The liability of so-called “secondary actors”—the investment banks, vendors, and others who might help a company commit securities fraud—is taking center stage in the courtroom these days. Though Compliance Week has covered this issue extensively over the past few years (see box below, right), the topic has again risen to the forefront in recent weeks, as several appeals courts have made split rulings on the issue and the U.S. Supreme Court has agreed to weigh in.
Most recently, the New Orleans-based 5th U.S. Circuit Court of Appeals overturned a decision that would have let Enron stockholders continue a class-action lawsuit against the banks that loaned money to the now-defunct poster child of corporate malfeasance. The appellate panel said such an action was impermissible because there was no showing that the financial institutions had a duty to shareholders. At worst, the banks were aiders and abetters—and consequently, not subject to private litigation under federal securities laws.
