Broker-Dealer Litigation - Greenberg Traurig LLP

to any of the claims except the “primary liability” claims. The court nevertheless noted that
modification as to the denial of defendants’ motion to dismiss aiding and abetting Rule 10b-5
violations under Janus was inappropriate. The court noted that the complaint contained direct
statements by both defendants that could serve as a basis for direct liability claims against them
and underlie the aiding and abetting claim against the other. The court recognized that the
complaint alleged various misstatements made by the investment advisor, which, under Janus,
were insufficient for a Rule 10b-5 violation. It found this unsurprising, however, as the
complaint had been filed prior to Janus. The court suggested that the SEC may choose to move
for leave to file an amended complaint where it could more clearly attribute misstatements to
specific entities or persons. Accordingly, the court did not modify the ruling on the motion to
dismiss as to aiding and abetting liability.
SEC v. Retail Pro, Inc., 2011 U.S. Dist. LEXIS 68863 (S.D. Cal. June 23, 2011)._
The Securities and Exchange Commission sought a permanent injunction prohibiting a
CFO from future violations of Section 10(b), and from aiding and abetting violations of
Section 13(a) of the Securities Exchange Act of 1934. In order to obtain a permanent injunction,
the SEC had the burden of showing that there was a reasonable likelihood of future violations of
the securities laws. The factors considered include: (1) the degree of scienter involved; (2) the
isolated or recurrent nature of the infraction; (3) defendant’s recognition of the wrongful nature
of his conduct; (4) the likelihood of future violations given defendant’s occupation; and (5) the
sincerity of assurances against future violations. On balance, the court found that an injunction
was appropriate because the CFO had a high degree of scienter as established by evidence
presented at summary judgment and at trial, the nature of the infractions were connected with
two related transactions over a nine-month period, and because of the CFO’s position presented
ongoing opportunities to violate the securities laws at issue.
Wirth v. Taylor, 2011 U.S. Dist. LEXIS 101773 (D. Utah Sept. 8, 2011).
Plaintiff investors sued defendants, an investment fund manager and the investment
recruiters, for violations of federal securities laws, 15 U.S.C. §§ 78j(b) and 78t(a), and Utah state
securities laws, Utah Code Ann. Sections 61-1-1 and 61-1-22(4)(a). Defendants brought a
motion for summary judgment. Plaintiffs argued that their claims under the Utah Uniform
Securities Act remain because Utah law allows for a private right of action against aiders and
abettors. In denying defendants’ motion for summary judgment on the Utah aider and abettor
liability claim, the court held that a private right of action for aider and abettor liability did exist
under Utah securities law, and that there were disputed issues of fact concerning defendants’
alleged federal securities violations.
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