Securities and Exchange Commission Rule 10b-5 forbids "any person…[t]o make any untrue statement of a material fact" in connection with the purchase or sale of securities. In June 2011, the U.S. Supreme Court held in Janus Capital Group v. First Derivative Traders1 that, for Rule 10b-5 purposes, "the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it." This holding promised a sea change in the way certain classes of securities litigation are handled in the federal courts, which until then had afforded plaintiffs far broader latitude in satisfying Rule 10b-5.
This sea change, however, has yet to materialize. While key cases are still winding their way through appeals, to date the district courts have been reluctant to give Janus its full scope, relying instead on a number of exceptions grounded in language from the decision. It will soon be for the circuit courts to determine whether these district court decisions draw meaningful distinctions from the central Janus decision, or instead manifest an underlying philosophical difference with the Supreme Court precedent.
'Ultimate Authority' Standard
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