Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A.

Supreme Court of the United States · 1994 · Corporations

511 U.S. 164 (1994)

Updated August 1, 2026

Corporationsaiding and abetting under 10b-5Section 10(b)Rule 10b-5aiding and abettingprivate right of actionprimary liabilitymanipulative act

Facts

Central Bank served as indenture trustee for bond issues used to finance improvements at Stetson Hills. Bond covenants required the collateral land to meet a 160% value test, and AmWest provided an updated 1988 appraisal that showed values nearly unchanged from 1986 despite a declining local real estate market. Central Bank received concerns about the appraisal, had its in-house appraiser question its optimism, and agreed to delay an independent review until after the 1988 bond closing. After default on the 1988 bonds, purchasers sued and alleged that Central Bank was liable not as a primary violator, but for aiding and abetting others' § 10(b) fraud.

Issue

Does § 10(b) of the Securities Exchange Act of 1934 permit a private plaintiff to maintain a civil action against a defendant who did not itself commit a manipulative or deceptive act, but allegedly aided and abetted another's § 10(b) violation?

Rule

A private plaintiff may not maintain an aiding-and-abetting suit under § 10(b). Section 10(b) prohibits only the making of a material misstatement or omission, or the commission of a manipulative act, in connection with the purchase or sale of securities; it does not extend private civil liability to those who merely aid and abet such conduct without themselves engaging in manipulative or deceptive acts.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, Solara Transit issued notes to finance a warehouse project. Mesa Crest Bank, the collateral agent, learned from an internal reviewer that the issuer's inventory figures looked inflated, but the bank made no statements to investors and merely agreed to postpone an audit until after the sale closed. After the notes defaulted, purchasers sued the bank in a private action under § 10(b).

Are the purchasers most likely to prevail against Mesa Crest Bank?

Explanation. Private § 10(b) liability reaches only defendants who themselves commit a manipulative or deceptive act, such as making a material misstatement or omission or engaging in manipulation. Mere assistance, delay, or involvement in the transaction is not enough. The majority rejected private aiding-and-abetting liability even where the defendant allegedly knew of the fraud and substantially assisted it.