In a decision that could have important consequences for the scope of federal securities fraud claims, the Supreme Court held last week that only the corporate entity that makes a statement to the public can be liable. Even if related companies prepare the statement, the court held in Janus Capital Group v. First Derivative Traders, “the maker of a statement is the entity with authority over the content of the statement and whether and how to communicate it.”
The plaintiffs, shareholders of Janus Capital Group, Inc. (the management company), alleged that the management company caused Janus Investment Fund to issue prospectuses that falsely suggested that the fund would not allow so-called “market timing” trading. In fact, the fund did allow such trading. When the New York attorney general filed a complaint against the management company challenging the practice, investors withdrew significant sums from the fund. The management company’s stock price allegedly dropped as a result.