511 U.S.

164
114 S.Ct. 1439
128 L.Ed.2d 119

CENTRAL BANK OF DENVER, N.A., Petitioner,

v.
FIRST INTERSTATE BANK OF DENVER, N.A. and Jack K.
Naber.
No. 92-854.

Supreme Court of the United States

Argued Nov. 30, 1993.
Decided April 19, 1994.

Syllabus *
As this Court has interpreted it, 10(b) of the Securities Exchange Act of
1934 imposes private civil liability on those who commit a manipulative
or deceptive act in connection with the purchase or sale of securities.
Following a public building authority's default on certain bonds secured
by landowner assessment liens, respondents, as purchasers of the bonds,
filed suit against the authority, the bonds' underwriters, the developer of
the land in question, and petitioner bank, as the indenture trustee for the
bond issues. Respondents alleged that the first three defendants had
violated 10(b) in connection with the sale of the bonds, and that
petitioner was "secondarily liable under 10(b) for its conduct in aiding
and abetting the [other defendants'] fraud." The District Court granted
summary judgment to petitioner, but the Court of Appeals reversed in light
of Circuit precedent allowing private aiding and abetting actions under
10(b).
Held: A private plaintiff may not maintain an aiding and abetting suit
under 10(b). Pp. ____.
(a) This case is resolved by the statutory text, which governs what
conduct is covered by 10(b). See, e.g., Ernst & Ernst v. Hochfelder, 425
U.S. 185, 197, 199, 96 S.Ct. 1375, 1383, 1384, 47 L.Ed.2d 668. That text
which makes it "unlawful for any person, directly or indirectly, . . . [t]o
use or employ, in connection with the purchase or sale of any security . . .,

any manipulative or deceptive device or contrivance"prohibits only the

making of a material misstatement (or omission) or the commission of a
manipulative act, and does not reach those who aid and abet a violation.
The "directly or indirectly" phrase does not cover aiding and abetting,
since liability for aiding and abetting would extend beyond persons who
engage, even indirectly, in a proscribed activity to include those who
merely give some degree of aid to violators, and since the "directly or
indirectly" language is used in numerous 1934 Act provisions in a way
that does not impose aiding and abetting liability. Pp. ____.
(b) Even if the 10(b) text did not answer the question at issue, the same
result would be reached by inferring how the 1934 Congress would have
addressed the question had it expressly included a 10(b) private right of
action in the 1934 Act. See Musick, Peeler & Garrett v. Employers Ins. of
Wausau, 508 U.S. ----, ----, 113 S.Ct. 2085, ----, 124 L.Ed.2d 194. None of
the express private causes of action in the federal securities laws imposes
liability on aiders and abettors. It thus can be inferred that Congress likely
would not have attached such liability to a private 10(b) cause of action.
See id., at ----, 113 S.Ct., at ----. Pp. ____.
(c) Contrary to respondents' contention, the statutory silence cannot be
interpreted as tantamount to an explicit congressional intent to impose
10(b) aiding and abetting liability. Congress has not enacted a general
civil aiding and abetting tort liability statute, but has instead taken a
statute-by-statute approach to such liability. Nor did it provide for aiding
and abetting liability in any of the private causes of action in the 1933 and
1934 securities Acts, but mandated it only in provisions enforceable in
actions brought by the Securities and Exchange Commission (SEC). Pp.
____.
(d) The parties' competing arguments based on other post-1934 legislative
developmentsrespondents' contentions that congressional acquiescence
in their position is demonstrated by 1983 and 1988 committee reports
making oblique references to 10(b) aiding and abetting liability and by
Congress' failure to enact a provision denying such liability after the lower
courts began interpreting 10(b) to include it, and petitioner's assertion
that Congress' failure to pass 1957, 1958, and 1960 bills expressly creating
such liability reveals an intent not to cover itdeserve little weight in the
interpretive process, would not point to a definitive answer in any event,
and are therefore rejected. Pp. ____.
(e) The SEC's various policy arguments in support of the aiding and
abetting cause of actione.g., that the cause of action deters secondary

actors from contributing to fraudulent activities and ensures that defrauded

plaintiffs are made wholecannot override the Court's interpretation of
the Act's text and structure because such arguments do not show that
adherence to the text and structure would lead to a result so bizarre that
Congress could not have intended it. Demarest v. Manspeaker, 498 U.S.
184, 191, 111 S.Ct. 599, 604, 112 L.Ed.2d 608 (1991). It is far from clear
that Congress in 1934 would have decided that the statutory purposes of
fair dealing and efficiency in the securities markets would be furthered by
the imposition of private aider and abettor liability, in light of the
uncertainty and unpredictability of the rules for determining such liability,
the potential for excessive litigation arising therefrom, and the resulting
difficulties and costs that would be experienced by client companies and
investors. Pp. ____.
(f) The Court rejects the suggestion that a private civil 10(b) aiding and
abetting cause of action may be based on 18 U.S.C. 2, a general aiding
and abetting statute applicable to all federal criminal offenses. The logical
consequence of the SEC's approach would be the implication of a civil
damages cause of action for every criminal statute passed for the benefit
of some particular class of persons. That would work a significant and
unacceptable shift in settled interpretive principles. P. ____.
969 F.2d 891, reversed.
KENNEDY, J., delivered the opinion of the Court, in which
REHNQUIST, C.J., and O'CONNOR, SCALIA, and THOMAS, JJ.,
joined. STEVENS, J., filed a dissenting opinion, in which BLACKMUN,
SOUTER, and GINSBURG, JJ., joined.
Tucker K. Trautman, Denver, CO, for petitioner.
Miles M. Gersh, Denver, CO, for respondents.
Edwin S. Kneedler, Washington, DC, for U.S. as amicus curiae, by special
leave of the Court.
Justice KENNEDY delivered the opinion of the Court.

As we have interpreted it, 10(b) of the Securities Exchange Act of 1934

imposes private civil liability on those who commit a manipulative or deceptive
act in connection with the purchase or sale of securities. In this case, we must
answer a question reserved in two earlier decisions: whether private civil
liability under 10(b) extends as well to those who do not engage in the

manipulative or deceptive practice but who aid and abet the violation. See
Herman & MacLean v. Huddleston, 459 U.S. 375, 379, n. 5, 103 S.Ct. 683,
685, n. 5, 74 L.Ed.2d 548 (1983); Ernst & Ernst v. Hochfelder, 425 U.S. 185,
191-192, n. 7, 96 S.Ct. 1375, 1380-1381, n. 7, 47 L.Ed.2d 668 (1976).
2

* In 1986 and 1988, the Colorado Springs-Stetson Hills Public Building

Authority (Authority) issued a total of $26 million in bonds to finance public
improvements at Stetson Hills, a planned residential and commercial
development in Colorado Springs. Petitioner Central Bank served as indenture
trustee for the bond issues.

The bonds were secured by landowner assessment liens, which covered about
250 acres for the 1986 bond issue and about 272 acres for the 1988 bond issue.
The bond covenants required that the land subject to the liens be worth at least
160% of the bonds' outstanding principal and interest. The covenants required
AmWest Development, the developer of Stetson Hills, to give Central Bank an
annual report containing evidence that the 160% test was met.

In January 1988, AmWest provided Central Bank an updated appraisal of the

land securing the 1986 bonds and of the land proposed to secure the 1988
bonds. The 1988 appraisal showed land values almost unchanged from the
1986 appraisal. Soon afterwards, Central Bank received a letter from the senior
underwriter for the 1986 bonds. Noting that property values were declining in
Colorado Springs and that Central Bank was operating on an appraisal over 16
months old, the underwriter expressed concern that the 160% test was not being
met.

Central Bank asked its in-house appraiser to review the updated 1988 appraisal.
The in-house appraiser decided that the values listed in the appraisal appeared
optimistic considering the local real estate market. He suggested that Central
Bank retain an outside appraiser to conduct an independent review of the 1988
appraisal. After an exchange of letters between Central Bank and AmWest in
early 1988, Central Bank agreed to delay independent review of the appraisal
until the end of the year, six months after the June 1988 closing on the bond
issue. Before the independent review was complete, however, the Authority
defaulted on the 1988 bonds.

Respondents First Interstate and Jack Naber had purchased $2.1 million of the
1988 bonds. After the default, respondents sued the Authority, the 1988
underwriter, a junior underwriter, an AmWest director, and Central Bank for
violations of 10(b) of the Securities Exchange Act of 1934. The complaint

alleged that the Authority, the underwriter defendants, and the AmWest
director had violated 10(b). The complaint also alleged that Central Bank was
"secondarily liable under 10(b) for its conduct in aiding and abetting the
fraud." App. 26.
7

The United States District Court for the District of Colorado granted summary
judgment to Central Bank. The United States Court of Appeals for the Tenth
Circuit reversed. First Interstate Bank of Denver, N.A. v. Pring, 969 F.2d 891
(1992).

The Court of Appeals first set forth the elements of the 10(b) aiding and
abetting cause of action in the Tenth Circuit: (1) a primary violation of 10(b);
(2) recklessness by the aider and abettor as to the existence of the primary
violation; and (3) substantial assistance given to the primary violator by the
aider and abettor. Id., at 898-903.

Applying that standard, the Court of Appeals found that Central Bank was
aware of concerns about the accuracy of the 1988 appraisal. Central Bank knew
both that the sale of the 1988 bonds was imminent and that purchasers were
using the 1988 appraisal to evaluate the collateral for the bonds. Under those
circumstances, the court said, Central Bank's awareness of the alleged
inadequacies of the updated, but almost unchanged, 1988 appraisal could
support a finding of extreme departure from standards of ordinary care. The
court thus found that respondents had established a genuine issue of material
fact regarding the recklessness element of aiding and abetting liability. Id., at
904. On the separate question whether Central Bank rendered substantial
assistance to the primary violators, the Court of Appeals found that a reasonable
trier of fact could conclude that Central Bank had rendered substantial
assistance by delaying the independent review of the appraisal. Ibid.

10

Like the Court of Appeals in this case, other federal courts have allowed private
aiding and abetting actions under 10(b). The first and leading case to impose
the liability was Brennan v. Midwestern Life Ins. Co., 259 F.Supp. 673 (ND
Ind.1966), aff'd, 417 F.2d 147 (CA7 1969), cert. denied, 397 U.S. 989, 90 S.Ct.
1122, 25 L.Ed.2d 397 (1970). The court reasoned that "[i]n the absence of a
clear legislative expression to the contrary, the statute must be flexibly applied
so as to implement its policies and purposes." 259 F.Supp., at 680-681. Since
1966, numerous courts have taken the same position. See, e.g., Cleary v.
Perfectune, Inc., 700 F.2d 774, 777 (CA1 1983); Kerbs v. Fall River Industries,
Inc., 502 F.2d 731, 740 (CA10 (1974)).

11

After our decisions in Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 97 S.Ct.

11

After our decisions in Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 97 S.Ct.
1292, 51 L.Ed.2d 480 (1977), and Ernst & Ernst v. Hochfelder, 425 U.S. 185,
96 S.Ct. 1375, 47 L.Ed.2d 668 (1976), where we paid close attention to the
statutory text in defining the scope of conduct prohibited by 10(b), courts and
commentators began to question whether aiding and abetting liability under
10(b) was still available. Professor Fischel opined that the "theory of secondary
liability [under 10(b) was] no longer viable in light of recent Supreme Court
decisions strictly interpreting the federal securities laws." Fischel, Secondary
Liability under Section 10(b) of the Securities Act of 1934, 69 Calif.L.Rev. 80,
82 (1981). In 1981, the District Court for the Eastern District of Michigan
found it "doubtful that a claim for 'aiding and abetting' . . . will continue to exist
under 10(b)." Benoay v. Decker, 517 F.Supp. 490, 495, aff'd, 735 F.2d 1363
(CA6 1984). The same year, the Ninth Circuit stated that the "status of aiding
and abetting as a basis for liability under the securities laws [wa]s in some
doubt." Little v. Valley National Bank of Arizona, 650 F.2d 218, 220, n. 3
(1981). The Ninth Circuit later noted that "[a]iding and abetting and other 'addon' theories of liability have been justified by reference to the broad policy
objectives of the securities acts. . . . The Supreme Court has rejected this
justification for an expansive reading of the statutes and instead prescribed a
strict statutory construction approach to determining liability under the acts."
SEC v. Seaboard Corp., 677 F.2d 1301, 1311, n. 12 (1982). The Fifth Circuit
has stated: "[I]t is now apparent that open-ended readings of the duty stated by
Rule 10b-5 threaten to rearrange the congressional scheme. The added layer of
liability . . . for aiding and abetting . . . is particularly problematic. . . . There is
a powerful argument that . . . aider and abettor liability should not be
enforceable by private parties pursuing an implied right of action." Akin v. Q-L
Investments, Inc., 959 F.2d 521, 525 (1992). Indeed, the Seventh Circuit has
held that the defendant must have committed a manipulative or deceptive act to
be liable under 10(b), a requirement that in effect forecloses liability on those
who do no more than aid or abet a 10b-5 violation. See, e.g., Barker v.
Henderson, Franklin, Starnes & Holt, 797 F.2d 490, 495 (1986).

12

We granted certiorari to resolve the continuing confusion over the existence and
scope of the 10(b) aiding and abetting action. 508 U.S. ----, 113 S.Ct. 2927,
124 L.Ed.2d 678 (1993).

II
13

In the wake of the 1929 stock market crash and in response to reports of
widespread abuses in the securities industry, the 73d Congress enacted two
landmark pieces of securities legislation: the Securities Act of 1933 (1933 Act)
and the Securities Exchange Act of 1934 (1934 Act). 48 Stat. 74, as amended,
15 U.S.C. 77a et seq.; 48 Stat. 881, 15 U.S.C. 78a et seq. The 1933 Act

regulates initial distributions of securities, and the 1934 Act for the most part
regulates post-distribution trading. Blue Chip Stamps v. Manor Drug Stores,
421 U.S. 723, 752, 95 S.Ct. 1917, 1933, 44 L.Ed.2d 539 (1975). Together, the
Acts "embrace a fundamental purpose . . . to substitute a philosophy of full
disclosure for the philosophy of caveat emptor." Affiliated Ute Citizens of Utah
v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 1471, 31 L.Ed.2d 741
(1972) (internal quotation marks omitted).
14

The 1933 and 1934 Acts create an extensive scheme of civil liability. The
Securities and Exchange Commission (SEC) may bring administrative actions
and injunctive proceedings to enforce a variety of statutory prohibitions. Private
plaintiffs may sue under the express private rights of action contained in the
Acts. They may also sue under private rights of action we have found to be
implied by the terms of 10(b) and 14(a) of the 1934 Act. Superintendent of
Ins. of New York v. Bankers Life & Casualty Co., 404 U.S. 6, 13, n. 9, 92 S.Ct.
165, 169, n. 9, 30 L.Ed.2d 128 (1971) ( 10(b)); J.I. Case Co. v. Borak, 377
U.S. 426, 430-435, 84 S.Ct. 1555, 1559-1561, 12 L.Ed.2d 423 (1964) ( 14(a)).
This case concerns the most familiar private cause of action: the one we have
found to be implied by 10(b), the general antifraud provision of the 1934 Act.
Section 10(b) states:

15

"It shall be unlawful for any person, directly or indirectly, by the use of any
means or instrumentality of interstate commerce or of the mails, or of any
facility of any national securities exchange

16

.....

17

"(b) To use or employ, in connection with the purchase or sale of any security
registered on a national securities exchange or any security not so registered,
any manipulative or deceptive device or contrivance in contravention of such
rules and regulations as the [SEC] may prescribe." 15 U.S.C. 78j.

18

Rule 10b-5, adopted by the SEC in 1942, casts the proscription in similar terms:

19

"It shall be unlawful for any person, directly or indirectly, by the use of any
means or instrumentality of interstate commerce, or of the mails or of any
facility of any national securities exchange,

20

"(a) To employ any device, scheme, or artifice to defraud, "(b) To make any
untrue statement of a material fact or to omit to state a material fact necessary in
order to make the statements made, in the light of the circumstances under

which they were made, not misleading, or

21

"(c) To engage in any act, practice, or course of business which operates or

would operate as a fraud or deceit upon any person,

22

"in connection with the purchase or sale of any security." 17 CFR 240.10b-5
(1993).

23

In our cases addressing 10(b) and Rule 10b-5, we have confronted two main
issues. First, we have determined the scope of conduct prohibited by 10(b).
See, e.g., Dirks v. SEC, 463 U.S. 646, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983);
Aaron v. SEC, 446 U.S. 680, 100 S.Ct. 1945, 64 L.Ed.2d 611 (1980); Chiarella
v. United States, 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980); Santa
Fe Industries Inc. v. Green, 430 U.S. 462, 97 S.Ct. 1292, 51 L.Ed.2d 480
(1977); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d
668 (1976). Second, in cases where the defendant has committed a violation of
10(b), we have decided questions about the elements of the 10b-5 private
liability scheme: for example, whether there is a right to contribution, what the
statute of limitations is, whether there is a reliance requirement, and whether
there is an in pari delicto defense. See Musick, Peeler & Garrett v. Employers
Ins. of Wausau, 508 U.S. ----, 113 S.Ct. 2085, 124 L.Ed.2d 194 (1993); Lampf,
Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773,
115 L.Ed.2d 321 (1991); Basic Inc. v. Levinson, 485 U.S. 224, 108 S.Ct. 978,
99 L.Ed.2d 194 (1988); Bateman Eichler, Hill Richards, Inc. v. Berner, 472
U.S. 299, 105 S.Ct. 2622, 86 L.Ed.2d 215 (1985); see also Blue Chip Stamps,
supra; Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374 (CA2 1974); cf.
Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 111 S.Ct. 2749, 115
L.Ed.2d 929 (1991) ( 14); Schreiber v. Burlington Northern, Inc., 472 U.S. 1,
105 S.Ct. 2458, 86 L.Ed.2d 1 (1985) (same).

24

The latter issue, determining the elements of the 10b-5 private liability scheme,
has posed difficulty because Congress did not create a private 10(b) cause of
action and had no occasion to provide guidance about the elements of a private
liability scheme. We thus have had "to infer how the 1934 Congress would
have addressed the issue[s] had the 10b-5 action been included as an express
provision in the 1934 Act." Musick, Peeler, supra, at ----, 113 S.Ct., at 2090.

25

With respect, however, to the first issue, the scope of conduct prohibited by
10(b), the text of the statute controls our decision. In 10(b), Congress
prohibited manipulative or deceptive acts in connection with the purchase or
sale of securities. It envisioned that the SEC would enforce the statutory

prohibition through administrative and injunctive actions. Of course, a private

plaintiff now may bring suit against violators of 10(b). But the private
plaintiff may not bring a 10b-5 suit against a defendant for acts not prohibited
by the text of 10(b). To the contrary, our cases considering the scope of
conduct prohibited by 10(b) in private suits have emphasized adherence to the
statutory language, " '[t]he starting point in every case involving construction of
a statute.' " Ernst & Ernst, supra, 425 U.S., at 197, 96 S.Ct., at 1383 (quoting
Blue Chip Stamps, 421 U.S., at 756, 95 S.Ct., at 1935 (Powell, J., concurring));
see Chiarella, supra, 445 U.S. at 226, 100 S.Ct., at 1113; Santa Fe Industries,
supra, 430 U.S., at 472, 97 S.Ct., at 1300. We have refused to allow 10b-5
challenges to conduct not prohibited by the text of the statute.
26

In Ernst & Ernst, we considered whether negligent acts could violate 10(b).
We first noted that "the words 'manipulative' or 'deceptive' used in conjunction
with 'device or contrivance' strongly suggest that 10(b) was intended to
proscribe knowing or intentional misconduct." 425 U.S., at 197, 96 S.Ct., at
1383. The SEC argued that the broad congressional purposes behind the Act
to protect investors from false and misleading practices that might injure them
suggested that 10(b) should also reach negligent conduct. Id., at 198, 96
S.Ct., at 1383. We rejected that argument, concluding that the SEC's
interpretation would "add a gloss to the operative language of the statute quite
different from its commonly accepted meaning." Id., at 199, 96 S.Ct., at 1383.

27

In Santa Fe Industries, another case involving "the reach and coverage of

10(b)," 430 U.S., at 464, 97 S.Ct., at 1296, we considered whether 10(b)
"reached breaches of fiduciary duty by a majority against minority shareholders
without any charge of misrepresentation or lack of disclosure." Id., 430 U.S. at
470, 97 S.Ct., at 1299 (internal quotation marks omitted). We held that it did
not, reaffirming our decision in Ernst & Ernst and emphasizing that the
"language of 10(b) gives no indication that Congress meant to prohibit any
conduct not involving manipulation or deception." Id., at 473, 97 S.Ct., at 1300.

28

Later, in Chiarella, we considered whether 10(b) is violated when a person

trades securities without disclosing inside information. We held that 10(b) is
not violated under those circumstances unless the trader has an independent
duty of disclosure. In reaching our conclusion, we noted that "not every
instance of financial unfairness constitutes fraudulent activity under 10(b)."
445 U.S., at 232, 100 S.Ct., at 1116-1117. We stated that "the 1934 Act cannot
be read more broadly than its language and the statutory scheme reasonably
permit," and we found "no basis for applying . . . a new and different theory of
liability" in that case. Id., at 234, 100 S.Ct., at 1118 (internal quotation marks
omitted). "Section 10(b) is aptly described as a catchall provision, but what it

catches must be fraud. When an allegation of fraud is based upon

nondisclosure, there can be no fraud absent a duty to speak." Id., at 234-235,
100 S.Ct., at 1118.
29

Adherence to the text in defining the conduct covered by 10(b) is consistent

with our decisions interpreting other provisions of the securities Acts. In Pinter
v. Dahl, 486 U.S. 622, 108 S.Ct. 2063, 100 L.Ed.2d 658 (1988), for example,
we interpreted the word "seller" in 12(l ) of the 1934 Act by "look[ing] first at
the language of 12(l )." Id., at 641, 108 S.Ct., at 2075. Ruling that a seller is
one who solicits securities sales for financial gain, we rejected the broader
contention, "grounded in tort doctrine," that persons who participate in the sale
can also be deemed sellers. Id., at 649, 108 S.Ct., at 2079. We found "no
support in the statutory language or legislative history for expansion of
12(1)," id., at 650, 108 S.Ct., at 2080, and stated that "[t]he ascertainment of
congressional intent with respect to the scope of liability created by a particular
section of the Securities Act must rest primarily on the language of that
section." Id. at 653, 108 S.Ct., at 2082.

30

Last Term, the Court faced a similar issue, albeit outside the securities context,
in a case raising the question whether knowing participation in a breach of
fiduciary duty is actionable under ERISA. Mertens v. Hewitt Associates, 508
U.S. ----, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). The petitioner in Mertens
said that the knowing participation cause of action had been available in the
common law of trusts and should be available under ERISA. We rejected that
argument and noted that no provision in ERISA "explicitly require[d]
[nonfiduciaries] to avoid participation (knowing or unknowing) in a fiduciary's
breach of fiduciary duty." Id., at ----, 113 S.Ct., at 2067. While plaintiffs had a
remedy against nonfiduciaries at common law, that was because
"nonfiduciaries had a duty to the beneficiaries not to assist in the fiduciary's
breach." Id., at ----, n. 5, 113 S.Ct., at 2068, n. 5. No comparable duty was set
forth in ERISA.

31

Our consideration of statutory duties, especially in cases interpreting 10(b),

establishes that the statutory text controls the definition of conduct covered by
10(b). That bodes ill for respondents, for "the language of Section 10(b) does
not in terms mention aiding and abetting." Brief for SEC as Amicus Curiae 8
(hereinafter Brief for SEC). To overcome this problem, respondents and the
SEC suggest (or hint at) the novel argument that the use of the phrase "directly
or indirectly" in the text of 10(b) covers aiding and abetting. See Brief for
Respondents 15 ("Inclusion of those who act 'indirectly' suggests a legislative
purpose fully consistent with the prohibition of aiding and abetting"); Brief for
SEC 8 ("[W]e think that when read in context [ 10(b) ] is broad enough to

encompass liability for such 'indirect' violations").

32

The federal courts have not relied on the "directly or indirectly" language when
imposing aiding and abetting liability under 10(b), and with good reason.
There is a basic flaw with this interpretation. According to respondents and the
SEC, the "directly or indirectly" language shows that "Congress . . . intended to
reach all persons who engage, even if only indirectly, in proscribed activities
connected with securities transactions." Brief for SEC 8. The problem, of
course, is that aiding and abetting liability extends beyond persons who engage,
even indirectly, in a proscribed activity; aiding and abetting liability reaches
persons who do not engage in the proscribed activities at all, but who give a
degree of aid to those who do. A further problem with respondents'
interpretation of the "directly or indirectly" language is posed by the numerous
provisions of the 1934 Act that use the term in a way that does not impose
aiding and abetting liability. See 7(f)(2)(C), 15 U.S.C. 78g(f)(2)(C) (direct
or indirect ownership of stock); 9(b)(2)-(3), 15 U.S.C. 78i(b)(2)-(3) (direct
or indirect interest in put, call, straddle, option, or privilege); 13(d)(1), 15
U.S.C. 78m(d)(1) (direct or indirect ownership); 16(a), 15 U.S.C. 78p(a)
(direct or indirect ownership); 20, 15 U.S.C. 78t (direct or indirect control
of person violating Act). In short, respondents' interpretation of the "directly or
indirectly" language fails to support their suggestion that the text of 10(b)
itself prohibits aiding and abetting. See 5B A. Jacobs, Litigation and Practice
Under Rule 10b-5 40.07, p. 2-465 (rev. 1993).

33

Congress knew how to impose aiding and abetting liability when it chose to do
so. See, e.g., Act of Mar. 4, 1909, 332, 35 Stat. 1152, as amended, 18 U.S.C.
2 (general criminal aiding and abetting statute); Packers and Stockyards Act,
1921, ch. 64, 202, 42 Stat. 161, as amended, 7 U.S.C. 192(g) (civil aiding
and abetting provision); see generally infra, at 16-20. If, as respondents seem to
say, Congress intended to impose aiding and abetting liability, we presume it
would have used the words "aid" and "abet" in the statutory text. But it did not.
Cf. Pinter v. Dahl, 486 U.S., at 650, 108 S.Ct., at 2080 ("When Congress
wished to create such liability, it had little trouble doing so"); Blue Chip
Stamps, 421 U.S., at 734, 95 S.Ct., at 1925 ("When Congress wished to provide
a remedy to those who neither purchase nor sell securities, it had little trouble in
doing so expressly").

34

We reach the uncontroversial conclusion, accepted even by those courts

recognizing a 10(b) aiding and abetting cause of action, that the text of the
1934 Act does not itself reach those who aid and abet a 10(b) violation.
Unlike those courts, however, we think that conclusion resolves the case. It is
inconsistent with settled methodology in 10(b) cases to extend liability

beyond the scope of conduct prohibited by the statutory text. To be sure, aiding
and abetting a wrongdoer ought to be actionable in certain instances. Cf.
Restatement (Second) of Torts 876(b) (1977). The issue, however, is not
whether imposing private civil liability on aiders and abettors is good policy
but whether aiding and abetting is covered by the statute.
35

As in earlier cases considering conduct prohibited by 10(b), we again

conclude that the statute prohibits only the making of a material misstatement
(or omission) or the commission of a manipulative act. See Santa Fe Industries,
430 U.S., at 473, 97 S.Ct., at 1301 ("language of 10(b) gives no indication
that Congress meant to prohibit any conduct not involving manipulation or
deception"); Ernst & Ernst, 425 U.S., at 214, 96 S.Ct., at 1391 ("When a statute
speaks so specifically in terms of manipulation and deception . . ., we are quite
unwilling to extend the scope of the statute"). The proscription does not include
giving aid to a person who commits a manipulative or deceptive act. We cannot
amend the statute to create liability for acts that are not themselves
manipulative or deceptive within the meaning of the statute.

III
36

Because this case concerns the conduct prohibited by 10(b), the statute itself
resolves the case, but even if it did not, we would reach the same result. When
the text of 10(b) does not resolve a particular issue, we attempt to infer "how
the 1934 Congress would have addressed the issue had the 10b-5 action been
included as an express provision in the 1934 Act." Musick, Peeler, 508 U.S., at
----, 113 S.Ct., at 2090. For that inquiry, we use the express causes of action in
the securities Acts as the primary model for the 10(b) action. The reason is
evident: Had the 73d Congress enacted a private 10(b) right of action, it
likely would have designed it in a manner similar to the other private rights of
action in the securities Acts. See Musick, Peeler, 508 U.S., at ---- - ----, 113
S.Ct., at 2089-2092.

37

In Musick, Peeler, for example, we recognized a right to contribution under

10(b). We held that the express rights of contribution contained in 9 and 18
of the Acts were "important . . . feature[s] of the federal securities laws and that
consistency required us to adopt a like contribution rule for the right of action
existing under Rule 10b-5." 508 U.S., at ----, 113 S.Ct., at 2091. In Basic Inc. v.
Levinson, 485 U.S. 224, 243, 108 S.Ct. 978, 989, 99 L.Ed.2d 194 (1988), we
decided that a plaintiff in a 10b-5 action must prove that he relied on the
defendant's misrepresentation in order to recover damages. In so holding, we
stated that the "analogous express right of action" 18(a) of the 1934 Act
"includes a reliance requirement." Ibid. And in Blue Chip Stamps, we held

that a 10b-5 plaintiff must have purchased or sold the security to recover
damages for the defendant's misrepresentation. We said that "[t]he principal
express private nonderivative civil remedies, created by Congress
contemporaneously with the passage of 10(b) . . . are by their terms expressly
limited to purchasers or sellers of securities." 421 U.S., at 735-736, 95 S.Ct., at
1925.
38

Following that analysis here, we look to the express private causes of action in
the 1933 and 1934 Acts. See, e.g., Musick, Peeler, supra, 508 U.S. at ---- - ----,
113 S.Ct., at 2089-2092; Blue Chip Stamps, supra, 421 U.S. at 735-736, 95
S.Ct., at 1925-1926. In the 1933 Act, 11 prohibits false statements or
omissions of material fact in registration statements; it identifies the various
categories of defendants subject to liability for a violation, but that list does not
include aiders and abettors. 15 U.S.C. 77k. Section 12 prohibits the sale of
unregistered, nonexempt securities as well as the sale of securities by means of
a material misstatement or omission; and it limits liability to those who offer or
sell the security. 15 U.S.C. 77l. In the 1934 Act, 9 prohibits any person
from engaging in manipulative practices such as wash sales, matched orders,
and the like. 15 U.S.C. 78i. Section 16 prohibits short-swing trading by
owners, directors, and officers. 15 U.S.C. 78p. Section 18 prohibits any
person from making misleading statements in reports filed with the SEC. 15
U.S.C. 78r. And 20A, added in 1988, prohibits any person from engaging in
insider trading. 15 U.S.C. 78t-1.

39

This survey of the express causes of action in the securities Acts reveals that
each (like 10(b)) specifies the conduct for which defendants may be held
liable. Some of the express causes of action specify categories of defendants
who may be liable; others (like 10(b)) state only that "any person" who
commits one of the prohibited acts may be held liable. The important point for
present purposes, however, is that none of the express causes of action in the
1934 Act further imposes liability on one who aids or abets a violation. Cf. 7
U.S.C. 25(a)(1) (1988 ed. and Supp. IV) (Commodity Exchange Act's private
civil aiding and abetting provision).

40

From the fact that Congress did not attach private aiding and abetting liability
to any of the express causes of action in the securities Acts, we can infer that
Congress likely would not have attached aiding and abetting liability to 10(b)
had it provided a private 10(b) cause of action. See Musick, Peeler, 508 U.S.,
at ----, 113 S.Ct., at 2091 ("[C]onsistency requires us to adopt a like
contribution rule for the right of action existing under Rule 10b-5"). There is no
reason to think that Congress would have attached aiding and abetting liability
only to 10(b) and not to any of the express private rights of action in the Act.

In Blue Chip Stamps, we noted that it would be "anomalous to impute to

Congress an intention to expand the plaintiff class for a judicially implied cause
of action beyond the bounds it delineated for comparable express causes of
action." 421 U.S., at 736, 95 S.Ct., at 1925-1926. Here, it would be just as
anomalous to impute to Congress an intention in effect to expand the defendant
class for 10b-5 actions beyond the bounds delineated for comparable express
causes of action.
41

Our reasoning is confirmed by the fact that respondents' argument would

impose 10b-5 aiding and abetting liability when at least one element critical for
recovery under 10b-5 is absent: reliance. A plaintiff must show reliance on the
defendant's misstatement or omission to recover under 10b-5. Basic Inc. v.
Levinson, supra, 485 U.S., at 243, 108 S.Ct., at 989-990. Were we to allow the
aiding and abetting action proposed in this case, the defendant could be liable
without any showing that the plaintiff relied upon the aider and abettor's
statements or actions. See also Chiarella, 445 U.S., at 228, 100 S.Ct., at 1114
(omission actionable only where duty to disclose arises from specific
relationship between two parties). Allowing plaintiffs to circumvent the
reliance requirement would disregard the careful limits on 10b-5 recovery
mandated by our earlier cases.

IV
42

Respondents make further arguments for imposition of 10(b) aiding and

abetting liability, none of which leads us to a different answer.

A.
43

The text does not support their point, but respondents and some amici invoke a
broad-based notion of congressional intent. They say that Congress legislated
with an understanding of general principles of tort law and that aiding and
abetting liability was "well established in both civil and criminal actions by
1934." Brief for SEC 10. Thus, "Congress intended to include" aiding and
abetting liability in the 1934 Act. Id., at 11. A brief history of aiding and
abetting liability serves to dispose of this argument.

44

Aiding and abetting is an ancient criminal law doctrine. See United States v.
Peoni, 100 F.2d 401, 402 (CA2 1938); 1 M. Hale, Pleas of the Crown 615
(1736). Though there is no federal common law of crimes, Congress in 1909
enacted what is now 18 U.S.C. 2, a general aiding and abetting statute
applicable to all federal criminal offenses. Act of Mar. 4, 1909, 332, 35 Stat.
1152. The statute decrees that those who provide knowing aid to persons

committing federal crimes, with the intent to facilitate the crime, are themselves
committing a crime. Nye & Nissen v. United States, 336 U.S. 613, 619, 69 S.Ct.
766, 769-770, 93 L.Ed. 919 (1949).
45

The Restatement of Torts, under a concert of action principle, accepts a doctrine

with rough similarity to criminal aiding and abetting. An actor is liable for
harm resulting to a third person from the tortious conduct of another "if he . . .
knows that the other's conduct constitutes a breach of duty and gives substantial
assistance or encouragement to the other. . . ." Restatement (Second) of Torts
876(b) (1977); see also W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser
and Keeton on Law of Torts 322-324 (5th ed. 1984). The doctrine has been at
best uncertain in application, however. As the Court of Appeals for the District
of Columbia Circuit noted in a comprehensive opinion on the subject, the
leading cases applying this doctrine are statutory securities cases, with the
common-law precedents "largely confined to isolated acts of adolescents in
rural society." Halberstam v. Welch, 705 F.2d 472, 489 (1983). Indeed, in some
States, it is still unclear whether there is aiding and abetting tort liability of the
kind set forth in 876(b) of the Restatement. See, e.g., FDIC v. S. Prawer &
Co., 829 F.Supp. 453, 457 (Maine 1993) (in Maine, "[i]t is clear . . . that aiding
and abetting liability did not exist under the common law, but was entirely a
creature of statute"); In re Asbestos School Litigation, 1991 WL 137128, *3,
1991 U.S.Dist.LEXIS 10471, *34 (E.D.Pa.1991) (cause of action under
Restatement 876 "has not yet been applied as a basis for liability" by
Pennsylvania courts); Meadow Limited Partnership v. Heritage Savings and
Loan Assn., 639 F.Supp. 643, 653 (E.D.Va.1986) (aiding and abetting tort
based on Restatement 876 "not expressly recognized by the state courts of the
Commonwealth" of Virginia); Sloane v. Fauque, 239 Mont. 383, 385, 784 P.2d
895, 896 (1989) (aiding and abetting tort liability is issue "of first impression in
Montana").

46

More to the point, Congress has not enacted a general civil aiding and abetting
statuteeither for suits by the Government (when the Government sues for
civil penalties or injunctive relief) or for suits by private parties. Thus, when
Congress enacts a statute under which a person may sue and recover damages
from a private defendant for the defendant's violation of some statutory norm,
there is no general presumption that the plaintiff may also sue aiders and
abettors. See, e.g., Electronic Laboratory Supply Co. v. Cullen, 977 F.2d 798,
805-806 (CA3 1992).

47

Congress instead has taken a statute-by-statute approach to civil aiding and

abetting liability. For example, the Internal Revenue Code contains a full
section governing aiding and abetting liability, complete with description of

scienter and the penalties attached. 26 U.S.C. 6701 (1988 ed. and Supp. IV).
The Commodity Exchange Act contains an explicit aiding and abetting
provision that applies to private suits brought under that Act. 7 U.S.C. 25(a)
(1); see also, e.g., 12 U.S.C. 93(b)(8) (1988 ed. and Supp. IV) (National Bank
Act defines violations to include "aiding and abetting"); 12 U.S.C. 504(h)
(1988 ed. and Supp. IV) (Federal Reserve Act defines violations to include
"aiding and abetting"); Packers and Stockyards Act, 1921, ch. 64, 202, 42
Stat. 161, 7 U.S.C. 192(g) (civil aiding and abetting provision). Indeed,
various provisions of the securities laws prohibit aiding and abetting, although
violations are enforceable only in actions brought by the SEC. See, e.g., 15
U.S.C. 78o (b)(4)(E) (1988 ed. and Supp. IV) (SEC may proceed against
brokers and dealers who aid and abet a violation of the securities laws); Insider
Trader Sanctions Act of 1984, Pub.L. 98-376, 98 Stat. 1264 (civil penalty
provision added in 1984 applicable to those who aid and abet insider trading
violations); 15 U.S.C. 78u-2 (1988 ed., Supp. IV) (civil penalty provision
added in 1990 applicable to brokers and dealers who aid and abet various
violations of the Act).
48

With this background in mind, we think respondents' argument based on

implicit congressional intent can be taken in one of three ways. First,
respondents might be saying that aiding and abetting should attach to all federal
civil statutes, even laws that do not contain an explicit aiding and abetting
provision. But neither respondents nor their amici cite, and we have not found,
any precedent for that vast expansion of federal law. It does not appear
Congress was operating on that assumption in 1934, or since then, given that it
has been quite explicit in imposing civil aiding and abetting liability in other
instances. We decline to recognize such a comprehensive rule with no
expression of congressional direction to do so.

49

Second, on a more narrow ground, respondents' congressional intent argument

might be interpreted to suggest that the 73d Congress intended to include aiding
and abetting only in 10(b). But nothing in the text or history of 10(b) even
implies that aiding and abetting was covered by the statutory prohibition on
manipulative and deceptive conduct.

50

Third, respondents' congressional intent argument might be construed as a

contention that the 73d Congress intended to impose aiding and abetting
liability for all of the express causes of action contained in the 1934 Actand
thus would have imposed aiding and abetting liability in 10(b) actions had it
enacted a private 10(b) right of action. As we have explained, however, none
of the express private causes of action in the Act imposes aiding and abetting
liability, and there is no evidence that Congress intended that liability for the

express causes of action.

51

Even assuming, moreover, a deeply rooted background of aiding and abetting

tort liability, it does not follow that Congress intended to apply that kind of
liability to the private causes of action in the securities Acts. Cf. Mertens, 508
U.S., at ----, 113 S.Ct., at 2067 (omission of knowing participation liability in
ERISA "appears all the more deliberate in light of the fact that 'knowing
participation' liability on the part of both cotrustees and third persons was well
established under the common law of trusts"). In addition, Congress did not
overlook secondary liability when it created the private rights of action in the
1934 Act. Section 20 of the 1934 Act imposes liability on "controlling
persons"persons who "contro[l] any person liable under any provision of this
chapter or of any rule or regulation thereunder." 15 U.S.C. 78t(a). This
suggests that "[w]hen Congress wished to create such [secondary] liability, it
had little trouble doing so." Pinter v. Dahl, 486 U.S., at 650, 108 S.Ct., at 2080;
cf. Touche Ross & Co. v. Redington, 442 U.S. 560, 572, 99 S.Ct. 2479, 2487,
61 L.Ed.2d 82 (1979) ("Obviously, then, when Congress wished to provide a
private damages remedy, it knew how to do so and did so expressly"); see also
Fischel, 69 Calif.L.Rev., at 96-98. Aiding and abetting is "a method by which
courts create secondary liability" in persons other than the violator of the
statute. Pinter v. Dahl, supra, 486 U.S. at 648, n. 24, 108 S.Ct., at 2079, n. 24.
The fact that Congress chose to impose some forms of secondary liability, but
not others, indicates a deliberate congressional choice with which the courts
should not interfere.

52

We note that the 1929 Uniform Sale of Securities Act contained a private
aiding and abetting cause of action. And at the time Congress passed the 1934
Act, the blue sky laws of 11 States and the Territory of Hawaii provided a
private right of action against those who aided a fraudulent or illegal sale of
securities. See Abrams, The Scope of Liability Under Section 12 of the
Securities Act of 1933: "Participation" and the Pertinent Legislative Materials,
15 Ford.Urb.L.J. 877, 945, and n. 423 (1987) (listing provisions). Congress
enacted the 1933 and 1934 Acts against this backdrop, but did not provide for
aiding and abetting liability in any of the private causes of action it authorized.

53

In sum, it is not plausible to interpret the statutory silence as tantamount to an

implicit congressional intent to impose 10(b) aiding and abetting liability.

B
54

When Congress reenacts statutory language that has been given a consistent
judicial construction, we often adhere to that construction in interpreting the

reenacted statutory language. See, e.g., Keene Corp. v. United States, 508 U.S. ---, ----, 113 S.Ct. 2035, 2043, 124 L.Ed.2d 118 (1993); Pierce v. Underwood,
487 U.S. 552, 567, 108 S.Ct. 2541, 2551, 101 L.Ed.2d 490 (1988); Lorillard v.
Pons, 434 U.S. 575, 580-581, 98 S.Ct. 866, 870, 55 L.Ed.2d 40 (1978).
Congress has not reenacted the language of 10(b) since 1934, however, so we
need not determine whether the other conditions for applying the reenactment
doctrine are present. Cf. Fogerty v. Fantasy, Inc., 510 U.S. ----, ---- - ----, 114
S.Ct. 1023, 1030-1033, 127 L.Ed.2d 455 (1994).
55

Nonetheless, the parties advance competing arguments based on other post1934 legislative developments to support their differing interpretations of
10(b). Respondents note that 1983 and 1988 committee reports, which make
oblique references to aiding and abetting liability, show that those Congresses
interpreted 10(b) to cover aiding and abetting. H.R.Rep. No. 100-910, pp. 2728 (1988); H.R.Rep. No. 355, p. 10 (1983). But "[w]e have observed on more
than one occasion that the interpretation given by one Congress (or a
committee or Member thereof) to an earlier statute is of little assistance in
discerning the meaning of that statute." Public Employees Retirement System v.
Betts, 492 U.S. 158, 168, 109 S.Ct. 2854, 2861, 106 L.Ed.2d 134 (1989); see
Weinberger v. Rossi, 456 U.S. 25, 35, 102 S.Ct. 1510, 1517-1518, 71 L.Ed.2d
715 (1982); Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S.
102, 118, and n. 13, 100 S.Ct. 2051, 2061, and n. 13, 64 L.Ed.2d 766 (1980).

56

Respondents observe that Congress has amended the securities laws on various
occasions since 1966, when courts first began to interpret 10(b) to cover
aiding and abetting, but has done so without providing that aiding and abetting
liability is not available under 10(b). From that, respondents infer that these
Congresses, by silence, have acquiesced in the judicial interpretation of 10(b).
We disagree. This Court has reserved the issue of 10b-5 aiding and abetting
liability on two previous occasions. Herman & MacLean v. Huddleston, 459
U.S., at 379, n. 5, 103 S.Ct., at 685, n. 5; Ernst & Ernst, 425 U.S., at 191-192,
n. 7, 96 S.Ct., at 1380, n. 7. Furthermore, our observations on the acquiescence
doctrine indicate its limitations as an expression of congressional intent. "It does
not follow . . . that Congress' failure to overturn a statutory precedent is reason
for this Court to adhere to it. It is 'impossible to assert with any degree of
assurance that congressional failure to act represents' affirmative congressional
approval of the [courts'] statutory interpretation. . . . Congress may legislate,
moreover, only through passage of a bill which is approved by both Houses and
signed by the President. See U.S. Const. Art. I, 7, cl. 2. Congressional
inaction cannot amend a duly enacted statute." Patterson v. McLean Credit
Union, 491 U.S. 164, 175, n. 1, 109 S.Ct. 2363, 2371, n. 1, 105 L.Ed.2d 132
(1989) (quoting Johnson v. Transportation Agency, Santa Clara County, 480

U.S. 616, 671-672, 107 S.Ct. 1442, 1472-1473, 94 L.Ed.2d 615 (1987) (Scalia,
J., dissenting)); see Helvering v. Hallock, 309 U.S. 106, 121, 60 S.Ct. 444, 452,
84 L.Ed. 604 (1940) (Frankfurter, J.) ("[W]e walk on quicksand when we try to
find in the absence of corrective legislation a controlling legal principle").
57

58

Central Bank, for its part, points out that in 1957, 1959, and 1960, bills were
introduced that would have amended the securities laws to make it "unlawful . .
. to aid, abet, counsel, command, induce, or procure the violation of any
provision" of the 1934 Act. S. 1179, 86th Cong., 1st Sess. 22 (1959); see also
S. 3770, 86th Cong., 2d Sess. 20 (1960); S. 2545, 85th Cong., 1st Sess. 20
(1957). These bills prompted "industry fears that private litigants, not only the
SEC, may find in this section a vehicle by which to sue aiders and abettors,"
and the bills were not passed. SEC Legislation: Hearings before a
Subcommittee of the Committee on Banking and Currency on S. 1178, S. 1179,
S. 1180, S. 1181, and S. 1182, 86th Cong., 1st Sess. 288, 370 (1959).
According to Central Bank, these proposals reveal that those Congresses
interpreted 10(b) not to cover aiding and abetting. We have stated, however,
that failed legislative proposals are "a particularly dangerous ground on which
to rest an interpretation of a prior statute." Pension Benefit Guaranty Corp. v.
LTV Corp., 496 U.S. 633, 650, 110 S.Ct. 2668, 2678, 110 L.Ed.2d 579 (1990).
"Congressional inaction lacks persuasive significance because several equally
tenable inferences may be drawn from such inaction, including the inference
that the existing legislation already incorporated the offered change." Ibid.
(internal quotation marks omitted); see United States v. Wise, 370 U.S. 405,
411, 82 S.Ct. 1354, 1359, 8 L.Ed.2d 590 (1962).
It is true that our cases have not been consistent in rejecting arguments such as
these. Compare Flood v. Kuhn, 407 U.S. 258, 281-282, 92 S.Ct. 2099, 21112112, 32 L.Ed.2d 728 (1972), with Pension Benefit Guaranty Corp., supra, 496
U.S., at 650, 110 S.Ct., at 2678; compare Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. Curran, 456 U.S. 353, 381-382, 102 S.Ct. 1825, 1840-1841, 72
L.Ed.2d 182 (1982), with Aaron v. SEC, 446 U.S. 680, 694, n. 11, 100 S.Ct.
1945, 1954, n. 11, 64 L.Ed.2d 611 (1980). As a general matter, however, we
have stated that these arguments deserve little weight in the interpretive
process. Even were that not the case, the competing arguments here would not
point to a definitive answer. We therefore reject them. As we stated last Term,
Congress has acknowledged the 10b-5 action without any further attempt to
define it. Musick, Peeler, 508 U.S., at ----, 113 S.Ct., at 2089. We find our role
limited when the issue is the scope of conduct prohibited by the statute. Id., at ---, 113 S.Ct., at 2088. That issue is our concern here, and we adhere to the
statutory text in resolving it.

C
59

The SEC points to various policy arguments in support of the 10b-5 aiding and
abetting cause of action. It argues, for example, that the aiding and abetting
cause of action deters secondary actors from contributing to fraudulent
activities and ensures that defrauded plaintiffs are made whole. Brief for SEC
16-17.

60

Policy considerations cannot override our interpretation of the text and structure
of the Act, except to the extent that they may help to show that adherence to the
text and structure would lead to a result "so bizarre" that Congress could not
have intended it. Demarest v. Manspeaker, 498 U.S. 184, 191, 111 S.Ct. 599,
604, 112 L.Ed.2d 608 (1991); cf. Pinter v. Dahl, 486 U.S., at 654, 108 S.Ct., at
2082 ("[W]e need not entertain Pinter's policy arguments"); Santa Fe
Industries, 430 U.S., at 477, 97 S.Ct., at 1303 (language sufficiently clear to be
dispositive). That is not the case here.

61

Extending the 10b-5 cause of action to aiders and abettors no doubt makes the
civil remedy more far-reaching, but it does not follow that the objectives of the
statute are better served. Secondary liability for aiders and abettors exacts costs
that may disserve the goals of fair dealing and efficiency in the securities
markets.

62

As an initial matter, the rules for determining aiding and abetting liability are
unclear, in "an area that demands certainty and predictability." Pinter v. Dahl,
486 U.S., at 652, 108 S.Ct., at 2081. That leads to the undesirable result of
decisions "made on an ad hoc basis, offering little predictive value" to those
who provide services to participants in the securities business. Ibid. "[S]uch a
shifting and highly fact-oriented disposition of the issue of who may [be liable
for] a damages claim for violation of Rule 10b-5" is not a "satisfactory basis for
a rule of liability imposed on the conduct of business transactions." Blue Chip
Stamps, 421 U.S., at 755, 95 S.Ct., at 1934; see also Virginia Bankshares, 501
U.S., at ----, 111 S.Ct., at 2754 ("The issues would be hazy, their litigation
protracted, and their resolution unreliable. Given a choice, we would reject any
theory . . . that raised such prospects"). Because of the uncertainty of the
governing rules, entities subject to secondary liability as aiders and abettors
may find it prudent and necessary, as a business judgment, to abandon
substantial defenses and to pay settlements in order to avoid the expense and
risk of going to trial.

63

In addition, "litigation under Rule 10b-5 presents a danger of vexatiousness

different in degree and in kind from that which accompanies litigation in

general." Blue Chip Stamps, supra, 421 U.S., at 739, 95 S.Ct., at 1927; see
Virginia Bankshares, 501 U.S., at ----, 111 S.Ct., at ----; S.Rep. No. 792, 73d
Cong., 2d Sess., p. 21 (1934) (attorney's fees provision is protection against
strike suits). Litigation under 10b-5 thus requires secondary actors to expend
large sums even for pretrial defense and the negotiation of settlements. See 138
Cong.Rec. S12605 (Aug. 12, 1992) (remarks of Sen. Sanford) (asserting that in
83% of 10b-5 cases major accounting firms pay $8 in legal fees for every $1
paid in claims).
64

This uncertainty and excessive litigation can have ripple effects. For example,
newer and smaller companies may find it difficult to obtain advice from
professionals. A professional may fear that a newer or smaller company may
not survive and that business failure would generate securities litigation against
the professional, among others. In addition, the increased costs incurred by
professionals because of the litigation and settlement costs under 10b-5 may be
passed on to their client companies, and in turn incurred by the company's
investors, the intended beneficiaries of the statute. See Winter, Paying Lawyers,
Empowering Prosecutors, and Protecting Managers: Raising the Cost of Capital
in America, 42 Duke L.J. 945, 948-966 (1993).

65

We hasten to add that competing policy arguments in favor of aiding and

abetting liability can also be advanced. The point here, however, is that it is far
from clear that Congress in 1934 would have decided that the statutory
purposes would be furthered by the imposition of private aider and abettor
liability.

D
66

At oral argument, the SEC suggested that 18 U.S.C. 2 is "significant" and

"very important" in this case. Tr. of Oral Arg. 41, 43. At the outset, we note
that this contention is inconsistent with the SEC's argument that recklessness is
a sufficient scienter for aiding and abetting liability. Criminal aiding and
abetting liability under 2 requires proof that the defendant "in some sort
associate[d] himself with the venture, that he participate[d] in it as in something
that he wishe[d] to bring about, that he [sought] by his action to make it
succeed." Nye & Nissen, 336 U.S., at 619, 69 S.Ct., at 770 (internal quotation
marks omitted). But recklessness, not intentional wrongdoing, is the theory
underlying the aiding and abetting allegations in the case before us.

67

Furthermore, while it is true that an aider and abettor of a criminal violation of

any provision of the 1934 Act, including 10(b), violates 18 U.S.C. 2, it does

not follow that a private civil aiding and abetting cause of action must also
exist. We have been quite reluctant to infer a private right of action from a
criminal prohibition alone; in Cort v. Ash, 422 U.S. 66, 80, 95 S.Ct. 2080, 2089,
45 L.Ed.2d 26 (1975), for example, we refused to infer a private right of action
from "a bare criminal statute." And we have not suggested that a private right of
action exists for all injuries caused by violations of criminal prohibitions. See
Touche Ross, 442 U.S., at 568, 99 S.Ct., at 2485 ("question of the existence of a
statutory cause of action is, of course, one of statutory construction"). If we
were to rely on this reasoning now, we would be obliged to hold that a private
right of action exists for every provision of the 1934 Act, for it is a criminal
violation to violate any of its provisions. 15 U.S.C. 78ff. And thus, given 18
U.S.C. 2, we would also have to hold that a civil aiding and abetting cause of
action is available for every provision of the Act. There would be no logical
stopping point to this line of reasoning: Every criminal statute passed for the
benefit of some particular class of persons would carry with it a concomitant
civil damages cause of action.
68

This approach, with its far-reaching consequences, would work a significant

shift in settled interpretive principles regarding implied causes of action. See,
e.g., Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S.Ct.
242, 62 L.Ed.2d 146 (1979). We are unwilling to reverse course in this case.
We decline to rely only on 18 U.S.C. 2 as the basis for recognizing a private
aiding and abetting right of action under 10(b).

V
69

Because the text of 10(b) does not prohibit aiding and abetting, we hold that a
private plaintiff may not maintain an aiding and abetting suit under 10(b).
The absence of 10(b) aiding and abetting liability does not mean that
secondary actors in the securities markets are always free from liability under
the securities Acts. Any person or entity, including a lawyer, accountant, or
bank, who employs a manipulative device or makes a material misstatement (or
omission) on which a purchaser or seller of securities relies may be liable as a
primary violator under 10b-5, assuming all of the requirements for primary
liability under Rule 10b-5 are met. See Fischel, 69 Calif.L.Rev., at 107-108. In
any complex securities fraud, moreover, there are likely to be multiple
violators; in this case, for example, respondents named four defendants as
primary violators. App. 24-25.

70

Respondents concede that Central Bank did not commit a manipulative or

deceptive act within the meaning of 10(b). Tr. of Oral Arg. 31. Instead, in the
words of the complaint, Central Bank was "secondarily liable under 10(b) for

its conduct in aiding and abetting the fraud." App. 26. Because of our
conclusion that there is no private aiding and abetting liability under 10(b),
Central Bank may not be held liable as an aider and abettor. The District
Court's grant of summary judgment to Central Bank was proper, and the
judgment of the Court of Appeals is
71

Reversed.

72

Justice STEVENS, with whom Justice BLACKMUN, Justice SOUTER, and

Justice GINSBURG join, dissenting.

73

The main themes of the Court's opinion are that the text of 10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. 78j(b), does not expressly
mention aiding and abetting liability, and that Congress knows how to legislate.
Both propositions are unexceptionable, but neither is reason to eliminate the
private right of action against aiders and abettors of violations of 10(b) and
the Securities and Exchange Commission's Rule 10b-5. Because the majority
gives short shrift to a long history of aider and abettor liability under 10(b)
and Rule 10b-5, and because its rationale imperils other well established forms
of secondary liability not expressly addressed in the securities laws, I
respectfully dissent.

74

In hundreds of judicial and administrative proceedings in every circuit in the

federal system, the courts and the SEC have concluded that aiders and abettors
are subject to liability under 10(b) and Rule 10b-5. See 5B A. Jacobs,
Litigation and Practice Under Rule 10b-5 40.02 (rev. ed. 1993) (citing cases).
While we have reserved decision on the legitimacy of the theory in two cases
that did not present it, all 11 Courts of Appeals to have considered the question
have recognized a private cause of action against aiders and abettors under
10(b) and Rule 10b-5.1 The early aiding and abetting decisions relied upon
principles borrowed from tort law; in those cases, judges closer to the times and
climate of the 73d Congress than we concluded that holding aiders and abettors
liable was consonant with the 1934 Act's purpose to strengthen the antifraud
remedies of the common law.2 One described the aiding and abetting theory,
grounded in "general principles of tort law," as a "logical and natural
complement" to the private 10(b) action that furthered the Exchange Act's
purpose of "creation and maintenance of a post-issuance securities market that
is free from fraudulent practices." Brennan v. Midwestern United Life Ins. Co.,
259 F.Supp. 673, 680 (N.D.Ind.1966) (borrowing formulation from the
Restatement of Torts 876(b) (1939)), later opinion, 286 F.Supp. 702 (1968),
aff'd, 417 F.2d 147 (CA7 1969), cert. denied, 397 U.S. 989, 90 S.Ct. 1122, 25
L.Ed.2d 397 (1970). See also Pettit v. American Stock Exchange, 217 F.Supp.

21, 28 (SDNY 1963).

75

The Courts of Appeals have usually applied a familiar three-part test for aider
and abettor liability, patterned on the Restatement of Torts formulation, that
requires (i) the existence of a primary violation of 10(b) or Rule 10b-5, (ii)
the defendant's knowledge of (or recklessness as to) that primary violation, and
(iii) "substantial assistance" of the violation by the defendant. See, e.g., Cleary
v. Perfectune, Inc., 700 F.2d 774, 776-777 (CA1 1983); IIT, An Int'l Investment
Trust v. Cornfeld, 619 F.2d 909, 922 (CA2 1980). If indeed there has been
"continuing confusion" concerning the private right of action against aiders and
abettors, that confusion has not concerned its basic structure, still less its
"existence." See ante, at ____. Indeed, in this case, petitioner assumed the
existence of a right of action against aiders and abettors, and sought review only
of the subsidiary questions whether an indenture trustee could be found liable
as an aider and abettor absent a breach of an indenture agreement or other duty
under state law, and whether it could be liable as an aider and abettor based
only on a showing of recklessness. These questions, it is true, have engendered
genuine disagreement in the Courts of Appeals.3 But instead of simply
addressing the questions presented by the parties, on which the law really was
unsettled, the Court sua sponte directed the parties to address a question on
which even the petitioner justifiably thought the law was settled, and reaches
out to overturn a most considerable body of precedent. 4

76

Many of the observations in the majority's opinion would be persuasive if we

were considering whether to recognize a private right of action based upon a
securities statute enacted recently. Our approach to implied causes of action, as
to other matters of statutory construction, has changed markedly since the
Exchange Act's passage in 1934. At that time, and indeed until quite recently,
courts regularly assumed, in accord with the traditional common law
presumption, that a statute enacted for the benefit of a particular class conferred
on members of that class the right to sue violators of that statute.5 Moreover,
shortly before the Exchange Act was passed, this Court instructed that such
"remedial" legislation should receive "a broader and more liberal interpretation
than that to be drawn from mere dictionary definitions of the words employed
by Congress." Piedmont & Northern R. Co. v. ICC, 286 U.S. 299, 311, 52 S.Ct.
541, 545, 76 L.Ed. 1115 (1932). There is a risk of anachronistic error in
applying our current approach to implied causes of action, ante, at ____, to a
statute enacted when courts commonly read statutes of this kind broadly to
accord with their remedial purposes and regularly approved rights to sue despite
statutory silence.

77

Even had 10(b) not been enacted against a backdrop of liberal construction of

remedial statutes and judicial favor toward implied rights of action, I would still
disagree with the majority for the simple reason that a "settled construction of
an important federal statute should not be disturbed unless and until Congress
so decides." Reves v. Ernst & Young, 494 U.S. 56, 74, 110 S.Ct. 945, 956, 108
L.Ed.2d 47 (1990) (STEVENS, J., concurring). See Blue Chip Stamps v. Manor
Drug Stores, 421 U.S. 723, 733, 95 S.Ct. 1917, 1924, 44 L.Ed.2d 539 (1975)
(the "longstanding acceptance by the courts" and "Congress' failure to reject"
rule announced in landmark Court of Appeals decision favored retention of the
rule).6 A policy of respect for consistent judicial and administrative
interpretations leaves it to elected representatives to assess settled law and to
evaluate the merits and demerits of changing it.7 Even when there is no
affirmative evidence of ratification, the Legislature's failure to reject a
consistent judicial or administrative construction counsels hesitation from a
court asked to invalidate it. Cf. Burnet v. Coronado Oil & Gas Co., 285 U.S.
393, 406, 52 S.Ct. 443, 447, 76 L.Ed. 815 (1932) (Brandeis, J., dissenting).
Here, however, the available evidence suggests congressional approval of aider
and abettor liability in private 10(b) actions. In its comprehensive revision of
the Exchange Act in 1975, Congress left untouched the sizeable body of case
law approving aiding and abetting liability in private actions under 10(b) and
Rule 10b-5. 8 The case for
78
[WESTm,S.Ct.
1459!]]leaving aiding and abetting liability intact draws further
strength from the fact that the SEC itself has consistently understood 10(b) to
impose aider and abettor liability since shortly after the rule's promulgation. See
Ernst & Young, 494 U.S., at 75, 110 S.Ct., at 956 (STEVENS, J., concurring). In
short, one need not agree as an original matter with the many decisions recognizing
the private right against aiders and abettors to concede that the right fits comfortably
within the statutory scheme, and that it has become a part of the established system
of private enforcement. We should leave it to Congress to alter that scheme.
79

The Court would be on firmer footing if it had been shown that aider and
abettor liability "detracts from the effectiveness of the 10b-5 implied action or
interferes with the effective operation of the securities laws." See Musick,
Peeler & Garrett v. Employers Ins. of Wausau, 508 U.S. ----, ----, 113 S.Ct.
2085, 2091, 124 L.Ed.2d 194 (1993). However, the line of decisions
recognizing aider and abettor liability suffers from no such infirmities. The
language of both 10(b) and Rule 10b-5 encompasses "any person" who
violates the Commission's anti-fraud rules, whether "directly or indirectly"; we
have read this "broad" language "not technically and restrictively, but flexibly
to effectuate its remedial purposes." Affiliated Ute Citizens of Utah v. United
States, 406 U.S. 128, 151, 92 S.Ct. 1456, 1471, 31 L.Ed.2d 741 (1972). In light
of the encompassing language of 10(b), and its acknowledged purpose to

strengthen the anti-fraud remedies of the common law, it was certainly no wild
extrapolation for courts to conclude that aiders and abettors should be subject to
the private action under 10(b).9 Allowing aider and abettor claims in private
10(b) actions can hardly be said to impose unfair legal duties on those whom
Congress has opted to leave unregulated: Aiders and abettors of 10(b) and
Rule 10b-5 violations have always been subject to criminal liability under 18
U.S.C. 2. See 15 U.S.C. 78ff (criminal liability for willful violations of
securities statutes and rules promulgated under them). Although the Court
canvasses policy arguments against aider and abettor liability, ante, at ____, it
does not suggest that the aiding and abetting theory has had such deleterious
consequences that we should dispense with it on those grounds.10 The agency
charged with primary responsibility for enforcing the securities laws does not
perceive such drawbacks, and urges retention of the private right to sue aiders
and abettors. See Brief for the Securities and Exchange Commission as Amicus
Curiae in Support of Respondents 5-17.
80

As framed by the Court's order redrafting the questions presented, this case
concerns only the existence and scope of aiding and abetting liability in suits
brought by private parties under 10(b) and Rule 10b-5. The majority's
rationale, however, sweeps far beyond even those important issues. The
majority leaves little doubt that the Exchange Act does not even permit the
Commission to pursue aiders and abettors in civil enforcement actions under
10(b) and Rule 10b-5. See ante, at 12 (finding it dispositive that "the text of the
1934 Act does not itself reach those who aid and abet a 10(b) violation").
Aiding and abetting liability has a long pedigree in civil proceedings brought by
the SEC under 10(b) and Rule 10b-5, and has become an important part of the
Commission's enforcement arsenal.11 Moreover, the majority's approach to
aiding and abetting at the very least casts serious doubt, both for private and
SEC actions, on other forms of secondary liability that, like the aiding and
abetting theory, have long been recognized by the SEC and the courts but are
not expressly spelled out in the securities statutes.12 The principle the Court
espouses todaythat liability may not be imposed on parties who are not
within the scope of 10(b)'s plain language is inconsistent with longestablished Commission and judicial precedent.

81

As a general principle, I agree, "the creation of new rights ought to be left to

legislatures, not courts." Musick, Peeler, 508 U.S., at ----, 113 S.Ct., at 2088.
But judicial restraint does not always favor the narrowest possible interpretation
of rights derived from federal statutes. While we are now properly reluctant to
recognize private rights of action without an instruction from Congress, we
should also be reluctant to lop off rights of action that have been recognized for
decades, even if the judicial methodology that gave them birth is now out of

favor. Caution is particularly appropriate here, because the judicially

recognized right in question accords with the longstanding construction of the
agency Congress has assigned to enforce the securities laws. Once again the
Court has refused to build upon a " 'secure foundation . . . laid by others,' "
Patterson v. McLean Credit Union, 491 U.S. 164, 222, 109 S.Ct. 2363, 2396,
105 L.Ed.2d 132 (1989) (STEVENS, J., dissenting) (quoting B. Cardozo, The
Nature of the Judicial Process 149 (1921)).
82

I respectfully dissent.

The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader. See
United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50
L.Ed. 499 (1906).

See, e.g., Cleary v. Perfectune, Inc., 700 F.2d 774, 777 (CA1 1983); IIT v.
Cornfeld, 619 F.2d 909, 922 (CA2 1980); Monsen v. Consolidated Dressed
Beef Co., 579 F.2d 793, 799-800 (CA3 1978); Schatz v. Rosenberg, 943 F.2d
485, 496-496 (CA4 1991); Fine v. American Solar King Corp., 919 F.2d 290,
300 (CA5 1990); Moore v. Fenex, Inc., 809 F.2d 297, 303 (CA6 1987), cert.
denied sub nom. Moore v. Frost, 483 U.S. 1006, 107 S.Ct. 3231, 97 L.Ed.2d
737 (1987); Schlifke v. Seafirst Corp., 866 F.2d 935, 947 (CA7 1989); K &
Partnership v. Continental Bank, N.A., 952 F.2d 971, 977 (CA8 1991); Levine
v. Diamanthuset, Inc., 950 F.2d 1478, 1483 (CA9 1991); Farlow v. Peat,
Marwick, Mitchell & Co., 956 F.2d 982, 986 (CA10 1992); Schneberger v.
Wheeler, 859 F.2d 1477, 1480 (CA11 1988). The only court not to have
squarely recognized aiding and abetting in private 10(b) actions has done so
in an action brought by the SEC, see Dirks v. SEC, 681 F.2d 824, 844 (CADC),
rev'd on other grounds, 463 U.S. 646, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983),
and has suggested that such a claim was available in private actions, see
Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 35-36 (CADC 1987). The
Seventh Circuit's test differs markedly from the other circuits' in that it requires
that the aider and abettor "commit one of the 'manipulative or deceptive' acts
prohibited under section 10(b) and rule 10b-5[.]" Robin v. Arthur Young & Co.,
915 F.2d 1120, 1123 (CA7 1990).

When 10(b) was enacted, aiding and abetting liability was widely, albeit not
universally, recognized in the law of torts and in state legislation prohibiting
misrepresentation in the marketing of securities. See, e.g., 1 T. Cooley, Law of
Torts 244 (3d ed. 1906) ("All who actively participate in any manner in the
commission of a tort, or who command, direct, advise, encourage, aid or abet it

commission, are jointly and severally liable therefor"). Section 16(1) of the
Uniform Sale of Securities Act, 9 U.L.A. 385 (1932), conferred a right to sue
aiders and abettors of securities fraud, as did the blue sky laws of 11 States. See
Abrams, The Scope of Liability Under Section 12 of the Securities Act of 1933:
"Participation" and the Pertinent Legislative Materials, 15 Fordham Urb.L.J.
877, 945 (1987). The courts' reliance on common law tort principles in defining
the scope of liability under 10(b) was by no means an anomaly. See, e.g.,
American Society of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S.
556, 565-574, 102 S.Ct. 1935, 1942-1947, 72 L.Ed.2d 330 (1982).
3

Compare, for example, the discussion in the opinion below of scienter in cases
in which defendant has no disclosure duty, 969 F.2d 891, 902-903 (CA10
1993), with that in Schatz v. Rosenberg, 943 F.2d 485 (CA4 1991), and Ross v.
Bolton, 904 F.2d 819, 824 (CA2 1990). See also Kuehnle, Secondary Liability
Under the Federal Securities LawsAiding and Abetting, Conspiracy,
Controlling Person, and Agency: Common-Law Principles and The Statutory
Scheme, 14 J.Corp.L. 313, 323-324, and n. 53 (1988).

"As I have said before, 'the adversary process functions most effectively when
we rely on the initiative of lawyers, rather than the activism of judges, to
fashion the questions for review.' New Jersey v. T.L.O., 468 U.S. 1214, 1216,
104 S.Ct. 3583, 3584, 82 L.Ed.2d 881 (1984) (dissenting from order directing
reargument)." Patterson v. McLean Credit Union, 485 U.S. 617, 623, 108 S.Ct.
1419, 1423, 99 L.Ed.2d 879 (1988) (STEVENS, J., dissenting from order
directing reargument).

See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 374378, 102 S.Ct. 1825, 1837-1839, 72 L.Ed.2d 182 (1982); Middlesex County
Sewerage Authority v. National Sea Clammers Assn., 453 U.S. 1, 22-25, 101
S.Ct. 2615, 2627-2629, 69 L.Ed.2d 435 (1981) (STEVENS, J., concurring in
the judgment in part and dissenting in part); California v. Sierra Club, 451 U.S.
287, 298-301, 101 S.Ct. 1775, 1781-1782, 68 L.Ed.2d 101 (1981) (STEVENS,
J., concurring). A discussion of the common law presumption is found in
Justice Pitney's opinion for the Court in Texas & Pacific R. Co. v. Rigsby, 241
U.S. 33, 39-40, 36 S.Ct. 482, 484-485, 60 L.Ed. 874 (1916). See also, e.g.,
Texas & New Orleans R. Co. v. Railway Clerks, 281 U.S. 548, 568-570, 50
S.Ct. 427, 433-434, 74 L.Ed. 1034 (1930).

None of the cases the majority relies upon to support its strict construction of
10(b), ante, at ____, even arguably involved a settled course of lower court
decisions. See Mertens v. Hewitt Associates, 508 U.S. ----, 113 S.Ct. 2063, 124
L.Ed.2d 161 (1993); Pinter v. Dahl, 486 U.S. 622, 635, n. 12, 108 S.Ct. 2063,
2072, n. 12, 100 L.Ed.2d 658 (1988); Chiarella v. United States, 445 U.S. 222,

229, n. 11, 100 S.Ct. 1108, 1115, n. 11, 63 L.Ed.2d 348 (1980); Santa Fe
Industries, Inc. v. Green, 430 U.S. 462, 475-476, n. 15, 97 S.Ct. 1292, 1302, n.
15, 51 L.Ed.2d 480 (1977); Ernst & Ernst v. Hochfelder, 425 U.S. 185, 191192, n. 7, 96 S.Ct. 1375, 1380, n. 7, 47 L.Ed.2d 668 (1976).
7

Of course, when a decision of this Court upsets settled law, Congress may step
in to reinstate the old law, cf. Securities Exchange Act 27A, as added by
Pub.L. 102-242, 476, 105 Stat. 2236, 2387, codified at 15 U.S.C. 78aa-1
(1988 ed., Supp. IV) (providing that relevant state limitations period should
govern actions pending when Lampf, Pleva, Lipkind, Prupis & Petrigrow v.
Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), came
down). However, we should not lightly heap new tasks on the Legislature's
already full plate. Moreover, congressional efforts to address the problems
posed by judicial decisions that disrupt settled law frequently create special
difficulties of their own. See, e.g., Plaut v. Spendthrift Farm, Inc., 1 F.3d 1487
(CA6 1993) (holding 27A unconstitutional), petition for cert. filed Jan. 11,
1994 (No. 93-1121); Pacific Mut. Life Ins. Co. v. First RepublicBank Corp.,
997 F.2d 39 (CA5 1993) (upholding it), cert. granted, --- U.S. ----, 114 S.Ct.
680, 126 L.Ed.2d 648 (1994).

By 1975, the renowned decision in Brennan v. Midwestern United Life Ins.

Co., 259 F.Supp. 673, 680 (ND Ind.1966), had been on the books almost a
decade and several Courts of Appeals had recognized aider and abettor liability
in private actions brought under 10(b) and Rule 10b-5. See Kerbs v. Fall
River Industries, Inc., 502 F.2d 731, 739-740 (CA10 1974); Landy v. FDIC,
486 F.2d 139, 162-163 (CA3 1973), cert. denied, 416 U.S. 960, 94 S.Ct. 1979,
40 L.Ed.2d 312 (1974); Strong v. France, 474 F.2d 747, 752 (CA9 1973);
Buttrey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 410 F.2d 135, 144
(CA7), cert. denied, 396 U.S. 838, 90 S.Ct. 98, 24 L.Ed.2d 88 (1969). See also
Lanza v. Drexel & Co., 479 F.2d 1277, 1301, 1303-1304 (CA2 1973) (en banc);
Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and
Abetting, Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120
U.Pa.L.Rev. 597, 620-638 (1972). We have noted the significance of the 1975
amendments in another case involving a "consistent line of judicial decisions"
on the implied right of action under 10(b) and Rule 10b-5. See Herman &
MacLean v. Huddleston, 459 U.S. 375, 384-386, 103 S.Ct. 683, 688-689, 74
L.Ed.2d 548 (1983). Those amendments emerged from " 'the most searching
reexamination of the competitive, statutory, and economic issues facing the
securities markets, the securities industry, and, of course, public investors, since
the 1930's.' " Id., at 385, n. 20, 103 S.Ct., at 688 (quoting H.R.Con.Rep. No.
94-229, p. 91 (1975)).
Congress' more recent visits to the securities laws also suggest approval of the

aiding and abetting theory in private 10(b) actions. The House Report
accompanying an aiding and abetting provision of the 1983 Insider Trading
Sanctions Act, see 15 U.S.C. 78u(d)(2)(A) (1982 ed., Supp. V), contains an
approving reference to "judicial application of the concept of aiding and
abetting liability to achieve the remedial purposes of the securities laws,"
H.R.Rep. No. 89-355, p. 10 (1983), and notes with favor Rolf v. Blyth, Eastman
Dillon & Co., 570 F.2d 38 (CA2), cert. denied, 439 U.S. 1039, 99 S.Ct. 642, 58
L.Ed.2d 698 (1978), which affirmed a judgment against an aider and abettor in
a private action under 10(b) and Rule 10b-5. Moreover, 5 of the Insider
Trading and Securities Fraud Enforcement Act of 1988, Pub.L. 100-704, 102
Stat. 4681, contains an express "acknowledgement," Musick, Peeler & Garrett
v. Employers Ins. of Wassau, 508 U.S. ----, ----, 113 S.Ct. 2085, 2089, 124
L.Ed.2d 194 (1993), of causes of action "implied from a provision of this title,"
15 U.S.C. 78t-1(d).
9

In a similar context we recognized a private right of action against secondary

violators of a statutory duty despite the absence of a provision explicitly
covering them. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456
U.S., at 394, 102 S.Ct., at 1847 ("Having concluded that exchanges can be held
accountable for breaching their statutory duties to enforce their own rules
prohibiting price manipulation, it necessarily follows that those persons who
are participants in a conspiracy to manipulate the market in violation of those
rules are also subject to suit by futures traders who can prove injury from these
violations").

10

Indeed, the Court anticipates, ante at ____, that many aiders and abettors will
be subject to liability as primary violators. For example, an accountant, lawyer,
or other person making oral or written misrepresentations (or omissions, if the
person owes a duty to the injured purchaser or seller, cf. Dirks v. SEC, 463 U.S.
646, 654-655, 103 S.Ct. 3255, 3261-3262, 77 L.Ed.2d 911 (1983)) in
connection with the purchase or sale of securities may be liable for a primary
violation of 10(b) and Rule 10b-5. See, e.g., W.O. Akin v. Q-L Investments,
Inc., 959 F.2d 521, 525-526 (CA5 1992).

11

See, e.g., SEC v. Coffey, 493 F.2d 1304, 1316 (CA6 1974); Ruder, 120
U.Pa.L.Rev., at 625-626, nn. 124 and 125. The Commission reports that it
asserted aiding and abetting claims in fifteen percent of its civil enforcement
proceedings in fiscal year 1992, and that elimination of aiding and abetting
liability would "sharply diminish the effectiveness of Commission actions."
Brief for the SEC as Amicus Curiae 18, n. 15.

12

The Court's rationale would sweep away the decisions recognizing that a
defendant may be found liable in a private action for conspiring to violate

10(b) and Rule 10b-5. See, e.g., U.S. Industries, Inc. v. Touche Ross & Co., 854
F.2d 1223, 1231 (CA10 1988); SEC v. Coffey, 493 F.2d 1304, 1316 (CA6
1974); Ferguson v. Omnimedia, Inc., 469 F.2d 194, 197-198 (CA1 1972); Shell
v. Hensley, 430 F.2d 819, 827 n. 13 (CA5 1970); Dasho v. Susquehanna Corp.,
380 F.2d 262, 267, n. 2 (CA7), cert. denied sub nom. Bard v. Dasho, 389 U.S.
977, 88 S.Ct. 480, 19 L.Ed.2d 470 (1967). See generally Kuehnle, 14 J.Corp.L.,
at 343-348. Secondary liability is as old as the implied right of action under
10(b) itself; the very first decision to recognize a private cause of action under
the section and rule, Kardon v. National Gypsum Co., 69 F.Supp. 512 (ED
Pa.1946), involved an alleged conspiracy. See also Fry v. Schumaker, 83
F.Supp. 476, 478 (ED Pa.1947) (Kirkpatrick, C.J.). In addition, many courts,
concluding that 20(a)'s "controlling person" provisions, 15 U.S.C. 78t, are
not the exclusive source of secondary liability under the Exchange Act, have
imposed liability in 10(b) actions based upon respondeat superior and other
common-law agency principles. See, e.g., Hollinger v. Titan Capital Corp., 914
F.2d 1564, 1576-1577 and n. 27 (CA9 1990) (en banc) (citing and following
decisions to this effect from six other circuits). See generally Kuehnle, 14
J.Corp.L., at 350-376. These decisions likewise appear unlikely to survive the
Court's decision. See ante, at ____.