## Facts

- Weis Securities, Inc., a registered broker-dealer, was required by § 17(a) of the Securities Exchange Act of 1934 and SEC regulations to keep records and file reports, including annual audited financial statements.
- Touche Ross & Co. served as Weis’s independent auditor and prepared the audited financial reports for filing with the SEC.
- After the SEC identified serious financial problems and potentially unlawful conduct at Weis, the Securities Investor Protection Corporation (SIPC) initiated a liquidation proceeding under SIPA, and a trustee (Redington) was appointed.
- The liquidation estate and SIPC funds proved insufficient to satisfy customer claims for assets left with Weis.
- SIPC and the trustee sued Touche Ross in federal court, alleging improper audits that concealed Weis’s true financial condition and contributed to customer losses, asserting theories under common law, § 17(a), and SEC regulations.

## Issues

1. Whether § 17(a) of the Securities Exchange Act of 1934 implies a private cause of action for damages by broker-dealer customers (or by SIPC and the trustee on their behalf) against the broker-dealer’s accountants for allegedly improper audits.

## Decision

- The Supreme Court reversed the Second Circuit and reinstated the district court’s dismissal.
- The Court held that § 17(a) does not create an implied private cause of action for damages.
- Because no federal damages remedy exists under § 17(a), the complaint failed to state a claim to the extent it relied on that section.

## Legal Principles

- Implied private rights of action depend on congressional intent; courts do not create damages remedies based on policy preferences or perceived enforcement needs.
- Statutory language that imposes recordkeeping and reporting duties for regulatory oversight, without rights-creating terms, does not support an implied private damages action.
- The existence of an express, carefully limited private remedy elsewhere in the same statute (e.g., § 18(a)) weighs strongly against implying additional, unmentioned private remedies.
- A statutory violation and resulting harm do not, by themselves, establish a private right to sue for damages under federal law.

## Conclusion

The Court held that § 17(a)’s broker-dealer reporting and recordkeeping regime is regulatory and enforceable by designated authorities, not a basis for a private damages suit against auditors, and it rejected an implied remedy absent clear congressional intent.


Touche Ross & Co. v. Redington, 442 U.S. 560 (1979)