"Bright Line," "Substantial Participation," or Something Else: Who is a Primary Violator Under Rule 10b-5?

Author(s)

Rodney D. Chrisman, Liberty UniversityFollow

Publication Date

2001

Document Type

Article

Disciplines

Law

Comments

89 KY. L.J. 201 (2001).

Abstract

This Note analyzes the competing theories currently used by courts and commentators to determine when a secondary actor’s conduct arises to the level of a primary violation under section 10(b) of the Securities and Exchange Act of 1934 and Securities and Exchange Commission rule 10b-5 on a theory of aiding and abetting primary violators. This Note proposes a workable and logical standard that can be used to differentiate a primary violation from mere aiding and abetting. Part I of the Note discusses the decision in Central Bank of Denver and the resulting dilemma that faced the lower courts in determining when a secondary actor is a primary violator. Part II provides an analytical discussion of the emergence of two tests often used to determine whether a secondary actor is a primary violator: the “bright line” and “substantial participation” tests. Finally, Part III discusses the elements of a primary violation of section 10(b) and rule 10b-5 as they relate to a secondary actor and proposes a workable and logical test to determine when a secondary actor’s conduct rises to the level of a primary violation.

Recommended Citation

Chrisman, Rodney D., ""Bright Line," "Substantial Participation," or Something Else: Who is a Primary Violator Under Rule 10b-5?" (2001). Faculty Publications and Presentations. 3.
https://digitalcommons.liberty.edu/lusol_fac_pubs/3