Janus Capital Group, Inc. v. First Derivative Traders

Supreme Court of the United States · 2011 · Corporations

564 U.S. 135 (2011)

Updated August 1, 2026

Corporationsmaker of statementsRule 10b-5Section 10(b)maker of statementultimate authorityprimary liabilityaiding and abetting

Facts

JCG created the Janus family of mutual funds, which were organized in the separate legal entity Janus Investment Fund. Janus Investment Fund retained JCG's wholly owned subsidiary, JCM, as investment adviser and administrator, but the fund and JCM maintained legal independence, and the fund had its own board of trustees. The prospectuses for several Janus funds stated that the funds were not intended for market timing and suggested that policies would curb that practice. First Derivative alleged that JCG and JCM caused those prospectuses to be issued and that the alleged falsity affected JCG's stock price when the New York Attorney General's allegations became public.

Issue

Whether JCM, a mutual fund investment adviser, can be held liable in a private action under SEC Rule 10b-5 for false statements included in Janus Investment Fund's prospectuses. Relatedly, the question was whether JCM "made" those statements within the meaning of Rule 10b-5.

Rule

Under Rule 10b-5, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. A person or entity without such control may suggest, draft, or assist, but does not thereby "make" the statement; one who prepares or publishes a statement on behalf of another is not its maker. In the ordinary case, attribution within the statement or implicit from surrounding circumstances is strong evidence that the statement was made by, and only by, the party to whom it is attributed.

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

In Chicago, Lakefront Biotech Fund is a legally separate investment company with its own board. Its outside adviser, North Pier Advisory LLC, drafted most of the fund's prospectus language, but the board had final power to approve the text and decide whether to file it, and the prospectus was filed only in the fund's name.

In a private Rule 10b-5 action alleging that the prospectus contained a material misstatement, who is most likely the "maker" of the statement?

Explanation. For Rule 10b-5 purposes, the maker is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. Drafting assistance alone is not enough. Because the fund's board retained final authority and the filing was in the fund's name, the fund—not the adviser—made the statement. (Derived from Janus Capital Group, Inc. v. First Derivative Traders (2011).)