Court Rules against Investors in Securities Fraud Decision

THE JOURNAL RECORD, April 20, 1994 | Go to article overview

Court Rules against Investors in Securities Fraud Decision


YWASHINGTON (AP) _ Investors may not sue bankers, lawyers or others who may have helped someone commit a securities fraud, the U.S. Supreme Court ruled Tuesday.

The anti-fraud provisions of a federal securities law include no private right to sue someone accused of "aiding and abetting" others who misled investors, the court said. The 5-4 decision overturned a long series of lower court rulings.

The ruling leaves investors with no federal remedy against those who aid in a securities fraud, who might be bankers, lawyers or accountants. But an investor still could sue someone who directly violated the securities law.

"Congress knew how to impose aiding and abetting liability when it chose to do so," Justice Anthony M. Kennedy wrote for the court. Congress could have included such liability in the securities law "but it did not," he said.

"To be sure, aiding and abetting a wrongdoer ought to be actionable in certain instances," Kennedy added. "The issue, however, is not whether imposing private civil liability on aiders and abettors is good policy."

Justice John Paul Stevens wrote in dissent that the high court should be "reluctant to lop off rights to action that have been recognized for decades."

The decision left unclear whether the federal government can still seek sanctions against suspected aiders and abettors. …

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