Broker-Dealer Litigation - Greenberg Traurig LLP

not approve the proposed settlement “because the court has not been provided with any proven
or admitted facts upon which to exercise even a modest degree of independent judgment.”
SEC v. Daifotis, 2011 WL 3295139 (N.D. Cal. Aug. 1, 2011).
In this enforcement action alleging violations of the securities laws based upon
defendants management of the Schwab YieldPlus Fund, defendants moved for reconsideration of
their motions to dismiss and strike the complaint against them in light of the Supreme Court’s
decision in Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (2011). In
Janus, the Supreme Court held that for purposes of Rule 10b-5’s prohibition making it “unlawful
for any person, directly or indirectly, . . . [t]o make any untrue statement of a material fact” in
connection with the purchase or sale of securities, 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.” 2011 WL 3295139 at *1 (quoting Janus, 131 S. Ct. at 2302).
Defendant Daifotis argued that Janus should also apply to claims brought under Section
17(a). The court rejected this argument, noting that because the specific language of Rule 10b-5
the Supreme Court was interpreting—specifically, the word “make”—is absent from the
language of Section 17(a), Janus’ holding does not apply to the SEC’s Section 17(a) claim. The
court also noted that because Janus’ interpretation of the word “make” followed the Supreme
court’s prior decisions limiting the scope of the implied private right of action and Section 17(a)
does not contain an implied private right of action, Janus’ rationale should not apply to a Section
17(a) claim.
SEC v. Mercury Interactive, LLC, 2011 WL 5871020 (N.D. Cal. Nov. 22, 2011).
The court had previously denied defendant Susan Skaer’s motion to dismiss the SEC’s
claims that she violated Sections 10(b) and 14(a) of the Securities Exchange Act and Section
17(a) of the Securities Act. Skaer moved for reconsideration of that decision based upon the
Supreme Court’s decision in Janus Capital Group Inc. v. First Derivative Traders, 131 S. Ct.
2296, 180 L.Ed.2d 166 (2011). Skaer argued that Janus should be extended to claims brought
pursuant to Section 17(a) of the Securities Act even though the Janus decision did not address a
claim under Section 17(a) of the Securities Act. Rather, Janus addressed what it means to
“make” a statement for purposes of Rule 10b-5(b), which provides that it is unlawful to “make
any untrue statement of a material fact . . . in connection with the purchase or sale of any
security.” The court stated that Section 17(a) does not require that the defendant “make” a
statement to be liable, and thus, the court agreed with those decisions that have concluded that
Janus does not extend to claims brought pursuant to Section 17(a) because Section 17(a) does
not contain the very language that Janus construed.
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