Just four weeks ago, I wrote about the 2nd Circuit’s landmark decision in SEC v. Apuzzo. There, the court made the Securities and Exchange Commission’s (SEC) pursuit of aiders and abettors of securities fraud significantly easier by lowering the standard that the SEC has to meet when showing that an alleged aider and abettor “substantially assisted” the fraud.
Reaching back to 1938, the 2nd Circuit applied the criminal standard for proving “substantial assistance”, but this time, in the context of a civil suit. Instead of showing that the defendant’s aiding and abetting proximately caused the fraud, the SEC must prove a lower criminal standard: merely that the defendant associated himself with the scheme, participated in it and wished the fraud to succeed. The court grounded its decision in the belief that “proximate cause” is a tort concept in private actions, inapplicable to SEC enforcement actions, where the goal is deterrence and not compensation for damages.