In August, the U.S. Court of Appeals for the Second Circuit changed or, in its own words, “clarified” the standard required for the Securities and Exchange Commission (SEC) to plead aiding and abetting liability in a federal securities case. SEC v. Apuzzo, 689 F.3d 204 (2d Cir. 2012) (Rakoff, J.). Apuzzo held that, to meet the requirement of “substantial assistance” in §20(e) of the Securities Exchange Act of 1934, the SEC is “not required to plead or prove that an aider and abettor proximately caused the primary securities law violation,” but instead must show “that [the defendant] in some sort associated himself with the venture, that he participated in it as something that he wished to bring about, and that he sought by his action to make it succeed.”1 The parties in Apuzzo had not disputed that proximate cause was required to be pled and proved, nor had either party argued for the criminal aiding and abetting test adopted in Apuzzo.2
Joseph Apuzzo has now filed a petition for rehearing en banc.3 In the petition, Apuzzo makes two points: Procedurally, the Apuzzo panel was not at liberty to change the long-settled proximate cause requirement for “substantial assistance” reaffirmed just three years ago in SEC v. DiBella, 587 F.3d 553, 566 (2d Cir. 2009). Substantively, in removing the proximate cause requirement, the Second Circuit failed to, among other things, heed the text and legislative history of §20(e).
