (find­ing that a statute vest­ing bank­rupt­cy courts with broad author­i­ty did not super­sede a nar­row­er one that specif­i­cal­ly gov­erns arrest and deten­tion of bankrupts).

25. 17 C.F.R. 240.10b‑5.

26. See Antonin Scalia & Bryan A. Gar­ner, Read­ing Law: The Inter­pre­ta­tion of Legal Texts 51 (1st ed. 2012).

27. See Loren­zo, 139 S. Ct. at 1108 (Thomas, J., dis­sent­ing) (cit­ing Rad­LAX Gate­way Hotel, LLC v. Amal­ga­mat­ed Bank, 566 U.S. 639, 645–46 (2012)).

28. See Pub. Pen­sion Fund Grp. v. KV Pharm. Co., 679 F.3d 972, 987 (8th Cir. 2012) (hold­ing that a fraud­u­lent scheme must include decep­tive con­duct apart from false state­ments); WPP Lux. Gam­ma Three Sarl v. Spot Run­ner, Inc., 655 F.3d 1039, 1057 (9th Cir. 2011) (same); Lentell v. Mer­rill Lynch & Co., 396 F.3d 161, 177 (2d Cir. 2005) (same).

29. Loren­zo, 139 S. Ct. at 1106 (Thomas, J., dissenting).

30. Janus, 564 U.S. at 142.

31. Loren­zo, 139 S. Ct. at 1110. (Thomas, J., dissenting).

32. This fact pat­tern nec­es­sar­i­ly assumes that the drafter is not also the “mak­er” of the state­ments, which would instead bring them under the ambit of Janus.

33. Loren­zo, 139 S. Ct. at 1101.

34. Scheme, The Mer­ri­am-Web­ster Dic­tio­nary, https://www.merriam-webster.com/dictionary/scheme (last vis­it­ed Oct. 18, 2020).

35. Id.

36. Rubin v. Unit­ed States, 449 U.S. 424, 430 (1981) (treat­ing a “pledge of stock” as plain­ly with­in the mean­ing of “offer or sale,” as described in the 1933 Secu­ri­ties Act).

37. Fami­lant, 910 F. Supp. 2d at 95 (not­ing that where incom­pa­ra­ble cat­e­gories of pro­scribed con­duct are described in a statute, one can­not ren­der the oth­er meaningless).

38. Id.

39. Id. at 96.

40. Loren­zo, 139 S. Ct. at 1108-09 (Thomas, J., dis­sent­ing) (cit­ing Rad­LAX, 566 U.S. at 645).

41. Loren­zo, 139 S. Ct. at 1103.

42. Id. at 1102.

43. See Loren­zo, 139 S. Ct. at 1102 (not­ing that the same ana­lyt­i­cal frame­work used in the Dis­sent does lit­tle to resolve super­fluity con­cerns as between sub­sec­tions (a) and (c)).

44. See also Mal­ouf v. SEC, 933 F.3d 1248, 1260 (10th Cir. 2019) (find­ing that invest­ment advisor’s fail­ure to cor­rect mis­state­ments con­cern­ing con­flict of inter­est could trig­ger pri­ma­ry lia­bil­i­ty under Rule 10b‑5(a) or (c)); SEC v. Mon­terosso, 756 F.3d 1326 (11th Cir. 2014) (hold­ing fal­si­fi­ca­tion of finan­cial records is action­able under Rule 10b‑5(a) despite the fact that the con­duct involves a false state­ment); Fami­lant, 910 F. Supp. 2d at 83 (hold­ing that scheme to con­ceal poor finan­cial per­for­mance is a vio­la­tion of Rule 10b‑5(a), despite the fact that it could be an omis­sion under sub­sec­tion (b)).

45. See Cen­tral Bank, 511 U.S. at 191 (“[A]ny per­son … includ­ing a lawyer, accoun­tant, or bank . . . may be liable as a pri­ma­ry vio­la­tor under 10b‑5.…”); Stoner­idge Inv. Part­ners, LLC v. Sci­en­tif­ic-Atlanta, 552 U.S. 148, 165–66 (2008) (not­ing that “sec­ondary actors who com­mit pri­ma­ry vio­la­tions” are pri­mar­i­ly liable).

46. See In re Zoran Corp. Deriv­a­tive Lit­ig., 511 F. Supp. 2d 986, 1011 (N.D. Cal. 2007) (find­ing that admin­is­ter­ing back­dat­ed stock options did not lead to lia­bil­i­ty under Rule 10b‑5(b) but was nonethe­less suf­fi­cient under sub­sec­tions (a) or (c)).

47. Id. (quot­ing Howard v. Everex Sys., Inc., 228 F.3d 1057, 1061 n.5 (9th Cir. 2000)).

48. See Loren­zo, 139 S. Ct. at 1111 (Thomas, J., dissenting).

49. See In re Int’l Bus. Machines Corp., 163 F.3d at 106 (list­ing the required ele­ments to state a cause of action under Rule 10b‑5).

50. See gen­er­al­ly, Pri­vate Secu­ri­ties Lit­i­ga­tion Reform Act, 15 U.S.C. § 78u–4 et seq. (1995) (impos­ing height­ened plead­ing stan­dards on pri­vate plain­tiffs includ­ing requir­ing proof of loss cau­sa­tion, and impos­ing a stay of dis­cov­ery dur­ing the pen­den­cy of a motion to dismiss).

51. See Loren­zo v. SEC, 872 F.3d 578, 594 (D.C. Cir. 2017), aff’d, 139 S. Ct. 1094 (2019) (cit­ing WPP Lux. Gam­ma Three Sarl v. Spot Run­ner, Inc., 655 F.3d 1039, 1057–58 (9th Cir. 2011) (not­ing that the dis­sent found Lorenzo’s con­duct to be out­side the scope of Rule 10b‑5(a) and (c) despite his sub­stan­tial role in the fraud).

52. See 15 U.S.C. § 78t(e).

53. See Loren­zo, 139 S. Ct. at 1104.

54. See id.; SEC v. Cap­i­tal Gains Research Bureau, 375 U.S. 180, 195 (1963) (not­ing that Con­gress intend­ed secu­ri­ties fraud leg­is­la­tion to be con­strued “flex­i­bly to effec­tu­ate its reme­di­al purposes”).

55. Loren­zo, 139 S. Ct. at 1104.