## Facts

- United Rentals, Inc. (URI) and its CFO allegedly structured transactions with Terex Corporation to allow URI to prematurely recognize revenue and inflate profits.
- The deals allegedly shifted the economic risks and rewards back to URI through indemnification while being recorded as sales in violation of GAAP.
- Joseph F. Apuzzo, Terex’s CFO, allegedly helped execute agreements that obscured URI’s continuing involvement and approved inflated Terex invoices used to support URI’s accounting treatment.
- The SEC alleged Apuzzo understood that disclosure of the deals’ true structure would defeat URI’s ability to recognize the reported revenue and that he acted to mask the economic reality.
- The SEC alleged Apuzzo aided and abetted URI’s violations of federal securities-law provisions governing fraud, reporting, books and records, and internal controls.

## Issues

1. In an SEC civil enforcement action for aiding and abetting, must the SEC plead and prove that the defendant’s assistance proximately caused the harm underlying the primary securities-law violation to establish “substantial assistance”?
2. What standard governs whether alleged conduct constitutes “substantial assistance” for SEC aiding-and-abetting liability?

## Decision

- The Second Circuit reversed the dismissal and remanded.
- The court held that “substantial assistance” in an SEC aiding-and-abetting claim does not require pleading or proof of proximate causation of investor harm.
- The court applied a participation-based standard: the defendant must associate with the venture, participate in it as something he wished to bring about, and seek by his actions to make it succeed.
- Accepting the complaint’s allegations as true, the court held the SEC plausibly pleaded substantial assistance because Apuzzo allegedly took affirmative steps to help implement and conceal the transactions enabling URI’s misstated financial reporting.

## Legal Principles

- SEC aiding-and-abetting liability requires proof of: (1) a primary securities-law violation; (2) the aider and abettor’s knowledge of that violation; and (3) substantial assistance in achieving the violation.
- “Substantial assistance” focuses on the defendant’s knowing participation in and support of the primary violation, not tort-style proximate causation of resulting harm.
- Allegations that a defendant knowingly structured, documented, or approved transactions and records to facilitate misstated financial reporting can satisfy substantial assistance at the pleading stage.

## Conclusion

The Second Circuit held that the SEC need not plead proximate causation to establish “substantial assistance” for aiding-and-abetting liability; it is enough to plausibly allege knowing participation aimed at helping the primary violation succeed, and the complaint against Apuzzo met that standard.


Sec. & Exch. Comm'n v. Apuzzo, 689 F.3d 204 (2d Cir. 2012)