FINANCIAL INSTITUTIONS ALERT: Broader Liability for Misleading Statements Rejected
June 13, 2011 - Ending a winning streak for plaintiffs in securities cases before the nation's top court, the justices ruled that liability for misleading statements extends only to the entity that makes the statement but not to anyone who had a hand in creating the statement. Under the Court's definition the word "make" applies to an entity that has absolute control over the statement including whether it is distributed. As between mutual funds and their advisors the court stated that any reapportionment of liability between the two is up to Congress, not the courts. Thus the court ruled that Janus could not be held liable for false statements made in the prospectuses of its subsidiary mutual funds over which it had a formal advisory role.
Janus Capital Group, Inc. v. First Derivative Traders, No. 09-525.