Secondary actors, such as lawyers, accountants, and bankers, are oftentimes critical players in securities fraud. The important question of their liability to private plaintiffs has been, and remains, one of considerable confusion. In Stoneridge Inv. Partners LLC v. Scientific-Atlanta, Inc., the U.S. Supreme Court could have, but failed to, dispel some of this confusion.
Contrary to the common understanding, Stoneridge did not foreclose liability on the part of secondary actors who manage to remain anonymous participants in securities fraud. Read carefully, Stoneridge instead held that proximity to fraud should drive the liability determination.
Although “proximity” is itself an indefinite concept, we are not without tools in deciphering it. For we have at our disposal a well-developed, long-tested method of analyzing proximity with an eye toward the just imposition of culpability: moral theology’s “principles of cooperation.” By turning to these principles, we have at our fingertips a ready-made set of factors to consider in assessing whether one’s conduct should be deemed proximate versus remote to another’s fraud.
The principles of cooperation also provide a framework around which we can organize securities fraud jurisprudence in general. For the insights gleaned from the principles regarding moral culpability in many respects parallel the conclusions reached by courts and commentators construing liability under the securities laws. Perhaps, in addition to the assistance it provides us in resolving the difficult issue of proximity, this framework could serve as a useful aid in resolving other, and future, securities fraud questions.