## Facts

- Janus Capital Group, Inc. (JCG) was a publicly traded asset-management company; Janus Capital Management LLC (JCM) was its wholly owned subsidiary and served as investment adviser/administrator to the Janus Investment Fund.
- The Janus Investment Fund was a separate legal entity owned by mutual fund investors and issued its own prospectuses.
- Fund prospectuses represented that the funds did not permit “market timing” and implied enforcement against it.
- Regulators later indicated the existence of undisclosed market-timing arrangements, followed by investor withdrawals and a decline in JCG’s stock price.
- JCG shareholders (through First Derivative Traders) sued JCG and JCM under § 10(b) and Rule 10b-5, alleging the misleading prospectus statements inflated JCG’s stock price.

## Issues

1. In a private Rule 10b-5(b) action, who “makes” a statement: the entity that issues it, or a separate adviser that participated in drafting and disseminating it?
2. Whether an investment adviser can be primarily liable under Rule 10b-5(b) for false statements in a client mutual fund’s prospectus when the fund is a separate legal entity.
3. Whether control-person liability under § 20(a) can stand when the alleged controlled entity is not primarily liable under Rule 10b-5.

## Decision

- The Supreme Court reversed the Fourth Circuit and reinstated dismissal for failure to state a claim.
- For Rule 10b-5 purposes, 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.
- Because the prospectuses were issued by the Janus Investment Fund and subject to the Fund’s ultimate authority, the Fund—not JCM—made the statements.
- With no primary Rule 10b-5 liability for JCM, § 20(a) control-person liability against JCG also failed.

## Legal Principles

- Rule 10b-5(b) liability in a private action attaches only to the “maker” of the statement, defined as the person or entity with ultimate authority over the statement’s content and its communication.
- Participation in drafting, editing, or disseminating another entity’s statement, without ultimate authority over it, is insufficient to constitute “making” the statement under Rule 10b-5(b).
- The implied private right of action under § 10(b) is construed narrowly; courts will not expand it in a manner that effectively recreates private aiding-and-abetting liability barred by precedent.
- Control-person liability under § 20(a) requires an underlying primary violation; absent primary liability, derivative control-person claims fail.

## Conclusion

The Court limited private Rule 10b-5(b) liability to the entity or person with ultimate authority over an alleged misstatement, holding that an investment adviser that helped prepare a mutual fund’s prospectus is not a primary violator when a separate fund controls and issues the prospectus; related § 20(a) claims fail without a primary violation.


Janus Cap. Grp., Inc. v. First Derivative Traders, 564 U.S. 135 (2011)