In Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., the Supreme Court determined that primary liability under section 10(b) of the Securities Exchange Act does not extend to third-party actors engaged in sham transactions, even when such transactions have the purpose and effect of deceiving investors. The Court reasoned that there is no liability when an actor's deceptive conduct is not communicated directly to investors. This Note argues that the Supreme Court misinterpreted section 10(b) and Rule 10b-5 and that policy considerations weigh in favor of using securities fraud litigation to deter culpable actors. It argues both for the substantial participation standard and the revitalization of scheme liability in order to best comply with the language and policies of section 10(b) and Rule 10b-5.
Travis S. Souza,
Freedom to Defraud: Stoneridge, Primary Liability, and the Need to Properly Define Section 10(b),
57 Duke Law Journal
Available at: http://scholarship.law.duke.edu/dlj/vol57/iss4/7