The Stoneridge Decision, Reliance Returns to 10b-5 Cases
The Corporate Counselor
March 2008
The article addresses the recent Supreme Court decision in Stoneridge Investment Partners v. Scientific Atlanta which determined that third parties such as investment banks, accounting firms and lawyers etc. who contract with companies that commit securities fraud are not liable to shareholders of those companies as primary violators. The Supreme Court also declared that secondary actors are free from liability for participating in a principal's fraud against its investors, as long as there is no reliance on the actions of the secondary actor by the investors in making their investment decisions.