Supreme Court Cabins "Scheme Liability" Under The Federal Securities Laws

On January 15, 2008, in Stoneridge Investment Partners v. Scientific Atlanta, the U.S. Supreme Court rejected the expansive approach to Section 10(b) liability that had gained traction in certain lower courts, and had resulted in secondary actors – banks, underwriters and commercial counterparties – being subject to securities fraud exposure even where they had neither said or done anything on which the investing public had relied. After Stoneridge, only parties who make material misstatements to the investing public, who fail to make statements when they have a duty to speak, or who engage in traditionally prohibited market manipulative conduct will face potential exposure under Section 10(b).