Gatekeepers or Not Gatekeepers? A Simple, Coherent Approach to Assigning Underwriter Liability to Financial Advisors in Direct Listings
Section 11 of the Securities Act imposes liability for damage caused by untrue or misleading information in Resale Registration Statements on underwriters. The exact scope of the statutory definition of underwriter, particularly its category of “participants,” is subject to a circuit split. Thus, whether financial advisors in direct listings are liable is an open question. In this Contribution, Graham Ellis (’22) argues that the courts should not adopt a categorical rule of inclusion or exclusion related to financial advisor underwriter status, but instead, should formulate an ad hoc analysis that emphasizes Congress’s initial purpose of assigning liability to ‘gatekeepers’ in securities transactions. This test should inquire into whether the financial advisor to the transaction acted as a conduit between the issuing company and the investing public, and whether the financial advisor publicly vouched for the accuracy of the registration statement.