Dan Gold in Compliance Week: Supreme Court Splits Decisions on Two Securities Cases


The U.S. Supreme Court issued a pair of decisions this month on securities class-action lawsuits—one that could help companies defend against such suits, the other a victory for shareholders.

The cases are the latest in a string of securities class actions that the high court has decided recently, a shift from past Supreme Courts that hesitated to rule on securities cases. “Over the past few years, the court has taken and decided significantly more securities-related cases,” says Dan Gold, a lawyer in the securities and shareholder litigation practice at law firm Haynes and Boone.

With the most recent ruling, Janus Capital Group v. First Derivative Traders, the court raised the hurdles for shareholders to hold a company responsible for the actions of financial intermediaries. The decision could have a huge effect on future cases related to securitized mortgages at the center of the financial crisis of 2008.

The case stemmed from a lawsuit filed by Janus Capital Group shareholders against Janus Capital Management, the fund's investment adviser, over allegations that Janus entered into several rapid-trading deals with hedge funds from 2000 to 2003 that resulted in financial losses for long-term fund holders.

The shareholders claimed Janus Capital Management, an affiliate of Janus Capital Group, was at fault for issuing prospectuses containing misstatements that Janus had adopted measures to curb such market-timing trades. A U.S. District Court in Maryland dismissed the case on the grounds that the defendant was not the entity that had prepared the prospectuses, but the Fourth Circuit Court of Appeals reversed, holding that Janus Capital Management made the alleged misstatements “by participating in the writing and dissemination of the prospectuses.”

Published in Compliance Week, June 28, 2011. To read the full article, click here. (Subscription required.)


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