JANUS CAPITAL GROUP v. FIRST DERIVATIVE TRADERS

Opinion of the Court

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SUPREME COURT OF THE UNITED STATES
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No. 09–525

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JANUS CAPITAL GROUP, INC., ET AL., PETITIONERS
v. FIRST DERIVATIVE TRADERS

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FOURTH CIRCUIT

[June 13, 2011]

JUSTICE THOMAS delivered the opinion of the Court.

This case requires us to determine whether Janus Capital Management LLC (JCM), a mutual fund investment adviser, can be held liable in a private action under Securities and Exchange Commission (SEC) Rule 10b–5 for false statements included in its client mutual funds’ prospectuses. Rule 10b–5 prohibits “mak[ing] any untrue statement of a material fact” in connection with the purchase or sale of securities. 17 CFR §240.10b–5 (2010). We conclude that JCM cannot be held liable because it did not make the statements in the prospectuses.

I

Janus Capital Group, Inc. (JCG), is a publicly traded company that created the Janus family of mutual funds. These mutual funds are organized in a Massachusetts business trust, the Janus Investment Fund. Janus Investment Fund retained JCG’s wholly owned subsidiary, JCM, to be its investment adviser and administrator. JCG and JCM are the petitioners here.

Although JCG created Janus Investment Fund, Janus Investment Fund is a separate legal entity owned entirely by mutual fund investors. Janus Investment Fund has no assets apart from those owned by the investors. JCM provides Janus Investment Fund with investment advisory services, which include “the management and administrative services necessary for the operation of [Janus] Fun[d],” App. 225a, but the two entities maintain legal independence. At all times relevant to this case, all of the officers of Janus Investment Fund were also officers of JCM, but only one member of Janus Investment Fund’s board of trustees was associated with JCM. This is more independence than is required: By statute, up to 60 percent of the board of a mutual fund may be composed of “interested persons.” See 54 Stat. 806, as amended, 15 U. S. C. §80a–10(a); see also 15 U. S. C. A. §80a–2(a)(19) (2009 ed. and Feb. 2011 Supp.) (defining “interested person”).

As the securities laws require, Janus Investment Fund issued prospectuses describing the investment strategy and operations of its mutual funds to investors. See 15 U. S. C. §§77b(a)(10), 77e(b)(2), 80a–8(b), 80a–2(a)(31), 80a–29(a)–(b). The prospectuses for several funds represented that the funds were not suitable for market timing and can be read to suggest that JCM would implement policies to curb the practice.1 For example, the Janus Mercury Fund prospectus dated February 25, 2002, stated that the fund was “not intended for market timing or excessive trading” and represented that it “may reject any purchase request . . . if it believes that any combination of trading activity is attributable to market timing or is otherwise excessive or potentially disruptive to the Fund.” App. 141a. Although market timing is legal, it harms other investors in the mutual fund.

In September 2003, the Attorney General of the State of New York filed a complaint against JCG and JCM alleging that JCG entered into secret arrangements to permit market timing in several funds run by JCM. After the complaint’s allegations became public, investors withdrew significant amounts of money from the Janus Investment Fund mutual funds.2 Because Janus Investment Fund compensated JCM based on the total value of the funds and JCM’s management fees comprised a significant percentage of JCG’s income, Janus Investment Fund’s loss of value affected JCG’s value as well. JCG’s stock price fell nearly 25 percent, from $17.68 on September 2 to $13.50 on September 26.

Respondent First Derivative Traders (First Derivative) represents a class of plaintiffs who owned JCG stock as of September 3, 2003. Its complaint asserts claims against JCG and JCM for violations of Rule 10b–5 and §10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, as amended, 15 U. S. C. §78j(b). First Derivative alleges that JCG and JCM “caused mutual fund prospectuses to be issued for Janus mutual funds and made them available to the investing public, which created the misleading impression that [JCG and JCM] would implement measures to curb market timing in the Janus [mutual funds].” App. to Pet. for Cert. 60a. “Had the truth been known, Janus [mutual funds] would have been less attractive to investors, and consequently, [JCG] would have realized lower revenues, so [JCG’s] stock would have traded at lower prices.” Id., at 72a.

First Derivative contends that JCG and JCM “materially misled the investing public” and that class members relied “upon the integrity of the market price of [JCG] securities and market information relating to [JCG and JCM].” Id., at 109a. The complaint also alleges that JCG should be held liable for the acts of JCM as a “controlling person” under 15 U. S. C. A. §78t(a) (Feb. 2011 Supp.) (§20(a) of the Act).

The District Court dismissed the complaint for failure to state a claim.3 In re Mutual Funds Inv. Litigation, 487 F. Supp. 2d 618, 620 (D Md. 2007). The Court of Appeals for the Fourth Circuit reversed, holding that First Derivative had sufficiently alleged that “JCG and JCM, by participating in the writing and dissemination of the prospectuses, made the misleading statements contained in the documents.” In re Mutual Funds Inv. Litigation, 566 F. 3d 111, 121 (2009) (emphasis in original). With respect to the element of reliance, the court found that investors would infer that JCM “played a role in preparing or approving the content of the Janus fund prospectuses,” id., at 127, but that investors would not infer the same about JCG, which could be liable only as a “control person” of JCM under §20(a). Id., at 128, 129–130.

II

We granted certiorari to address whether JCM can be held liable in a private action under Rule 10b–5 for false statements included in Janus Investment Fund’s prospectuses. 561 U. S. ___ (2010). Under Rule 10b–5, it is unlawful for “any person, directly or indirectly, . . . [t]o make any untrue statement of a material fact” in connection with the purchase or sale of securities. 17 CFR §240.10b–5(b).4 To be liable, therefore, JCM must have “made” the material misstatements in the prospectuses. We hold that it did not.5

A

The SEC promulgated Rule 10b–5 pursuant to authority granted under §10(b) of the Securities Exchange Act of 1934, 15 U. S. C. §78j(b). Although neither Rule 10b–5 nor §10(b) expressly creates a private right of action, this Court has held that “a private right of action is implied under §10(b).” Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co., 404 U. S. 6, 13, n. 9 (1971). That holding “remains the law,” Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 165 (2008), but “[c]oncerns with the judicial creation of a private cause of action caution against its expansion,” ibid. Thus, in analyzing whether JCM “made” the statements for purposes of Rule 10b–5, we are mindful that we must give “narrow dimensions . . . to a right of action Congress did not authorize when it first enacted the statute and did not expand when it revisited the law.” Id., at 167.

1

One “makes” a statement by stating it. When “make” is paired with a noun expressing the action of a verb, the resulting phrase is “approximately equivalent in sense” to that verb. 6 Oxford English Dictionary 66 (def. 59) (1933) (hereinafter OED); accord, Webster’s New International Dictionary 1485 (def. 43) (2d ed. 1934) (“Make followed by a noun with the indefinite article is often nearly equivalent to the verb intransitive corresponding to that noun”). For instance, “to make a proclamation” is the approximate equivalent of “to proclaim,” and “to make a promise” approximates “to promise.” See 6 OED 66 (def. 59). The phrase at issue in Rule 10b–5, “[t]o make any . . . statement,” is thus the approximate equivalent of “to state.”

For purposes of Rule 10b–5, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. Without control, a person or entity can merely suggest what to say, not “make” a statement in its own right. One who prepares or publishes a statement on behalf of another is not its maker. And in the ordinary case, attribution within a statement or implicit from surrounding circumstances is strong evidence that a statement was made by—and only by—the party to whom it is attributed. This rule might best be exemplified by the relationship between a speechwriter and a speaker. Even when a speechwriter drafts a speech, the content is entirely within the control of the person who delivers it. And it is the speaker who takes credit—or blame—for what is ultimately said.

This rule follows from Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164 (1994), in which we held that Rule 10b–5’s private right of action does not include suits against aiders and abettors. See id., at 180. Such suits—against entities that contribute “substantial assistance” to the making of a statement but do not actually make it—may be brought by the SEC, see 15 U. S. C. A. §78t(e), but not by private parties. A broader reading of “make,” including persons or entities without ultimate control over the content of a statement, would substantially undermine Central Bank. If persons or entities without control over the content of a statement could be considered primary violators who “made” the statement, then aiders and abettors would be almost nonexistent.6

This interpretation is further supported by our recent decision in Stoneridge. There, investors sued “entities who, acting both as customers and suppliers, agreed to arrangements that allowed the investors’ company to mislead its auditor and issue a misleading financial statement.” 552 U. S., at 152–153. We held that dismissal of the complaint was proper because the public could not have relied on the entities’ undisclosed deceptive acts. Id., at 166–167. Significantly, in reaching that conclusion we emphasized that “nothing [the defendants] did made it necessary or inevitable for [the company] to record the transactions as it did.” Id., at 161.7 This emphasis suggests the rule we adopt today: that the maker of a statement is the entity with authority over the content of the statement and whether and how to communicate it. Without such authority, it is not “necessary or inevitable” that any falsehood will be contained in the statement.

Our holding also accords with the narrow scope that we must give the implied private right of action. Id., at 167. Although the existence of the private right is now settled, we will not expand liability beyond the person or entity that ultimately has authority over a false statement.

2

The Government contends that “make” should be defined as “create.” Brief for United States as Amicus Curiae 14–15 (citing Webster’s New International Dictionary 1485 (2d ed. 1958) (defining “make” as “[t]o cause to exist, appear, or occur”)). This definition, although perhaps appropriate when “make” is directed at an object unassociated with a verb (e.g., “to make a chair”), fails to capture its meaning when directed at an object expressing the action of a verb.

Adopting the Government’s definition of “make” would also lead to results inconsistent with our precedent. The Government’s definition would permit private plaintiffs to sue a person who “provides the false or misleading information that another person then puts into the statement.” Brief for United States as Amicus Curiae 13.8 But in Stoneridge, we rejected a private Rule 10b–5 suit against companies involved in deceptive transactions, even when information about those transactions was later incorporated into false public statements. 552 U. S., at 161. We see no reason to treat participating in the drafting of a false statement differently from engaging in deceptive transactions, when each is merely an undisclosed act preceding the decision of an independent entity to make a public statement.

For its part, First Derivative suggests that the “wellrecognized and uniquely close relationship between a mutual fund and its investment adviser” should inform our decision. Brief for Respondent 21. It suggests that an investment adviser should generally be understood to be the “maker” of statements by its client mutual fund, like a playwright whose lines are delivered by an actor. We decline this invitation to disregard the corporate form. Although First Derivative and its amici persuasively argue that investment advisers exercise significant influence over their client funds, see Jones v. Harris Associates L. P., 559 U. S. ___, ___ (2010) (slip op., at 1–2), it is undisputed that the corporate formalities were observed here. JCM and Janus Investment Fund remain legally separate entities, and Janus Investment Fund’s board of trustees was more independent than the statute requires. 15 U. S. C. §80a–10.9 Any reapportionment of liability in the securities industry in light of the close relationship between investment advisers and mutual funds is properly the responsibility of Congress and not the courts. Moreover, just as with the Government’s theory, First Derivative’s rule would create the broad liability that we rejected in Stoneridge.

Congress also has established liability in §20(a) for “[e]very person who, directly or indirectly, controls any person liable” for violations of the securities laws. 15 U. S. C. A. §78t(a). First Derivative’s theory of liability based on a relationship of influence resembles the liability imposed by Congress for control. To adopt First Derivative’s theory would read into Rule 10b–5 a theory of liability similar to—but broader in application than, see post, at 9—what Congress has already created expressly elsewhere.10 We decline to do so.

B Under this rule, JCM did not “make” any of the statements in the Janus Investment Fund prospectuses; Janus Investment Fund did. Only Janus Investment Fund—not JCM—bears the statutory obligation to file the prospectuses with the SEC. 15 U. S. C. §§77e(b)(2), 80a–8(b), 80a–29(a)–(b); see also 17 CFR §230.497 (imposing requirements on “investment companies”). The SEC has recorded that Janus Investment Fund filed the prospectuses. See JIF Group1 Standalone Prospectuses (Feb. 25, 2002), online at http://www.sec.gov/Archives/edgar/data/ 277751 / 000027775102000049 / 0000277751-02-000049.txt (as visited June 10, 2011, and available in Clerk of Court’s case file) (recording the “Filer” of the Janus Mercury Fund prospectus as “Janus Investment Fund”). There is no allegation that JCM in fact filed the prospectuses and falsely attributed them to Janus Investment Fund. Nor did anything on the face of the prospectuses indicate that any statements therein came from JCM rather than Janus Investment Fund—a legally independent entity with its own board of trustees.11 First Derivative suggests that both JCM and Janus Investment Fund might have “made” the misleading statements within the meaning of Rule 10b–5 because JCM was significantly involved in preparing the prospectuses. But this assistance, subject to the ultimate control of Janus Investment Fund, does not mean that JCM “made” any statements in the prospectuses. Although JCM, like a speechwriter, may have assisted Janus Investment Fund with crafting what Janus Investment Fund said in the prospectuses, JCM itself did not “make” those statements for purposes of Rule 10b–5.12

* * *

The statements in the Janus Investment Fund prospectuses were made by Janus Investment Fund, not by JCM. Accordingly, First Derivative has not stated a claim against JCM under Rule 10b–5. The judgment of the United States Court of Appeals for the Fourth Circuit is reversed. It is so ordered.

1 Market timing is a trading strategy that exploits time delay in mutual funds’ daily valuation system. The price for buying or selling shares of a mutual fund is ordinarily determined by the next net asset value (NAV) calculation after the order is placed. The NAV calculation usually happens once a day, at the close of the major U. S. markets. Because of certain time delays, however, the values used in these calculations do not always accurately reflect the true value of the underlying assets. For example, a fund may value its foreign securities based on the price at the close of the foreign market, which may have occurred several hours before the calculation. But events might have taken place after the close of the foreign market that could be expected to affect their price. If the event were expected to increase the price of the foreign securities, a market-timing investor could buy shares of a mutual fund at the artificially low NAV and sell the next day when the NAV corrects itself upward. See Disclosure Regarding Market Timing and Selective Disclosure of Portfolio Holdings, 68 Fed. Reg. 70402 (proposed Dec. 17, 2003).

2 In 2004, JCG and JCM settled these allegations and agreed to reduce their fees by $125 million and pay $50 million in civil penalties and $50 million in disgorgement to the mutual fund investors.

3 The elements of a private action under Rule 10b–5 are “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 157 (2008).

4 Rule 10b–5 makes it “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, . . . [t]o 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 . . . .” 17 CFR §240.10b–5(b).

5 Although First Derivative argued below that JCG violated Rule 10b–5 by making the statements in the prospectuses, it now seeks to hold JCG liable solely as a control person of JCM under §20(a). The only question we must answer, therefore, is whether JCM made the misstatements. Whether First Derivative has stated a claim against JCG as a control person depends on whether it has stated a claim against JCM.

6 The dissent correctly notes that Central Bank involved secondary, not primary, liability. Post, at 4 (opinion of BREYER, J.). But for Central Bank to have any meaning, there must be some distinction between those who are primarily liable (and thus may be pursued in private suits) and those who are secondarily liable (and thus may not be pursued in private suits). We draw a clean line between the two—the maker is the person or entity with ultimate authority over a statement and others are not. In contrast, the dissent’s only limit on primary liability is not much of a limit at all. It would allow for primary liability whenever “[t]he specific relationships alleged . . . warrant [that] conclusion”—whatever that may mean. Post, at 11.

7 We agree that “no one in Stoneridge contended that the equipment suppliers were, in fact, the makers of the cable company’s misstatements.” Post, at 8. If Stoneridge had addressed whether the equipment suppliers were “makers,” today’s decision would be unnecessary. The point is that Stoneridge’s analysis suggests that they were not.

8 Because we do not find the meaning of “make” in Rule 10b–5 to be ambiguous, we need not consider the Government’s assertion that we should defer to the SEC’s interpretation of the word elsewhere. Brief for United States as Amicus Curiae 13 (citing Brief for SEC as Amicus Curiae in Pacific Inv. Mgmt. Co. LLC v. Mayer Brown LLP, No. 09– 1619 (CA2), p. 7); see Christensen v. Harris County, 529 U. S. 576, 588 (2000). We note, however, that we have previously expressed skepticism over the degree to which the SEC should receive deference regarding the private right of action. See Piper v. Chris-Craft Industries, Inc., 430 U. S. 1, 41, n. 27 (1977) (noting that the SEC’s presumed expertise “is of limited value” when analyzing “whether a cause of action should be implied by judicial interpretation in favor of a particular class of litigants”). This also is not the first time this Court has disagreed with the SEC’s broad view of §10(b) or Rule 10b–5. See, e.g., Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164, 188–191 (1994); Dirks v. SEC, 463 U. S. 646, 666, n. 27 (1983); Ernst & Ernst v. Hochfelder, 425 U. S. 185, 207 (1976); Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 746, n. 10 (1975).

9 Nor does First Derivative contend that any statements made by JCM to Janus Investment Fund were “public statements” for the purposes of Basic Inc. v. Levinson, 485 U. S. 224, 227–228 (1988). We do not address whether and in what circumstances statements would qualify as “public.” Cf. post, at 12–13 (citing cases involving liability for statements made to analysts); In re Aetna, Inc. Securities Litigation, 617 F. 3d 272, 275–277 (CA3 2010) (involving allegations that defendants “publicly tout[ed]” falsities on analyst conference calls).

10 We do not address whether Congress created liability for entities that act through innocent intermediaries in 15 U. S. C. A. §78t(b). See Tr. of Oral Arg. 6, 61.

11 First Derivative suggests that “indirectly” in Rule 10b–5 may broaden the meaning of “make.” We disagree. The phrase “directly or indirectly” is set off by itself in Rule 10b–5 and modifies not just “to make,” but also “to employ” and “to engage.” We think the phrase merely clarifies that as long as a statement is made, it does not matter whether the statement was communicated directly or indirectly to the recipient. A different understanding of “indirectly” would, like a broad definition of “make,” threaten to erase the line between primary violators and aiders and abettors established by Central Bank. In this case, we need not define precisely what it means to communicate a “made” statement indirectly because none of the statements in the prospectuses were attributed, explicitly or implicitly, to JCM. Without attribution, there is no indication that Janus Investment Fund was quoting or otherwise repeating a statement originally “made” by JCM. Cf. Anixter v. Home-Stake Production Co., 77 F. 3d 1215, 1220, and n. 4 (CA10 1996) (quoting a signed “ ‘Auditor’s Report’ ” included in a prospectus); Basic, supra, at 227, n. 4 (quoting a news item reporting a statement by Basic’s president). More may be required to find that a person or entity made a statement indirectly, but attribution is necessary.

12 That JCM provided access to Janus Investment Fund’s prospectuses on its Web site is also not a basis for liability. Merely hosting a document on a Web site does not indicate that the hosting entity adopts the document as its own statement or exercises control over its content. Cf. United States v. Ware, 577 F. 3d 442, 448 (CA2 2009) (involving the issuance of false press releases through innocent companies). In doing so, we do not think JCM made any of the statements in Janus Investment Fund’s prospectuses for purposes of Rule 10b–5 liability, just as we do not think that the SEC “makes” the statements in the many prospectuses available on its Web site.

BREYER, J., dissenting

SUPREME COURT OF THE UNITED STATES
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No. 09–525

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JANUS CAPITAL GROUP, INC., ET AL., PETITIONERS
v. FIRST DERIVATIVE TRADERS

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FOURTH CIRCUIT

[June 13, 2011]

JUSTICE BREYER, with whom JUSTICE GINSBURG, JUSTICE SOTOMAYOR, and JUSTICE KAGAN join, dissenting.

This case involves a private Securities and Exchange Commission (SEC) Rule 10b–5 action brought by a group of investors against Janus Capital Group, Inc., and Janus Capital Management LLC (Janus Management), a firm that acted as an investment adviser to a family of mutual funds (collectively, the Janus Fund or Fund). The inves ­ tors claim that Janus Management knowingly made mate ­ rially false or misleading statements that appeared in prospectuses issued by the Janus Fund. They say that they relied upon those statements, and that they suffered resulting economic harm.

Janus Management and the Janus Fund are closely related. Each of the Fund’s officers is a Janus Manage ­ ment employee. Janus Management, acting through those employees (and other of its employees), manages the purchase, sale, redemption, and distribution of the Fund’s investments. Janus Management prepares, modifies, and implements the Janus Fund’s long-term strategies. And Janus Management, acting through those employees, carries out the Fund’s daily activities.

Rule 10b–5 says in relevant part that it is unlawful for “any person, directly or indirectly . . . [t]o make any untrue statement of a material fact” in connection with the pur ­ chase or sale of securities. 17 CFR §240.10b–5(b) (2010) (emphasis added). See also 15 U. S. C. §78j(b) (§10(b) of the Securities Exchange Act of 1934). The specific legal question before us is whether Janus Management can be held responsible under the Rule for having “ma[d]e” cer ­ tain false statements about the Janus Fund’s activities. The statements in question appear in the Janus Fund’s prospectuses.

The Court holds that only the Janus Fund, not Janus Management, could have “ma[d]e” those statements. The majority points out that the Janus Fund’s board of trus ­ tees has “ultimate authority” over the content of the statements in a Fund prospectus. And in the majority’s view, only “the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it” can “make” a statement within the terms of Rule 10b–5. Ante, at 6.

In my view, however, the majority has incorrectly inter ­ preted the Rule’s word “make.” Neither common English nor this Court’s earlier cases limit the scope of that word to those with “ultimate authority” over a statement’s content. To the contrary, both language and case law indicate that, depending upon the circumstances, a man ­ agement company, a board of trustees, individual company officers, or others, separately or together, might “make” statements contained in a firm’s prospectus—even if a board of directors has ultimate content-related responsi ­ bility. And the circumstances here are such that a court could find that Janus Management made the statements in question.

I

Respondent’s complaint sets forth the basic elements of a typical Rule 10b–5 “fraud on the market” claim. It alleges that Janus Management made statements that “created the misleading impression that” it “would implement measures to curb” a trading strategy called “market timing.” Second Amended Complaint ¶6 (here ­ inafter Complaint), App. to Pet. for Cert. 60a. The complaint adds that Janus Management knew that these “market timing” statements were false; that the statements were material; that the market, in pricing securities (including related securities) relied upon the statements; that as a result, when the truth came out (that Janus Management indeed permitted “market timing” in the Janus Fund), the price of relevant shares fell; and the false statements thereby caused respondent significant economic losses. Complaint ¶¶4–10, id., at 60a–63a. Cf. Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 157 (2008) (identi ­ fying the elements of “a typical §10(b) private action”).

The majority finds the complaint fatally flawed, however, because (1) Rule 10b–5 says that no “person” shall “directly or indirectly . . . make any untrue statement of a material fact,” (2) the statements at issue appeared in the Janus Fund’s prospectuses, and (3) only “the person or entity with ultimate authority over the statement, includ ­ ing its content and whether and how to communicate it” can “make” a false statement. Ante, at 2–3, 5–6.

But where can the majority find legal support for the rule that it enunciates? The English language does not impose upon the word “make” boundaries of the kind the majority finds determinative. Every day, hosts of corpo ­ rate officials make statements with content that more senior officials or the board of directors have “ultimate authority” to control. So do cabinet officials make state ­ ments about matters that the Constitution places within the ultimate authority of the President. So do thousands, perhaps millions, of other employees make statements that, as to content, form, or timing, are subject to the control of another.

Nothing in the English language prevents one from saying that several different individuals, separately or together, “make” a statement that each has a hand in producing. For example, as a matter of English, one can say that a national political party has made a statement even if the only written communication consists of uniform press releases issued in the name of local party branches; one can say that one foreign nation has made a statement even when the officials of a different nation (subject to its influence) speak about the matter; and one can say that the President has made a statement even if his press officer issues a communication, sometimes in the press officer’s own name. Practical matters related to context, including control, participation, and relevant audience, help determine who “makes” a statement and to whom that statement may properly be “attributed,” see ante, at 11, n. 11—at least as far as ordinary English is concerned.

Neither can the majority find support in any relevant precedent. The majority says that its rule “follows from Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164 (1994),” in which the Court “held that Rule 10b–5’s private right of action does not include suits against aiders and abettors.” Ante, at 7. But Central Bank concerns a different matter. And it no more requires the majority’s rule than free air travel for small children requires free air travel for adults.

Central Bank is a case about secondary liability, liability attaching, not to an individual making a false statement, but to an individual helping someone else do so. Central Bank involved a bond issuer accused of having made materially false statements, which overstated the values of property that backed the bonds. Central Bank also involved a defendant that was a bank, serving as inden ­ ture trustee, which was supposed to check the bond is ­ suer’s valuations. The plaintiffs claimed that the bank delayed its valuation checks and thereby helped the issuer make its false statements credible. The question before the Court concerned the bank’s liability—a secondary liability for “aiding and abetting” the bond issuer, who (on the theory set forth) was primarily liable.

The Court made this clear. The question presented was “whether private civil liability under §10(b) extends . . . to those who do not engage in the manipulative or deceptive practice, but who aid and abet the violation.” 511 U. S., at 167 (emphasis added). The Court wrote that “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.” Id., at 176 (emphasis added). The Court described civil law “aiding and abetting” as “ ‘know[ing] that the other’s conduct constitutes a breach of duty and giv[ing] substantial assistance or encouragement to the other . . . .’ ” Id., at 181 (quoting Restatement (Second) of Torts §876(b) (1977); emphasis added). And it reviewed a Court of Appeals decision that had defined the elements of aiding and abetting as “(1) a primary violation of §10(b); (2) recklessness by the aider and abettor as to the exis ­ tence of the primary violation; and (3) substantial assistance given to the primary violator by the aider and abet ­ tor.” 511 U. S., at 168 (emphasis added). Faced with this question, the Court answered that §10(b) and Rule 10b–5 do not provide for this kind of “aiding and abetting” liabil ­ ity in private suits.

By way of contrast, the present case is about primary liability—about individuals who allegedly themselves “make” materially false statements, not about those who help others to do so. The question is whether Janus Man ­ agement is primarily liable for violating the Act, not whether it simply helped others violate the Act. The Central Bank defendant concededly did not make the false statements in question (others did), while here the defen ­ dants allegedly did make those statements. And a rule (the majority’s rule) absolving those who allegedly did make false statements does not “follow from” a rule (Central Bank’s rule) absolving those who concededly did not do so.

The majority adds that to interpret the word “make” as including those “without ultimate control over the content of a statement” would “substantially undermine” Central Bank’s holding. Ante, at 7. Would it? The Court in Central Bank specifically wrote that its holding did “not mean that secondary actors in the securities markets are always free from liability under the secu ­ rities Acts. Any person or entity, including a lawyer, accountant, or bank, who employs a manipulative de ­ vice 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.” 511 U. S., at 191 (some empha ­ sis added). Thus, as far as Central Bank is concerned, depending upon the circumstances, board members, senior firm officials, officials tasked to develop a marketing document, large investors, or others (taken together or separately) all might “make” materially false statements subjecting themselves to primary liability. The majority’s rule does not protect, it extends, Central Bank’s holding of no ­ liability into new territory that Central Bank explicitly placed outside that holding. And by ignoring the language in which Central Bank did so, the majority’s rule itself undermines Central Bank. Where is the legal support for the majority’s “draw[ing] a clean line,” ante, at 7, n. 6, that so seriously conflicts with Central Bank? Indeed, where is the legal support for the majority’s suggestion that plain ­ tiffs must show some kind of “attribution” of a statement to a defendant, ante, at 11, n. 11—if it means plaintiffs must show, not only that the defendant “ma[d]e” the statement, but something more? The majority also refers to Stoneridge, but that case offers it no help. In Stoneridge, firms that supplied electronic equipment to a cable television company agreed with the cable television company to enter into a series of fraudulent sales and purchases, for example, a sale at an unusually high price, thereby providing funds which the suppliers would use to buy advertising from the cable television company. These arrangements enabled the cable television company to fool its accountants (and ultimately the public) into believing that it had more revenue (for example, advertising revenue) than it really had. As part of the agreement, the companies exchanged letters and backdated contracts to conceal the fraud. Investors subsequently sued the cable television company, some of its officers, its auditors, and the equipment suppliers, as well, claiming that all of them had engaged in a scheme to defraud securities purchasers. In respect to most of the defendants, investors identified allegedly materially false statements contained in the cable television company’s financial statements or similar documents. But in respect to the equipment suppliers, in ­ vestors claimed that the relevant deceptive conduct was in the letters, backdated contracts, and related oral conversations about the scheme. The investors argued that the equipment suppliers, “by participating in the transactions,” violated §10(b) and Rule 10b–5. Stoneridge, 552 U. S., at 155.

The Court held that the equipment suppliers could not be found liable for securities fraud in a private suit under §10(b). But in doing so, it did not deny that the equipment suppliers had made the false statements contained in the letters, contracts, and conversations. See id., at 158–159. Rather, the Court said the issue in the case was whether “any deceptive statement or act respondents made was not actionable because it did not have the requisite proximate relation to the investors’ harm.” Ibid. (emphasis added). And it held that these deceptive statements or actions could not provide a basis for liability because the investors could not prove sufficient reliance upon the particular false statements that the equipment suppliers had made.

The Court pointed out that the equipment suppliers “had no duty to disclose; and their deceptive acts were not communicated to the public.” Id., at 159. And the Court went on to say that “as a result,” the investors “cannot show reliance upon any” of the equipment suppliers’ actions, “except in an indirect chain that we find too remote for liability.” Ibid. The Court concluded, “[the equipment suppliers’] deceptive acts, which were not disclosed to the investing public, are too remote to satisfy the requirement of reliance. It was [the cable company], not [the equipment suppliers], that misled its auditor and filed fraudulent financial statements; nothing [the equipment suppliers] did made it necessary or inevitable for [the cable company] to record the transactions as it did.” Id., at 161. Insofar as the equipment suppliers’ conduct was at issue, the fraudulent “arrangement . . . took place in the marketplace for goods and services, not in the investment sphere.” Id., at 166.

It is difficult for me to see how Stoneridge “support[s]” the majority’s rule. Ante, at 7. No one in Stoneridge disputed the making of the relevant statements, the fraudulent contracts and the like. And no one in Stoneridge contended that the equipment suppliers were, in fact, the makers of the cable company’s misstatements. Rather, Stoneridge was concerned with whether the equipment suppliers’ separate statements were sufficiently disclosed in the securities marketplace so as to be the basis for investor reliance. They were not. But this is a different inquiry than whether statements acknowledged to have been disclosed in the securities marketplace and ripe for reliance can be said to have been “ma[d]e” by one or another actor. How then does Stoneridge support the majority’s new rule?

The majority adds that its rule is necessary to avoid “a theory of liability similar to—but broader in application than”—§20(a)’s liability, for “ ‘[e]very person who, directly or indirectly, controls any person liable’ ” for violations of the securities laws. Ante, at 10 (quoting 15 U. S. C. A. §78t(a) (Feb. 2011 Supp.)). But that is not so. This Court has explained that the possibility of an express remedy under the securities laws does not preclude a claim under §10(b). Herman & MacLean v. Huddleston, 459 U. S. 375, 388 (1983).

More importantly, a person who is liable under §20(a) controls another “person” who is “liable” for a securities violation. Morrison v. National Australia Bank Ltd., 561 U. S. ___, ___, n. 2 (2010) (slip op., at 3, n. 2) (“Liability under §20(a) is obviously derivative of liability under some other provision of the Exchange Act”). We here examine whether a person is primarily liable whether they do, or they do not, control another person who is liable. That is to say, here, the liability of some “other person” is not at issue.

And there is at least one significant category of cases that §10(b) may address that derivative forms of liability, such as under §20(a), cannot, namely, cases in which one actor exploits another as an innocent intermediary for its misstatements. Here, it may well be that the Fund’s board of trustees knew nothing about the falsity of the prospectuses. See, e.g., In re Lammert, Release No. 348, 93 S. E. C. Docket 5676, 5700 (2008) (Janus Management was aware of market timing in the Janus Fund no later than 2002, but “[t]his knowledge was never shared with the Board”). And if so, §20(a) would not apply.

The possibility of guilty management and innocent board is the 13th stroke of the new rule’s clock. What is to happen when guilty management writes a prospectus (for the board) containing materially false statements and fools both board and public into believing they are true? Apparently under the majority’s rule, in such circum ­ stances no one could be found to have “ma[d]e” a materially false statement—even though under the common law the managers would likely have been guilty or liable (in analogous circumstances) for doing so as principals (and not as aiders and abettors). See, e.g., 2 W. LaFave, Substantive Criminal Law §13.1(a) (2d ed. 2003); 1 M. Hale, Pleas of the Crown 617 (1736); Perkins, Parties to Crime, 89 U. Pa. L. Rev. 581, 583 (1941) (one is guilty as a principal when one uses an innocent third party to commit a crime); Restatement (Second) of Torts §533 (1976). Cf. United States v. Giles, 300 U. S. 41, 48–49 (1937).

Indeed, under the majority’s rule it seems unlikely that the SEC itself in such circumstances could exercise the authority Congress has granted it to pursue primary violators who “make” false statements or the authority that Congress has specifically provided to prosecute aiders and abettors to securities violations. See §104, 109 Stat. 757 (codified at 15 U. S. C. A. §78t(e) (Feb. 2011 Supp.)) (granting SEC authority to prosecute aiders and abettors). That is because the managers, not having “ma[d]e” the statement, would not be liable as principals and there would be no other primary violator they might have tried to “aid” or “abet.” Ibid.; SEC v. DiBella, 587 F. 3d 553, 566 (CA2 2009) (prosecution for aiding and abetting requires primary violation to which offender gave “substantial assistance” (internal quotation marks omitted)).

If the majority believes, as its footnote hints, that §20(b) could provide a basis for liability in this case, ante, at 10, n. 10, then it should remand the case for possible amend ­ ment of the complaint. “There is a dearth of authority construing Section 20(b),” which has been thought largely “superfluous in 10b–5 cases.” 5B A. Jacobs, Disclosure and Remedies Under the Securities Law §11–8, p. 11–72 (2011). Hence respondent, who reasonably thought that it referred to the proper securities law provision, is faultless for failing to mention §20(b) as well.

In sum, I can find nothing in §10(b) or in Rule 10b–5, its language, its history, or in precedent suggesting that Congress, in enacting the securities laws, intended a loophole of the kind that the majority’s rule may well create.

II

Rejecting the majority’s rule, of course, does not decide the question before us. We must still determine whether, in light of the complaint’s allegations, Janus Management could have “ma[d]e” the false statements in the prospectuses at issue. In my view, the answer to this question is “Yes.” The specific relationships alleged among Janus Management, the Janus Fund, and the prospectus statements warrant the conclusion that Janus Management did “make” those statements.

In part, my conclusion reflects the fact that this Court and lower courts have made clear that at least sometimes corporate officials and others can be held liable under Rule 10b–5 for having “ma[d]e” a materially false statement even when that statement appears in a document (or is made by a third person) that the officials do not legally control. In Herman & MacLean, for example, this Court pointed out that “certain individuals who play a part in preparing the registration statement,” including corporate officers, lawyers, and accountants, may be primarily liable even where “they are not named as having prepared or certified” the registration statement. 459 U. S., at 386, n. 22. And as I have already pointed out, this Court wrote in Central Bank that a “lawyer, accountant, or bank, who . . . 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 re ­ quirements for primary liability under Rule 10b–5 are met.” 511 U. S., at 191 (some emphasis added).

Given the statements in our opinions, it is not surpris ­ ing that lower courts have found primary liability for actors without “ultimate authority” over issued state ­ ments. One court, for example, concluded that an ac ­ countant could be primarily liable for having “ma[d]e” false statements, where he issued fraudulent opinion and certification letters reproduced in prospectuses, annual reports, and other corporate materials for which he was not ultimately responsible. Anixter v. Home-Stake Production Co., 77 F. 3d 1215, 1225–1227 (CA10 1996). In a later case postdating Stoneridge, that court reaffirmed that an outside consultant could be primarily liable for having “ma[d]e” false statements, where he drafted fraudulent quarterly and annual filing statements later reviewed and certified by the firm’s auditor, officers, and counsel. SEC v. Wolfson, 539 F. 3d 1249, 1261 (CA10 2008). And another court found that a corporation’s chief financial officer could be held primarily liable as having “ma[d]e” misstatements that appeared in a form 10–K that she prepared but did not sign or file. McConville v. SEC, 465 F. 3d 780, 787 (CA7 2006).

One can also easily find lower court cases explaining that corporate officials may be liable for having “ma[d]e” false statements where those officials use innocent persons as conduits through which the false statements reach the public (without necessarily attributing the false statements to the officials). See, e.g., In re Navarre Corp. Securities Litigation, 299 F. 3d 735, 743 (CA8 2002) (liabil ­ ity may be premised on use of analysts as a conduit to communicate false statements to market); In re Cabletron Systems, Inc., 311 F. 3d 11, 38 (CA1 2002) (rejecting a test requiring legal “control” over third parties making state ­ ments as giving “company officials too much leeway to commit fraud on the market by using analysts as their mouthpieces” (internal quotation marks omitted)); Novak v. Kasaks, 216 F. 3d 300, 314–315 (CA2 2000); Cooper v. Pickett, 137 F. 3d 616, 624 (CA9 1997); Freeland v. Iridium World Communications, Ltd., 545 F. Supp. 2d 59, 75– 76 (DC 2008).

My conclusion also reflects the particular circumstances that the complaint alleges. The complaint states that “Janus Management, as investment advisor to the funds, is responsible for the day-to-day management of its investment portfolio and other business affairs of the funds. Janus Management furnishes advice and recom ­ mendations concerning the funds’ investments, as well as administrative, compliance and accounting services for the funds.” Complaint ¶18, App. to Pet. for Cert. 65a. Each of the Fund’s 17 officers was a vice president of Janus Management. App. 250a–258a. The Fund has “no assets separate and apart from those they hold for shareholders.” In re Mutual Funds Inv. Litigation, 384 F. Supp. 2d 845, 853, n. 3 (Md. 2005). Janus Management disseminated the fund prospectuses through its parent company’s Web site. Complaint ¶38, App. to Pet. for Cert. 72a. Janus Management employees drafted and reviewed the Fund prospectuses, including language about “market timing.” Complaint ¶31, id., at 69a; In re Mutual Funds Inv. Litigation, 590 F. Supp. 2d 741, 747 (Md. 2008). And Janus Management may well have kept the trustees in the dark about the true “market timing” facts. Complaint ¶51, App. to Pet. for Cert. 80a; In re Lammert, 93 S. E. C. Docket, at 5700.

Given these circumstances, as long as some managers, sometimes, can be held to have “ma[d]e” a materially false statement, Janus Management can be held to have done so on the facts alleged here. The relationship between Janus Management and the Fund could hardly have been closer. Janus Management’s involvement in preparing and writing the relevant statements could hardly have been greater. And there is a serious suggestion that the board itself knew little or nothing about the falsity of what was said. See supra, at 9, 13. Unless we adopt a formal rule (as the majority here has done) that would arbitrarily exclude from the scope of the word “make” those who manage a firm—even when those managers perpetrate a fraud through an unknowing intermediary—the management company at issue here falls within that scope. We should hold the allegations in the complaint in this respect legally sufficient.

With respect, I dissent.

Transcript: 

ORAL ARGUMENT OF MARK A. PERRY ON BEHALF OF THE PETITIONERS

Chief Justice John G. Roberts: We will hear argument first this morning in Case 09-525, Janus Capital Group v. First Derivative Traders.

Mr. Perry.

Mr. Perry: Mr. Chief Justice, and may it please the Court:

Affirming the judgment below would authorize private securities fraud class actions against every service provider that participates in the drafting of a public company's prospectus.

It is therefore nothing less than a frontal assault on this Court's decisions in Central Bank and Stoneridge.

In those cases, Your Honors, this Court held that service providers may not be sued primarily in private class actions and left that matter for Congress to resolve.

And Congress did respond, not once, not twice, but three times, to those decisions.

First, in the PSLRA, the Congress authorized a Federal action, a government action, only against aiders and abettors, leaving the question of private class actions for this Court's resolution.

Justice Sonia Sotomayor: Counsel, is -- who is the violator alleged here?

Not in the complaint, but in the briefs?

As I read the briefs, they claim that Janus itself did not make the false statement, that the two appellants did, that they are the actual speakers because they were talking about their activities, and they used Janus as a conduit to deceive the market.

That's, I think, what they're alleging.

Mr. Perry: Justice Sotomayor, the challenge statements appear in the prospectuses for the Janus Funds, separate legal entities not parties to this lawsuit.

Justice Sonia Sotomayor: So how do we sustain the intermediary cases when the company, through market analysts, divulges misleading statements?

We don't talk about the market analysts' falsity; we talk about the company's falsity, because the market analysts didn't have scienter.

Mr. Perry: Your Honor, the company -- excuse me -- the conduit or analyst cases fall under two categories, neither of which is met here.

First, they are a scheme between the company -- orchestrated by the company to distribute its information through the analysts to the market, and they are brought under 10b-5(a) as scheme cases.

That is most of the analyst cases.

There is no 10b-5(a) claim in this case.

This is only a 10b-5(b)-making claim.

Second, those few cases, the analyst cases that are brought under (b), involve an admission; that is, the company has failed to correct a statement made by an analyst where there is a duty to do so.

There is no omission claim in this case because there is no duty--

Justice Sonia Sotomayor: Well, what's the difference between an omission or a commission if a company purposely divulges a falsehood to an analyst, knowing it's going to be distributed and told?

So who is making the false statement, the analyst or the company?

Mr. Perry: --Your Honor, the company makes the statement to the market.

Under basic, the analyst is the market.

It is the ears of the market that takes the information.

Justice Sonia Sotomayor: So why isn't -- why aren't the two appellants, on their theory, on -- we can talk about whether the complaint does or does not adequately allege their theory.

That's a different issue.

I accept that.

But under their theory, why isn't the appellants the primary violator, not even a secondary?

Because they -- they claim, I think -- and I'm going to find out from them -- that Janus had no scienter, that it didn't make the false statements, that all of this was done in secret by the appellants, so they were the only violator.

Mr. Perry: Your Honor, the analyst cases, the issuer speaks to the market directly.

Here, there is an intervening legal entity, the Janus Funds.

Scienter or no scienter, that is a separate corporation--

Justice Sonia Sotomayor: Do you mean to say to me that puppets become a legal defense for someone who intentionally manipulates the market information?

Mr. Perry: --Justice Sotomayor, the Congress has drafted two statutes that deal with puppets.

Section 20(b), which these plaintiffs have not invoked, makes it unlawful for one party to do indirectly what it would not be permitted to do directly.

That's the puppet statute, the ventriloquist dummy statute.

Justice Sonia Sotomayor: That's the control person statute?

Mr. Perry: No.

There is also 20(a), which is the control person statute, also not invoked by these plaintiffs.

Those are forms of secondary liability, Your Honor.

In fact, the Court's questions go to the distinction between primary and secondary liability.

Justice Sonia Sotomayor: But I -- but if Janus had no scienter, if its board of directors did not know that the statements were false, they had no way of knowing, because as I understand the complaint, and this is alleged, the deal was secret.

So Janus itself could not be a primary violator.

Who is?

Mr. Perry: Justice Sotomayor, our position is nobody had scienter, and every adjudicator to look at these facts -- Judge Mott in the district court, the ALJ of the SEC, has found that there was no scienter anywhere up and down the line.

So the fact that somebody didn't have scienter doesn't answer the problem here.

The question--

Justice Ruth Bader Ginsburg: Well, somebody deviated from what was the announced policy -- that there was to be no market timers investing in this -- in these Janus Funds.

Somebody made the decision that certain hedge funds would be allowed to engage in that activity.

Who was that somebody?

Mr. Perry: --The advisor personnel made the determination, Justice Ginsburg, that the policy was discretionary, that when it said we may refuse trades, the Funds may refuse trades, that there are discretion--

Justice Ruth Bader Ginsburg: Well, the statement that's alleged to have been -- the conduct that is alleged to have been in opposition to the announced policy, that is attributable squarely to -- this is the entity called JCM?

Mr. Perry: --That's correct, Your Honor.

Justice Ruth Bader Ginsburg: So it made the decision that violated the policy?

Mr. Perry: That's correct, Your Honor.

And the SEC--

Justice Ruth Bader Ginsburg: Nonetheless, it's not a primary actor?

Mr. Perry: --Not as to these plaintiffs, Your Honor.

Justice Anthony Kennedy: But can -- can -- can we discuss the case, and -- and -- and perhaps you don't think so.

Can't we discuss this case, must we not discuss this case, on the theory that JCM's scienter, JCM's knowledge of a false statement, is a given in the case?

Now, maybe you'll be able to prove otherwise.

You say that they're not liable anyway.

Mr. Perry: Justice Kennedy, you're exactly right.

That is the theory pleaded in the complaint.

Justice Anthony Kennedy: And it seems to me that's what the argument here is mostly about.

Mr. Perry: And the question that is before this Court, we would submit, is whether, scienter or no scienter, JCM can be held liable for the statements in another company's prospectus.

This Court has never held--

Justice Sonia Sotomayor: Even though there was no scheme with another actor?

Even though it was the only violator, which is a fair reading of the complaint?

Mr. Perry: --They chose not to bring a scheme case.

And remember, there is a second set of investors here: The fund investors.

The SEC brought an action, secured $100 million on behalf of them.

There was a series of private litigation that has been resolved, brought by those investors.

These investors did not purchase the securities offered by the -- the prospectus they challenge.

And again, there's a fundamental disconnect between the defendant in the case and the challenge--

Justice Anthony Kennedy: But once again -- once again, if the complainants in the case, the plaintiffs in the case -- hypothetical case, not this case, hypothetical case -- were injured shareholders the Fund, I take it you say still they could not sue JCM?

Mr. Perry: --Your Honor, for different reasons.

They can sue JCM for -- for an omission, because there's a duty that runs from JCM the Fund.

That was the theory advanced in that separate lawsuit accepted by the district court, which has since been resolved.

They can't -- these plaintiffs can't bring an omission case, because there is no duty that runs from JCM out to the JCG shareholders.

The district court held that.

They didn't appeal that to the Fourth Circuit.

They didn't present that in their cert petition.

So they can't bring that omissions case.

Any wrongdoing in this case -- Justice Ginsburg, to finish my answer to your question, the policy says funds are not intended for market timing.

The advisor allowed 12 traders to trade frequently.

The only wrongdoing, if there is any wrongdoing, was the failure of the advisor to disclose to the trustees the deviation from the policy.

That is a State law breach of contract.

It may be a breach of fiduciary duty.

Justice Elena Kagan: Well, Mr. Perry, who wrote the relevant statements?

Mr. Perry: Your Honor, the Fund made the statements to the public.

They were drafted--

Justice Elena Kagan: I understand that they were in the Fund's prospectus, but who wrote them?

Mr. Perry: --They were drafted by lawyers for the Fund, lawyers representing the Fund.

Justice Elena Kagan: Who paid those lawyers?

Mr. Perry: The advisor paid the lawyers' salaries.

Justice Elena Kagan: So JCM paid the lawyers?

Mr. Perry: Correct, Your Honor.

Justice Elena Kagan: And so it was JCM's lawyers who wrote the prospectus, including the relevant statements here, the asserted misrepresentations?

Mr. Perry: I -- I disagree with that, Justice Kagan.

They don't allege that in the complaint, and the facts show that the lawyers--

Justice Elena Kagan: Well, suppose the complaint had alleged that.

Suppose the complaint had simply said: JCM's lawyers authored the relevant statements in the prospectus.

Mr. Perry: --One would have to--

Justice Elena Kagan: Would that be enough to survive a motion to dismiss?

Mr. Perry: --No, Your Honor.

One would have to further look at who those lawyers were representing.

The truth in the real world is--

Justice Elena Kagan: They're paid by JCM.

Mr. Perry: --Every prospectus is written by lawyers, Justice Kagan.

Lawyers write prospectuses.

Justice Elena Kagan: These are in-house counsel for the investment advisor.

Mr. Perry: In-house counsel, outside counsel, once they draft materials and present them to their client, it becomes the client's statement when adopted by the client.

The board of trustees the Funds has to review every policy, is responsible for every policy drafted, by inside counsel, outside counsel, consultants.

It's not unusual for companies to retain outside service providers to provide any number of policies: Employment policies, investment policies, anything else.

Justice Ruth Bader Ginsburg: Mr. Perry, you -- you said that it was the Fund's lawyers who drafted the prospectus, but in fact, it was JCM's lawyers, the lawyers -- they were in-house lawyers for JCM.

And they served -- served the Fund in doing this prospectus, but they were on the payroll of JCM, and they were JCM's legal department.

Mr. Perry: Your Honor, like all lawyers, they wear multiple hats.

I represent multiple clients.

These lawyers represent multiple clients.

Justice Ruth Bader Ginsburg: I thought they were in-house lawyers?

Mr. Perry: They are in-house lawyers at JCM, but they also represent the Funds, and the SEC has specifically recognized in the context of investment companies that where an advisor counsel is representing the Funds, his client or her client, for those purposes, is the Funds.

And here, these lawyers are very careful to separate who their -- their clients are for various purposes.

Justice Anthony Kennedy: Well, let's say that JCM's principal officers and managers wrote the statement.

You still say there's nobody?

Mr. Perry: Absolutely, Justice Kennedy, because when the statement is adopted by the issuer, it becomes the issuer's statement.

Only an issuer can make the statement.

Justice Anthony Kennedy: Yes.

It's not attributable, at least publicly, to JCM.

Mr. Perry: That's--

Justice Anthony Kennedy: Is there an alternate theory that JCM is really the day-to-day managers in day-to-day active control of the Fund, and therefore, it should be chargeable as if it and the Fund are the same for purposes of making the statement?

Mr. Perry: --Your Honor--

Justice Anthony Kennedy: And we would say that that's different from, say, an outside law firm or an auditor?

Mr. Perry: --Your Honor, the word "control" appears more than a hundred times in the briefs on the plaintiff's side of this case in this Court, and the Congress has dealt with control.

Section 20(a) provides a separate cause of action against those who control another entity.

Justice Sonia Sotomayor: Except that I, as I read your brief, and you can correct me if I'm wrong, you were arguing that since there was an independent board of directors, presumably because there are two corporate -- different corporate funds -- two different corporate forms, that there couldn't be control person liability under 20(a).

You seem that -- I thought, reading your brief, that's what you were alleging.

So you can't have your cake and eat it, too.

Either the independence of the board makes no difference or it does, so which is your position?

Mr. Perry: Our position, Your Honor, is that the Congress has dealt with the situation where you have two separate companies and to make a claim against the second company, you have to prove control.

Whether or not they could in this case, none of us knows, because they never brought that claim.

They represented to the district court--

Justice Sonia Sotomayor: Under what theory would you defend an allegation that the investment manager who had control over the everyday affairs of the company, drafted or helped draft the prospectus, hired the lawyers who helped draft it, wouldn't be a control person?

How would you defend that?

Mr. Perry: --Your Honor, the investment company, the mutual funds, are separately owned, separately governed.

Justice Sonia Sotomayor: Exactly.

So you -- you're -- if they can't be control persons because they're separate companies, then how do they escape being primary violators?

Mr. Perry: Well, Your Honor, then -- then we're just saying that the investment advisor is a service provider like every other service provider.

They are like the--

Justice Sonia Sotomayor: But it's not in this case, because the allegation is that it -- not the company, that it chose to deceive the market.

Mr. Perry: --Your Honor, with respect, the allegation is that the advisor wrote a certain policy, but the very document cited for that in the complaint says that the trustees are responsible for the policies of the funds.

The trustees, when they adopt them, it becomes the corporate policies of them.

I mean, on the plaintiff's--

Justice Elena Kagan: Mr. Perry, does the Fund have employees?

Mr. Perry: --Yes, Your Honor.

The Fund has--

Justice Elena Kagan: Who are the Fund's employees?

Mr. Perry: --Are the officers of the Fund, the chief executive officer, the chief financial officer--

Justice Elena Kagan: Are all of the employees also employees of JCM?

Mr. Perry: --Not the president, Your Honor, but the others are joint -- serve in joint capacities.

Justice Elena Kagan: And could you just run through a little bit how one of these prospectuses gets -- gets issues eventually?

The JCM lawyers start the process by drafting, and then what happens?

Mr. Perry: The lawyers representing the trusts, both in-house and external, draft the underlying document--

Justice Elena Kagan: Well, here, I believe there was a statement in your interrogatories that it's JCM's lawyers, in-house lawyers, who drafted the relevant statement.

Mr. Perry: --The particular prospectus, answered in that prospectus.

That's exactly right.

Justice Elena Kagan: And then what happens?

Mr. Perry: They are presented to the board of trustees, which holds a meeting.

The board of trustees is -- the Funds are represented by outside counsel and the independent trustees are represented by outside counsel.

Justice Elena Kagan: Was there any change to these statements made by the board of trustees?

Mr. Perry: These particular statements?

Justice Elena Kagan: Yes.

Mr. Perry: Yes, Your Honor.

There were changes to the market timing policy throughout the class period.

In fact, earlier in the class period there was a disclosure that market timing might be permitted pursuant to a -- a written contract.

That was revised later.

The trustees asked multiple questions.

They were back and forth with their lawyers.

Outside counsel was always involved, and there were other consultants involved periodically as well.

Chief Justice John G. Roberts: Does the outside counsel you're talking about represent the Fund only?

Mr. Perry: There is two separate sets of outside counsel.

One law firm represents only the Fund.

It does not represent the advisor; only represents the Funds, Your Honor.

There's a second law firm in this case that represents the independent trustees.

Six of the seven trustees determined that to secure their independence, because the chairman of the board at that time was an interested person under the statute, they have a separate law firm.

There are two law firms that have nothing to do with the advisors.

Justice Ruth Bader Ginsburg: But the law firm that -- the lawyers who drafted the prospectus were in-house counsel for JCM on JCM's payroll?

Mr. Perry: They were paid by JCM, and at the time they drafted, they were representing the Funds, again, as allowed by the SEC, as disclosed in the documents--

Justice Ruth Bader Ginsburg: But they weren't the independent outside lawyers who were representing the board or the Fund; they were the in-house counsel?

Mr. Perry: --Those outside counsel reviewed every policy.

In fact, if you look at the--

Justice Ruth Bader Ginsburg: I guess my question was simply: The drafters of the prospectus were the in-house counsel for JCM?

Mr. Perry: --The -- the paragraph being challenged in this case, that's correct, Your Honor.

The interrogatory response doesn't speak more broadly than that, but I agree with that.

Chief Justice John G. Roberts: I suppose if the lawyers for the trust did an inadequate job of reviewing the JCM drafts, they would be subject to a malpractice action by the trust?

Mr. Perry: Correct, Your Honor.

And then the trust, of course, has contractual and other rights against the advisor that it has enforced, you know, in this very case.

The trustees made a claim against the advisor for all of this underlying conduct.

Except--

Justice Stephen G. Breyer: What happens if the president of the oil company, knowing that the statement is false, says: We have discovered 42 trillion barrels of oil in Yucatan.

He writes it on a piece of paper; he gives it to the board of trustees; they think it's true and they issue it.

Joe Smith buys stock and later loses money.

Can Joe Smith sue the president of Yucatan, of the oil company, for having made an untrue statement of material fact?

Mr. Perry: --If he's an authorized agent of the same company that issued the statement?

Justice Stephen G. Breyer: What he is -- he didn't issue it.

What he did was he gave it to the board of trustees, who issued it.

Mr. Perry: If the board of trustees of his company, so that the statement--

Justice Stephen G. Breyer: He's the president of the company.

Mr. Perry: --And the distinction here, Justice Breyer, is--

Justice Stephen G. Breyer: No, no.

I'm asking what happens.

Is there recovery?

Mr. Perry: --If he is an authorized agent, he may be sued as--

Justice Stephen G. Breyer: He is running the business, the daily affairs, of the company.

Of course the president of a company is an authorized agent of the company, and so, yes.

Mr. Perry: --He may be subject to liability, then.

Justice Stephen G. Breyer: Now, if he is subject to liability, why isn't your firm, your client, subject to liability, who, after all, run every affair of the Fund?

Mr. Perry: Your Honor, they run the management of the Fund.

The investment of--

Justice Stephen G. Breyer: Yes, that's what a president does.

The president of a company manages the company.

And if the president is liable, why isn't the group of people who do everything for the company -- why aren't they liable?

Mr. Perry: --Because the corporate form has meaning in the Federal law and in State law, and where--

Justice Stephen G. Breyer: No, you have to explain it to me more.

I'm not being difficult.

I understand this less well than you think I do, and I want to know.

That's an obvious, naive question, and I would like an answer that anyone could understand.

Mr. Perry: --The answer is, Your Honor: These funds are managed -- governed, excuse me, is a better word -- by the trustees.

That is disclosed in these documents.

In fact, the documents say -- it's at page 258A of the Joint Appendix -- the trustees are responsible for all the policies.

They have outsourced, if you will, certain functions, operational functions: Which stock to buy, which stock to sell, which transfer agent to hire.

Those are functions that could be kept in house, but could be--

Justice Stephen G. Breyer: I get it.

In other words, you're saying on the papers here, it's -- it's the trustees that manage everything.

Mr. Perry: --That govern everything.

Justice Stephen G. Breyer: That govern everything, and these are like helpers?

Mr. Perry: Well, they're -- they're--

Justice Stephen G. Breyer: They do a lot as helpers.

Now, let me suggest to you, if that's one possible distinction, what about this distinction: That the managers of a Fund, even though they are outsourced people brought in, are liable as principals, not aiders or abettors, if -- following criminal law here, if -- they are principals if they get the false statement to the public through a conduit, the conduit being an entity or person that is unaware of the falsity of the statement?

That's LaFave on criminal law.

What is -- what about that?

Mr. Perry: --Three answers.

First, as dealt with in section 20(b), which is the ventriloquist dummy statute that these plaintiffs didn't invoke.

Second, the Congress looked at this very question in 1938 and 1939, when there were proposals to merge the management, the advisor function, with the funds, to make them one unitary entity.

In the Investment Company Act of 1940 and the Investment Advisors Act of 1940 the Congress elected not do that.

As this Court has recognized, it chose not to require compulsorily internalization of the management function.

It allowed this separate entity.

And therefore, when you have separate companies, under State law -- again, my client is a Delaware limited liability corporation.

The Funds are Massachusetts business trusts.

They have nothing in common.

There's no joint ownership, no joint governance--

Chief Justice John G. Roberts: Could you--

Justice Sonia Sotomayor: You're -- you're not suggesting, are you, that they did this for purposes of protecting your client from lawsuit?

Mr. Perry: --Absolutely not.

Justice Sonia Sotomayor: When it -- no, they did it for a business reason, that having separate entities was economically more useful for the market, correct?

Mr. Perry: And every fund, or virtually every fund in -- in the United States, is set up this way.

And again--

Justice Sonia Sotomayor: So -- but that doesn't answer Justice Breyer's question, now.

Mr. Perry: --My third--

Justice Sonia Sotomayor: Assuming that they didn't do it for that reason, what does it mean?

Mr. Perry: --My third answer is that extensive regulatory involvement in the two acts enacted in 1940 specifically to regulate this industry, that Congress never made the decision to hold the advisor liable for the Fund's conduct.

In fact, no statute says that, and the SEC has never taken that position.

There is no case cited in any of the briefs -- they have 234 pages, 138 cases.

Not one holds an investment advisor liable for statements of the fund's prospectuses.

Justice Anthony Kennedy: Just -- just to clarify Justice Breyer's hypothetical.

In your -- in the hypothetical you gave where the president gives an innocent board of directors false information and the prospectus goes out, is the company liable because their agent -- is the company liable under 10b-5?

Mr. Perry: The company may be sued under 10b-5.

It has got to meet all the elements.

Justice Anthony Kennedy: Yes.

Mr. Perry: But yes, it is an authorized agent making a statement on behalf of the company.

Justice Anthony Kennedy: So what you're saying is that the -- the agency relation that the president of the company holds is different that than the agency relation that JCM holds?

Mr. Perry: Absolutely right, Your Honor, and that's a distinction--

Justice Anthony Kennedy: Why is that?

Mr. Perry: --It's grounded in State law, and it differs between one company and two companies.

Where Congress has looked at issuers, for example--

Justice Antonin Scalia: Well, but is JCM an agent?

Are you acknowledging that they're an agent of -- of the Fund?

Mr. Perry: --You know, for certain purposes, Justice Scalia, they are an agent.

Justice Antonin Scalia: What -- what purposes are that?

For purposes of -- at issue here?

Mr. Perry: No, Your Honor, for -- not for drafting a prospectus.

For carrying out the investment function.

They are laid out in the contract--

Justice Antonin Scalia: Okay--

Mr. Perry: --It's attached as an appendix to our brief, which sets forth the things that JCM is an agent for investment operations, not an agent specifically for registering the Fund's securities for sales, complying with the Federal securities laws, preparing and issuing the prospectus.

All those things, by contrast--

Justice Anthony Kennedy: So even though they did those things, they acted in excess of their authority?

Mr. Perry: --They did not do those things, Your Honor.

Justice Anthony Kennedy: But that's the allegation.

Mr. Perry: No, it's not the allegation.

Justice Anthony Kennedy: Well, suppose it were proved that they did do those things.

Suppose it were proven that they did 100 percent of prospectus work.

The only thing that the Fund did was to mail it.

Mr. Perry: I don't know how to respond to that, Justice Kennedy, since it's so far beyond what they could possibly prove here.

What happened here--

Justice Ruth Bader Ginsburg: Well, this case -- this case went off on -- in the district court, it was -- was it 12b-6?

Mr. Perry: --Yes, Your Honor.

Justice Ruth Bader Ginsburg: Okay.

And all that the Fourth Circuit said is, it goes beyond; it has to go further.

And the -- the impression that I got from the Fourth Circuit's opinion is -- and it could be reduced to a very simple statement.

They say: JCM was in the driver's seat.

It was running the show.

And if that can be proved, they thought that they would have a good case under--

Mr. Perry: And, Your Honor, no court, no case from this Court or any court of appeals has ever held that the driver's seat exception, the central bank, exists.

And that is an expansion.

The second issue in the case, of course, which is attribution: Even if there is making by JCM, none of these statements were attributed to JCM.

The prospectus is very clear that at issue--

Justice Ruth Bader Ginsburg: --But that was -- I mean, before you started out with statements that sounded like the sky is falling because lawyers would no longer be safe, banks would no longer be safe -- but the Fourth Circuit was -- was a much narrower view.

Its view was, this -- JCM was the manager.

It was controlling everything.

Mr. Perry: --Justice Ginsburg, the Fourth Circuit's view was the manager helps the Fund.

That -- nobody even defends the Fourth Circuit's ruling.

The government now comes in with a theory that they admit, on page 22 of the government's brief, does apply to every lawyer, every accountant, every--

Justice Antonin Scalia: --I thought that the question on which we granted cert was very clear: whether the Fourth Circuit erred in concluding that a service provider can be held primarily liable in the private securities fraud action for, quote, "helping", close quote, or, quote, "participating in", close quote, another company's misstatements.

Now, is -- is that an accurate description of the Court's holding?

It was not objected to by the Respondent here.

Mr. Perry: --Absolutely, Justice Scalia.

And that question can only be--

Justice Antonin Scalia: And that's what I thought we granted.

We weren't talking about control here.

That -- that was not the issue, I thought.

Mr. Perry: --We agree with the Court.

The question presented can only be answered one way: The court of appeals erred.

If I may reserve my remaining time.

Chief Justice John G. Roberts: --Thank you, Counsel.

Mr. Frederick.

ORAL ARGUMENT OF DAVID C. FREDERICK ON BEHALF OF THE RESPONDENT

Mr. Frederick: Thank you, Mr. Chief Justice, and may it please the Court.

Justice Antonin Scalia: Mr. Frederick, is that an accurate description of -- of the question before us?

Mr. Frederick: I don't think it is, Justice Scalia.

Justice Antonin Scalia: Why didn't you object to it in -- in your -- in your opposition?

Mr. Frederick: We did object, in the sense that we described the complaint's allegations as JCM writing and preparing and being responsible for the prospectus.

And the question of--

Justice Antonin Scalia: I don't -- but we -- we don't reevaluate facts.

We -- we review the holding of a lower court.

Now, was this an accurate description of the holding of the Fourth Circuit?

And if it wasn't, why didn't you say that in your brief in opposition?

Mr. Frederick: --We did say it in our brief in opposition, Justice Scalia, and the Solicitor General, when you called for the views of the Solicitor General, also said in the invitation brief that this case was not an appropriate vehicle for deciding just simply JCM was responsible for the prospectuses in all their various aspects: In writing, preparing, et cetera.

And so we--

Chief Justice John G. Roberts: How can -- I'm sorry.

Please--

Mr. Frederick: --So we would submit that for the reasons we stated in our opposition and we stated in our red brief, as the case comes to this Court on reviewing a motion to dismiss of a complaint's well-pleaded allegations -- and I can go through the complaint's allegations if you like that explain how JCM wrote and prepared the prospectus and the policies for the Fund and then implemented them falsely -- we would submit this case is not about service providers, but it is about Janus Capital Management being the primary violator.

They were the ones who had the motive to lie, they had the incentive to lie, and they did lie.

Justice Antonin Scalia: Did they make the statements?

Isn't that the statutory text that we're dealing with?

Mr. Frederick: Yes, they did.

Justice Antonin Scalia: They did make the statements?

Mr. Frederick: Yes, they composed and created--

Justice Antonin Scalia: It didn't go out under their name.

Mr. Frederick: --It did, in--

Justice Antonin Scalia: If someone writes a speech for me, one can say he drafted the speech, but I make the speech.

Mr. Frederick: --Justice Scalia, we address the definition of SEC's interpretation, which is entitled to deference, as to being to create or to compose or to accept as one's own.

Justice Antonin Scalia: That's not what -- it depends on the context of "make".

If you're talking about making heaven and earth, yes, that means to create, but if you're talking about making a representation, that means presenting the representation to someone, not -- not drafting it for someone else to make.

Mr. Frederick: In the prospectus, there is a section on management that explains that Janus Capital Management engages in the day-to-day functions.

There are no employees of Janus Funds themselves.

All of this is outsourced management--

Chief Justice John G. Roberts: --Except -- except when they review material going in the prospectus.

Mr. Frederick: --But that--

Chief Justice John G. Roberts: Then they have independent representation by outside counsel.

Mr. Frederick: --Right.

What they don't have, Mr. Chief Justice, and where the falsity is here, is the ability of any of those outsiders to determine whether or not implementing the policy will be done fraudulently, and that's where the culpability is here.

JCM runs these funds, and although the statement might get accepted by the board of trustees--

Chief Justice John G. Roberts: I don't understand -- I don't understand your answer.

The outside counsel reviews what the policy is going to be?

Mr. Frederick: --Yes.

Chief Justice John G. Roberts: Our question is the validity of that statement, whether that's deceptive in the prospectus.

That seems to me to be an entirely different question.

I understood your theory of the case to be that JCM is liable, basically, because they put it in the prospectus.

Mr. Frederick: And what they did was to falsely represent what they would do with that statement.

I would direct the Court to paragraph 5.

Chief Justice John G. Roberts: Well, that's the question, I guess, that -- your response seems to beg the question -- is that they falsely represented.

The issue is whether or not something happened between their drafting and its appearance in the prospectus.

That makes it appropriate to say that that's a statement of the trust rather than a statement of JCM.

Mr. Frederick: It is a statement of both, in the sense that the Fund is attracting investors, but the Fund is managed and controlled by the investment manager; here, JCM.

Justice Antonin Scalia: But if JCM falsely represented what it would do, it made that false representation to the Fund, and the Fund, as has been acknowledged, would have a cause of action against JCM.

Mr. Frederick: No--

Justice Antonin Scalia: But that's not what's going on here.

Mr. Frederick: --No.

In fact, paragraph 5 of the complaint says Janus is representing that its mutual funds -- Janus Capital Management, its mutual funds -- were designed to be long-term investments.

It then says in paragraph 6:

"As recognized in the prospectuses, JCM purported market timing policy was designed to protect long-term investors. "

So if you read the prospectus and you read the complaint, it is absolutely clear what Janus Capital Management is telling all the mutual fund investors of the world: If you invest in Janus, we will protect your long-term investments.

Justice Antonin Scalia: What isn't clear from all of those things is that JCM made any representation to the public.

The representation was made in the prospectus issued by the Fund, not by JCM.

Now, the Fund may have a cause of action against JCM, but what's crucial here is whether -- whether you can establish that it is JCM who made the representation to the public, and I don't see how you can get there.

You might proceed under the control provision, but not by saying that they made the representation.

Mr. Frederick: Justice Scalia, they wrote the prospectus.

They're--

Justice Antonin Scalia: That's fine.

Just like writing a speech for somebody.

Mr. Frederick: --And when they issued the prospectus, they used their address and represented to the public that they--

Chief Justice John G. Roberts: I'm sorry to interrupt, but it seems be an important -- when they issued the prospectus?

Who issued the prospectus?

Mr. Frederick: --Sorry.

JCM filed it and disseminated it on its website, and all investors in the Janus Funds knew to -- knew to make inquiries to the manager if they had any question about the Funds.

Justice Antonin Scalia: If I carry a letter over and file it on behalf of some principal, does it become my letter?

Have I made that representation?

Sure, they filed it.

What does that prove?

Mr. Frederick: Because it's--

Justice Antonin Scalia: As you say, they have no other agents, unless the trustees themselves were going to walk over and file it.

JCM was functioning in that capacity as an employee of the Fund in the filing.

They didn't file it on their own behalf.

Mr. Frederick: --Yes, they did.

Justice Antonin Scalia: On their own behalf?

Mr. Frederick: Absolutely.

They created the fund, Justice Scalia.

That's how mutual funds work.

Managers create them, they lure investors to them, they get money by having a percentage of assets under management.

Chief Justice John G. Roberts: And the SEC has recognized that they remain two separate entities, despite the interconnected relationship.

Mr. Frederick: Certainly, but there are many cases -- in fact, I don't think it's ever been disputed in the courts of appeals that if one company outsources its management function and those outsourced managers make lies on behalf of the company, they are also--

Chief Justice John G. Roberts: The one activity -- one activity that we know they did not outsource was review of the materials submitted by JCM.

They had independent counsel that conducted that review.

Would it have been a breach of the trustees' fiduciary obligations to the fund investors under common law -- I forget where this is incorporated -- to rubberstamp what they get from somebody on the outside, not to have independent counsel review what they're going to say in their prospectus?

Mr. Frederick: --Mr. Chief Justice, my answer to your question is: That's actually a very difficult question under fiduciary duty law, because here, the fiduciaries have been duped themselves.

They, when they got the wording of the prospectus and the policy that JCM was purporting to implement -- JCM didn't tell the Board that there are 12 secret deals with hedge funds, pursuant to which we're going to make money by attracting long-term investors and make money with short-term market climbers--

Chief Justice John G. Roberts: Isn't that, again, what has been conceded: That there may well be an action from the Fund represented by their trustees against--

Justice Antonin Scalia: Common lawsuit for duping.

Mr. Frederick: --Justice Scalia, in no instance that I'm aware of where a mutual fund investment advisor is a publicly traded company would that cause of action run on behalf of the managers shareholders.

What we're talking about here is a company with a product, and they lie about the product.

And in that instance, it's no different from the Vioxx case last year with Merck or the difference from the cold remedy case you are going to hear argument in next term.

The mutual funds happen to be the product of the company.

They make misstatements about the product--

Justice Samuel Alito: Suppose this case didn't involve a mutual fund.

Suppose it involved a corporation with thousands of employees and the prospectus is drafted by outside counsel.

It's adopted by the directors of the company without changing a word.

Now, would that case come out the same?

And if not, what would -- what exactly would you have us say to distinguish the two?

Mr. Frederick: --Well, the outside lawyers, I think, are distinguishable in a number of different ways.

One is that they are reacting on information provided by the company.

That information is typically not subject to an independent investigation by outside counsel to determine the truth or veracity of the information.

Justice Samuel Alito: What if it's alleged they knew exactly what was going on?

Mr. Frederick: If there is scienter, where the lawyers knowingly act in a way that helps or that contributes to that fraud, they may well be subject as aiders and abettors.

It depends on whether you can establish that the lawyers have met all of the elements.

I mean, you would have to show reliance.

You would have to show lost causation.

You would have to show the primary violation of the party--

Justice Samuel Alito: And what are aiders and abettors?

I thought there wasn't aiding and abetting.

Mr. Frederick: --Sorry.

The SEC would be able to proceed against the lawyers for aiding and abetting.

Whether or not there would be a private action would depend on whether the lawyers -- it could be pleaded under the heightened pleading requirements that they had met all of the elements of the 10b-5 claim.

I would submit that's extremely difficult.

Justice Stephen G. Breyer: What is it that -- I'm unclear on this.

That's why I use the oil company example.

Plain, ordinary -- the top executives in the oil company write the false statement.

They give it to a board that doesn't know it's false, and the board puts it out in its name.

Now, it seems to me it ought to be clear at this point in securities law whether those -- the president and the vice president are or are not liable under this 10-b, the (b) part.

Mr. Frederick: Yes, and we cited those cases--

Justice Stephen G. Breyer: And they are liable.

Mr. Frederick: --i believe at page 37.

Justice Stephen G. Breyer: You're saying they are liable?

All right.

Then their response to that is: This is not like the president of the oil company, and the reason that it's not is something to do with the nature of the obligation that runs between the managers and the Fund, which is somehow different between -- you understand it better than I.

Can you say what it is and what you think your response is?

Mr. Frederick: Yes.

What I will say is that they don't have a principal distinction between those two situations.

Simply having a contract to outsource management where those management functions of the company are resulting in false statements issued by the company shouldn't make--

Justice Stephen G. Breyer: All right.

So you're saying -- you're saying it shouldn't matter that -- if they issued worse if they run the whole company than if they're just the president?

Mr. Frederick: --That's correct.

Justice Stephen G. Breyer: All right.

Now, at that point, we get into a problem, and the problem is how do we distinguish an aider or abettor from the principal?

At that point I am uncertain indeed, and that's why I put out this for comment, this suggestion that you follow criminal law here and say at least they are a principal if they have a high position, they participate in it, they do all these things you say, and the entity they're fooling in the first instance is simply a conduit, and therefore, you cannot say it's a scheme, because the other part of the scheme wasn't part of it.

Mr. Frederick: Well, to be a primary violator, you have to have met all the elements of the cause of action.

Justice Stephen G. Breyer: Yes.

Mr. Frederick: To be an aider and abettor for SEC enforcement purposes, you simply have to provide substantial assistance to one who is a primary violator.

Justice Stephen G. Breyer: What's the difference between substantial assistance and doing it?

Mr. Frederick: You would not have to make the statement.

You would do something to assist the person making the statement.

Justice Antonin Scalia: Mr. Frederick, I thought we had held -- I was sure we had held that there is no aiding and abetting liability--

Mr. Frederick: Yes.

I'm -- I'm not saying--

Justice Antonin Scalia: --under the provision we're discussing here.

Justice Stephen G. Breyer: There's a distinction.

You want to say what the distinction is.

So I would say, consistent with the view, there is no aiding and abetting liability.

You still would win your case?

Mr. Frederick: --That's correct, because there is no primary violator under JCM's view of the facts here.

They are the primary violator under our view of the facts here, because they met all of the elements of the 10b-5 action, and they had a motive do it, and they made--

Justice Sonia Sotomayor: Is your claim premised on Janus being duped or not?

If Janus was not duped, if its board knew and JCM was doing the activity with either the consent or acquiescence of the board, would you have a claim here?

Mr. Frederick: --We would.

It would be somewhat different because we would plead multiple violators as the court and central bank and from which--

Justice Sonia Sotomayor: Then go back to Justice Breyer's question, because I can see when there's one primary violator who uses another entity as a dupe or as a puppet, but I can't, and I don't know how to distinguish what you're proposing, from aiding and abetting.

There has to be something to differentiate the two, so what is it?

Mr. Frederick: --It's the failure on the part of the person who would not have met all of the elements of the 10b-5 claim.

You have to have someone -- you have two people, okay?

Both of them have to have satisfied all the elements of a 10b-5 claim to be primary violators.

If there is one element that is not satisfied with respect to that person, that person is only an aider and abettor and not subject to private remedies under Section 10(b).

They would be subject to aiding and abetting liability under the SEC.

Justice Samuel Alito: The distinction you're drawing is between making the statement and assisting in making the statement.

Isn't that what you just said?

Mr. Frederick: Well, no, in the sense that we believe, and we assert in the complaint and the complaint is adequately pleaded, is that JCM made the statements.

Now--

Justice Samuel Alito: Yes, aiding and abetting is assisting in making these statements as if -- as in something you want to take place, right?

Mr. Frederick: --Yes.

Justice Samuel Alito: What is the difference, the distinction in -- in this context?

One possible distinction is who formally makes it, in whose name is it made, but that's obviously not your -- your position.

So what is it to distinguish a principal here from an aider and abettor?

Mr. Frederick: Who has substantive control over the content of the message.

That kind of substantive control, as -- as the Court in the Utah Ten Commandments case pointed out, the government can have speech attributed to it on the basis of it putting up a monument on public land.

There can be multiple speakers with respect to one message, and the question of how much substantive control you attribute to a particular speaker we believe is the appropriate way to view--

Justice Antonin Scalia: Do you deny that the Fund had substantive control?

Couldn't the Fund have stopped this statement from being placed in its prospectus?

Didn't it have outside lawyers who advised it whether it should allow this statement to be included in its prospectus?

How can you say that they -- they didn't have control?

Mr. Frederick: --Well, they did not have a knowledge of the falsity.

Justice Antonin Scalia: Well, that may mean that they're duped, but it doesn't mean that they don't have control.

They had control, but you say they -- they were duped, but that's quite a different theory from saying that they had control -- that they didn't have control.

Mr. Frederick: No, Justice Scalia, they didn't have substantive control over the content of the message, because if they did, they would not have allowed these false statements to have been issued.

And that's the whole point -- that's the theory here, JCM was luring long-term investors with the promise, if you park your money with the Janus Funds, it will be safe in -- from the kinds of market timing problems.

They were then secretly going out and luring money from the hedge funds for then--

Justice Anthony Kennedy: But there is -- there is nothing in the record to indicate that that statement was attributed to JCM?

Mr. Frederick: --The public understood it that way.

Justice Anthony Kennedy: You can -- you can play with the words, JCM?

I -- I see nothing in -- in the record that would justify that.

Mr. Frederick: Well, JA 275A, Justice -- Justice Kennedy -- excuse me -- says that Janus Capital Management reserved the Janus name for itself.

Justice Ruth Bader Ginsburg: How did it reserve that?

You said twice in your brief that Janus is a name to which JCM reserves the right.

How did it reserve the right?

Mr. Frederick: It said, and this is at page 275A, if for some reason Janus Capital Management's contract is terminated, the Funds can no longer use the Janus name.

They were intending to trademark and get the name out there to attract investors to the investment advisor's method of investing.

And it was that type of usage that brought all of this together.

The Fund and the management, they are in function essentially one entity.

The fact that they have contractually outsourced the management function should not alleviate the securities fraud that is alleged here.

Justice Elena Kagan: Mr. Frederick, a substantial part of the power of your argument comes from this notion that, as Justice Ginsburg said, that JCM was in the driver's seat, that JCM had control, that they were -- Janus was at most an alter ego of JCM and maybe something more, that it was just a creature of JCM.

But the securities legislation seems to deal with that in section 20.

And your case is not brought under section 20, and because of the relationship between mutual funds and their investment advisors, presumably could not be brought under section 20.

So, why should we think relevant the kind of controlled relationship that you're talking about?

Mr. Frederick: Because you don't want to create a road map for other people to commit fraud, Justice Kagan, and that's what their theory does.

What their theory does is it says is we set up shell companies or if we dupe people to make statements, we can commit securities fraud with impunity, because we won't be held liable to having made the statement, even though we wrote it, we had substantive control over it, et cetera.

Chief Justice John G. Roberts: --Except, except to the SEC, right?

Because they can pursue it under aiding and abetting.

It's kind of a big--

Mr. Frederick: Well--

Chief Justice John G. Roberts: --problem if you're trying to say we're safe from the actions for security fraud.

Mr. Frederick: --Well, Chief Justice Roberts, this Court on numerous occasions has said that the private securities action is a complement to the enforcement efforts of the SEC, and in this instance, the shareholders of the investment--

Chief Justice John G. Roberts: Well, I know, but you were just responding by saying the problem is that this will give people a road map.

But they're going to hit a pretty big bump in the road when the SEC brings an action against them, including potential criminal actions.

Mr. Frederick: --But, no, the problem, Mr. Chief Justice, is that under their construction of the facts there's no primary violator.

Mr. Perry said this morning--

Chief Justice John G. Roberts: The SEC--

Mr. Frederick: --there's no primary violator.

And, so, if there's no primary violator, there can be no controlled person and there can be no aiding and abetting.

Chief Justice John G. Roberts: --Thank you, Mr. Frederick.

Mr. Gannon.

ORAL ARGUMENT OF CURTIS E. GANNON, ON BEHALF OF THE UNITED STATES, AS AMICUS CURIAE, SUPPORTING RESPONDENT

Mr. Gannon: Mr. Chief Justice, and may it please the Court:

Justice Sonia Sotomayor: Counsel, could you start by taking your brief and distilling it down to three sentences?

Define what a primary violator is, what a secondary violator is who aids and abets, and who a control person is?

And then tell me how that definition would exclude lawyers, auditors, investment -- general investment advisors, et cetera.

I've read your brief, but I've been trying to distill it down to three sentences.

So try to do that for me.

Mr. Gannon: --A primary violator must be somebody who has actually committed all the elements of a 10b-5--

Justice Sonia Sotomayor: Give me an example of that.

What do you see as all of the elements?

Mr. Gannon: --Well, the elements for the private cause of action are the ones that this Court has repeated.

They are--

Justice Sonia Sotomayor: I understand.

But--

Mr. Gannon: --In this case the key one we're talking about is you would need to be an actual maker of the statement, and -- and--

Justice Sonia Sotomayor: --And that becomes -- how is that different from aiding and abetting the making of a statement?

Mr. Gannon: --It -- we think that somebody can make a statement if they create the statement, and the statute and the rule both expressly apply to those who make statements directly--

Justice Sonia Sotomayor: But that's every lawyer--

--who writes the false statement knowing it's false.

So, are you saying every lawyer who writes the statement knowing that it's false is a primary--

Mr. Gannon: --Scienter is another element, and so a lawyer who just reviews the policy, JCM in this case, when JCM submitted false statements to the funds, if the funds were unaware, this is where Mr. Frederick concluded for the Chief Justice that if there -- if the person who actually releases the statement to the world has been duped and doesn't have scienter, then there is -- they are not going to be--

Chief Justice John G. Roberts: So, just to get--

Mr. Gannon: --A primary violator.

Chief Justice John G. Roberts: --to get back, so you are conceding that if you lose this case, you will be unable to bring any aiding and abetting case in a situation such as this?

Mr. Gannon: Under sections 20 -- it depends on what the situation--

Chief Justice John G. Roberts: It seems like a yes or no question.

Mr. Gannon: --Yes, if the situation here is one in which the Funds ultimately cannot be proved to have scienter.

If they did not know about the falsity of the statements in the prospectuses that they released to the public, then there would not be a primary violator.

Under section 20(e) for aiding and abetting liability, the Commission can bring an aiding and abetting claim against somebody who provides substantial assistance, recklessly or knowingly -- recklessly or knowingly provides substantial assistance to a primary violator, but the Court has repeatedly made clear that a primary violator needs to have violated all of the elements of a 10b-5 cause of action which includes--

Justice Samuel Alito: I'm still not clear what your distinction is between making the statement and aiding and abetting in the making of the statement.

Now, could you explain that for me?

Mr. Gannon: --Well, I think that--

Justice Samuel Alito: Is it necessary that the person in whose -- the entity in whose name the statement is made is an empty shell, it's simply a puppet that's controlled by somebody else?

Is that -- is that necessary or does it go beyond that?

Mr. Gannon: --No, I don't think that that's necessary.

If the position -- the position that the Commission has taken is that somebody who makes a statement, if he writes the statement or provides the false information that's used to construct the statement or allows the statement to be attributed to him, and we think that that's a reasonable construction of the term "make", because the statute and the rule both apply to persons who make the statement directly or indirectly.

And, so, they could be using a conduit, whether the conduit is witting or unwitting, they would be a primary violator if they had--

Justice Antonin Scalia: I don't think that's a reasonable interpretation of -- of -- of make a statement indirectly.

I mean, you can make it indirectly by not issuing it yourself but having somebody else make it in your name.

Mr. Gannon: --Well, if--

Justice Antonin Scalia: But I would not say I'm making a speech indirectly if I have drafted the speech.

Mr. Gannon: --Well, but if--

Justice Antonin Scalia: The person for whom I drafted the speech is making the speech.

Mr. Gannon: --Well, that may be true in the case of a speech, Justice Scalia, but in a classic boiler room situation, where somebody has written the scripts for salespersons to -- to use in order to make calls to sell stocks, the person who actually writes the scripts may never speak the words to a customer, he may never have his own name spoken on the phone, and therefore, the statements have not been attributed to him--

Justice Stephen G. Breyer: He may just be some poor associate, his first day at work.

The law firm sent him there and he got stuck down in the boiler room.

And somebody said, why don't you write something that will get everybody to sell things, and -- and why don't you say we're a thousand tons of oil instead of only a ton.

In -- he writes it out.

You think he's liable?

Mr. Gannon: --If he writes it out and he doesn't know, he obviously isn't liable--

Justice Stephen G. Breyer: No, no, at some level he knows,

"I shouldn't be saying they found 1,000 tons of oil when they only found 50. "

okay?

And four people told him to go do something like that, but he's the guy who wrote it.

I would say he didn't behave well, but I don't think he's the principal.

Mr. Gannon: --In that instance, because he was acting specifically at the direction of superiors--

Justice Stephen G. Breyer: They didn't say what words to write.

Mr. Gannon: --They gave--

Justice Stephen G. Breyer: They gave him the general idea, and then he did it.

He created the words, to use your phrase; when you say creating the words, he's a great writer.

Mr. Gannon: --It -- we do, on page 22, acknowledge that somebody needs to be sufficiently involved in the creation or dissemination of the statement in order to be -- in order to be deemed its maker or its author.

Justice Stephen G. Breyer: Ah, now we have "sufficiently involved".

Once we're into sufficiently involved, we're back into what is sufficient to make the person the principal rather than the aider and the abettor, and apparently creating or writing the statement is not clear whether it is or is not sufficient.

So we're back into the problem.

Mr. Gannon: In this instance there's no doubt that the manager of the funds was not a mere advisor.

They bodily--

Justice Stephen G. Breyer: I'm interested in your test.

I'm interested in your test, not the--

Mr. Gannon: --Well, the -- the test does acknowledge that -- that if there is not sufficient control over the content of the -- the message and the dissemination of it that somebody may be more in an advisory capacity.

That might be the instance with lots of outside law firms when they're acting at the specific direction of counsel.

That's not the situation of--

Justice Ruth Bader Ginsburg: In that connection, just again, would you answer the -- the statement that Mr. Perry made that the government had, in fact conceded that this theory would spread, not only to -- to the investment advisor so closely linked to funds but to every lawyer, every accountant, every bank.

Mr. Gannon: --Well--

Justice Ruth Bader Ginsburg: You said you said that on page something here.

Mr. Gannon: --We said that -- he was referring to the statement on page 22 of the government's brief, referring to the need -- for the -- for the author to be sufficiently involved in creating or disseminating the statement.

And I think it's very important to recognize that scienter is an important limiting -- limiting principle for the 10b-5 cause of action.

Justice Antonin Scalia: Well, that will always be charged.

It's the simplest thing in the world to charge scienter.

Mr. Gannon: It would be--

Justice Antonin Scalia: And you've bought yourself a big lawsuit.

Mr. Gannon: --It's not simple, Justice Scalia, in light of the PSLRA, there requires it to be alleged with articularly; there need to be facts sufficient to give rise to a strong inference that the defendant acted with scienter, and -- and there are penalties beyond rule 11 that are -- that are imposed if the -- if the plaintiff is -- is mistaken in doing so.

Justice Anthony Kennedy: You think attribution to the actor is not necessary for the actor's liability for his statement?

Mr. Gannon: That's correct.

We think that -- and any other rule would immunize falsely attributed or anonymous statements.

And if the whole purpose of a fraud was to convince somebody that this statement came from Warren Buffet, so that I could turn a quick buck before the market realized that it wasn't actually from Warren Buffett, the fact that it was not attributed to me would not change the fact that I had made the statement and that the market had relied upon it.

The truth is that reasonable investors, and that's the test for purposes of reliance, can rely on anonymous and falsely attributed statements.

In this instance there's no reason to doubt that an investor would have relied on statements in the prospectus about the fund's purported antimarket timing and excessive trading policies.

And so we think that there -- in general there doesn't need to be an attribution requirement, but in this instance it's quite clear that a reasonable investor could have relied on these -- prospectus.

Justice Sonia Sotomayor: --Counsel, could you have -- you just admitted if there -- if the company was duped, you couldn't have aiding and abetting liability.

Could you impose a 20(b) or 20(b) control person liability?

Mr. Gannon: The control person liability also needs to have a primary violator under the terms of 20(a).

Justice Elena Kagan: Mr. Gannon, suppose that we think that the test that the SEC is using and you recite on page 13 is really pretty broad and that it might apply to a range of factual situations that are not before us.

Is there a way to confine our holding just to the mutual fund situation, and if there is, how would you do that?

Mr. Gannon: Well, I think the easiest way would be to analogize it to the cases involving corporate employees.

As Petitioners acknowledge, there are cases where a corporate employee drafts a statement that's issued in the company's name.

In this instance the investment advisor is management for the company, and the fact that they happen to be management by virtue of contract rather than just the internal arrangements of the corporation shouldn't change that arrangement.

It -- it's also the case that if the Court were -- were looking for a way to narrow its holding, it could do so by talking about the elements of the 10b-5 cause of action, which -- which would apply only to private suits and -- and not to enforcement actions brought by the Commission or by the Department of Justice.

Justice Anthony Kennedy: Your point is that--

Justice Antonin Scalia: Well, it should change that, because Congress has made it very clear that investment advisors are not to be treated like employees.

You -- you want us to undo a clear distinction that Congress has made.

Mr. Gannon: Well, the -- that statute says that somebody -- any person makes the false statement directly or indirectly, and in this instance the SEC sought -- got a cease and desist order that's reprinted at -- on page 407 in the joint appendix that was predicated on a provision of the Investment Company Act, section 34b, that -- that tracks 10b and makes it unlawful for any person to make any untrue statement of material facts; and the Commission believes that they were chargeable with that violation.

Chief Justice John G. Roberts: Thank you, Mr. Gannon.

Mr. Perry, you have 4 minutes remaining.

REBUTTAL ARGUMENT OF MARK A. PERRY ON BEHALF OF THE PETITIONERS

Mr. Perry: Justice Kennedy, in response to your attribution question, Mr. Gannon said something about falsely attributed or anonymous statements.

We have neither here.

We have a correctly attributed, nonanonymous prospectus that under Federal law says on the first page of the document who it's attributed to, the Janus Funds, who have their own trustees.

Justice Ginsburg, who is in the driver's seat?

Page 258a of the joint appendix, quote:

"The trustees are responsible for major decisions relating to each Fund's objectives, policies and techniques. "

"The trustees also supervise the operations of the Fund by their officers and review the investment decisions of the officers. "

There is no misdirection here about who is in charge.

The trustees are in charge.

Justice Ruth Bader Ginsburg: But the -- the whole arrangement was made possible by JCM.

JCM wants long-term investors, so it puts this provision in the prospectus.

The board of directors have no reason to believe that JCM is dissembling and it's going to go out and seek hedge funds.

Mr. Perry: If it is a dupe case, Justice Ginsburg and Justice Sotomayor, it's dealt with by 20(b), which justice -- Mr. Gannon did not answer.

You notice 20(b) does not require a primary violation.

It allows the Commission to proceed directly against any person who acts indirectly where it can't act directly.

So 20(b) answers this problem.

The Commission also -- the 34b of the Investment Company Act is broader.

There's also section 206 and 215 of the Investment Advisors Act which regulate the conduct of investment advisors.

Congress has dealt in a very reticulated way, and all of the questions today I would submit show the absence of bright lines being proposed by my friends on this side of the table.

They can't articulate the difference between primary and secondary, between principal and agent, between aiders and abettors and anything else.

This is an area that needs bright lines, it needs to be resolved on motions to dismiss.

Scienter can't be resolved on a motion to dismiss.

And the Congress, in the Dodd-Frank act, which the plaintiffs said in their opposition in this Court to this certiorari petition, was going to solve the problem by enacting a statute -- turns out Congress didn't enact that statute.

Instead, Congress referred this issue to the General Accounting Office, to the Controller General, and said take a year, take all the resources of the Federal Government, study the problem of the distinction between companies that issue securities on the one hand, -- the funds here -- and those who provide services on the other hand -- the advisor here.

And tell us, come back to the Congress and tell us whether we need to solve the problem.

If the government--

Justice Samuel Alito: Well, just to sum up, if there are -- if investors in a mutual fund are duped by a false statement that is made in fact, is written by -- by the management company and issued by the fund without knowledge of its falsity, is there anyplace they can get -- look to for relief?

Mr. Perry: --The investors in the mutual fund, Justice Alito--

Justice Samuel Alito: In the mutual fund, yes.

Mr. Perry: --got $100 million through the SEC action and resolved all the civil litigation.

They're a separate class of investors, whole different set of securities laws problems, because they were the recipients of the prospectus that offered these securities and that contained the false statements.

These plaintiffs' foundation problem, they didn't purchase or sell the securities that were offered by the prospectus they complain about.

They can't find any false statements--

Justice Elena Kagan: Mr. Perry, on the allegations of this complaint, these plaintiffs were harmed by the misrepresentations, the alleged misrepresentations from JCM to the fund.

So if the Fund was duped, would these shareholders, JCM's shareholders, have any relief?

Mr. Perry: --These shareholders -- JCG's shareholders have no relief.

And Justice Kagan, I would point out in the 70 years since the Investment Company Act was enacted and the modern mutual fund industry was built, I'm not aware of any case -- and they certainly haven't cited one -- in which the investors in the parent company have ever recovered a dime in an SEC action, a private action or otherwise, for statements in the fund's prospectuses.

There is a -- there is a line between corporate entities, and the liability runs up different channels.

This is a totally novel, unprecedented theory that they're presenting.

Justice Ruth Bader Ginsburg: What was the theory of -- of the fund shareholders?

You said the fund shareholders recovered during the settlement.

Mr. Perry: Right.

Justice Ruth Bader Ginsburg: What -- what was that act?

Mr. Perry: Their theory was that there was an omission, that the advisor owned a duty to the Fund.

The statements were correctly made, Justice Ginsburg.

There was no market timing.

When the advisor later allowed certain traders in, it owed a duty to correct the statements to the Fund.

That was the liability theory of the investors.

These plaintiffs can't pursue that liability theory because the duty doesn't run the other way, it doesn't run from JCM to JCG's investors, that's the law in this case.

Therefore, they can't bring an omissions case, they have to bring an affirmative misstatements case for statements that were not directed to this group of investors.

Chief Justice John G. Roberts: Thank you, Mr. Perry.

The case is submitted.

Transcript: 

Justice Clarence Thomas: This case comes to us on a writ of certiorari to the -- to the United States Court of Appeals for the Fourth Circuit.

Janus Capital Group, a publicly traded company created Janus Investment Fund, a collection of mutual funds.

Janus Investment Fund then hired Janus Capital Management or JCM wholly on subsidiary of Janus Capital Group, to be its investment advisor and administrator.

As required by statute, Janus Investment Fund filed prospectuses with the Securities Exchange Commission for its mutual funds.

Some of the -- those pros -- prospectuses suggested that JCM would implement policies against market timing, a trading strategy that can harm investors.

When it came to light that JCM permitted Market Timing, investors withdrew money from the Janus Investment Fund, mutual funds.

Janus Capital Group stock price also plummeted.

Respondents, stockholders of Janus Capital Group sued Janus Capital Group and JCM under SEC Rule 10b-5 which makes it unlawful to make any untrue statement of material fact in connection with the purchase or sale of securities.

The stockholders alleged that -- that the companies have made material untrue statements by participating in the writing and dissemination of the prospectuses.

The District Court dismissed the complaint for failure to state a claim.

But the Court of Appeals for the Fourth Circuit reversed holding that the stockholders had alleged sufficient facts claimed that both companies had made misleading statements.

In an opinion filed with the clerk today, we reversed the judgment of the Court of Appeals for purposes of Rule 10b-5, the maker of a statement is a person or entity with ultimate authority over the statement including its content and whether and how to communicate it.

Here, even if JCM assisted with the drafting of the prospectuses, they were Janus Investment Fund's prospectuses and that company had ultimate authority over them.

Janus Investment Fund, not JCM or Janus Capital Group made the statements.

Justice Breyer has filed a dissenting opinion, in which Justices Ginsburg, Sotomayor and Kagan joined.