STONERIDGE INVESTMENT PARTNERS, LLC v. SCIENTIFIC-ATLANTA, INC., et al.

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Syllabus
STONERIDGE INVESTMENT PARTNERS, LLC v.
SCIENTIFIC-ATLANTA, INC., et al.
certiorari to the united states court of appeals for
the eighth circuit
No. 06–43. Argued October 9, 2007—Decided January 15, 2008
Alleging losses after purchasing Charter Communications, Inc., common
stock, petitioner filed suit against respondents and others under § 10(b)
of the Securities Exchange Act of 1934 and Securities and Exchange
Commission (SEC) Rule 10b–5. Acting as Charter’s customers and
suppliers, respondents had agreed to arrangements that allowed Char
ter to mislead its auditor and issue a misleading financial statement af
fecting its stock price, but they had no role in preparing or disseminat
ing the financial statement. Affirming the District Court’s dismissal of
respondents, the Eighth Circuit ruled that the allegations did not show
that respondents made misstatements relied upon by the public or vio
lated a duty to disclose. The court observed that, at most, respondents
had aided and abetted Charter’s misstatement, and noted that the pri
vate cause of action this Court has found implied in § 10(b) and Rule
10b–5, Superintendent of Ins. of N. Y. v. Bankers Life & Casualty Co.,
404 U. S. 6, 13, n. 9, does not extend to aiding and abetting a § 10(b)
violation, see Central Bank of Denver, N. A. v. First Interstate Bank of
Denver, N. A., 511 U. S. 164, 191.
Held: The § 10(b) private right of action does not reach respondents be
cause Charter investors did not rely upon respondents’ statements or
representations. Pp. 156–167.
(a) Although Central Bank prompted calls for creation of an express
cause of action for aiding and abetting, Congress did not follow this
course. Instead, in § 104 of the Private Securities Litigation Reform
Act of 1995 (PSLRA), it directed the SEC to prosecute aiders and abet
tors. Thus, the § 10(b) private right of action does not extend to aiders
and abettors. Because the conduct of a secondary actor must therefore
satisfy each of the elements or preconditions for § 10(b) liability, the
plaintiff must prove, as here relevant, reliance upon a material misrepre
sentation or omission by the defendant. Pp. 156–158.
(b) The Court has found a rebuttable presumption of reliance in two
circumstances. First, if there is an omission of a material fact by one
with a duty to disclose, the investor to whom the duty was owed need
not provide specific proof of reliance. Affiliated Ute Citizens of Utah
v. United States, 406 U. S. 128, 153–154. Second, under the fraud-on

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Syllabus
the-market doctrine, reliance is presumed when the statements at issue
become public. Neither presumption applies here: Respondents had no
duty to disclose; and their deceptive acts were not communicated to the
investing public during the relevant times. Petitioner, as a result, can
not show reliance upon any of respondents’ actions except in an indirect
chain that is too remote for liability. P. 159.
(c) Petitioner’s reference to so-called “scheme liability” does not, ab
sent a public statement, answer the objection that petitioner did not in
fact rely upon respondents’ deceptive conduct. Were the Court to
adopt petitioner’s concept of reliance—i. e., that in an efficient market
investors rely not only upon the public statements relating to a security
but also upon the transactions those statements reflect—the implied
cause of action would reach the whole marketplace in which the issuing
company does business. There is no authority for this rule. Reliance
is tied to causation, leading to the inquiry whether respondents’ decep
tive acts were immediate or remote to the injury. Those acts, which
were not disclosed to the investing public, are too remote to satisfy the
reliance requirement. It was Charter, not respondents, that misled its
auditor and filed fraudulent financial statements; nothing respondents
did made it necessary or inevitable for Charter to record the transac
tions as it did. The Court’s precedents counsel against petitioner’s at
tempt to extend the § 10(b) private cause of action beyond the securities
markets into the realm of ordinary business operations, which are gov
erned, for the most part, by state law. See, e. g., Marine Bank v.
Weaver, 455 U. S. 551, 556. The argument that there could be a reliance
finding if this were a common-law fraud action is answered by the fact
that § 10(b) does not incorporate common-law fraud into federal law, see,
e. g., SEC v. Zandford, 535 U. S. 813, 820, and should not be interpreted
to provide a private cause of action against the entire marketplace in
which the issuing company operates, cf. Blue Chip Stamps v. Manor
Drug Stores, 421 U. S. 723, 733, n. 5. Petitioner’s theory, moreover,
would put an unsupportable interpretation on Congress’ specific re
sponse to Central Bank in PSLRA § 104 by, in substance, reviving the
implied cause of action against most aiders and abettors and thereby
undermining Congress’ determination that this class of defendants
should be pursued only by the SEC. The practical consequences of
such an expansion provide a further reason to reject petitioner’s ap
proach. The extensive discovery and the potential for uncertainty and
disruption in a lawsuit could allow plaintiffs with weak claims to extort
settlements from innocent companies. See, e. g., Blue Chip, supra, at
740–741. It would also expose to such risks a new class of defendants—
overseas firms with no other exposure to U. S. securities laws—thereby
deterring them from doing business here, raising the cost of being a

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150 STONERIDGE INVESTMENT PARTNERS, LLC v.
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Syllabus
publicly traded company under U. S. law, and shifting securities offer
ings away from domestic capital markets. Pp. 159–164.
(d) Upon full consideration, the history of the § 10(b) private right of
action and the careful approach the Court has taken before proceeding
without congressional direction provide further reasons to find no liabil
ity here. The § 10(b) private cause of action is a judicial construct that
Congress did not direct in the text of the relevant statutes. See, e. g.,
Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U. S. 350,
358–359. Separation of powers provides good reason for the now
settled view that an implied cause of action exists only if the underlying
statute can be interpreted to disclose the intent to create one, see, e. g.,
Alexander v. Sandoval, 532 U. S. 275, 286–287. The decision to extend
the cause of action is thus for the Congress, not for this Court. This
restraint is appropriate in light of the PSLRA, in which Congress rati
fied the implied right of action after the Court moved away from a
broad willingness to imply such private rights, see, e. g., Merrill Lynch,
Pierce, Fenner & Smith, Inc. v. Curran, 456 U. S. 353, 381–382, and
n. 66. It is appropriate for the Court to assume that when PSLRA
§ 104 was enacted, Congress accepted the § 10(b) private right as then
defined but chose to extend it no further. See, e. g., Alexander, supra,
at 286–287. Pp. 164–166.
443 F. 3d 987, affirmed and remanded.
Kennedy, J., delivered the opinion of the Court, in which Roberts,
C. J., and Scalia, Thomas, and Alito, JJ., joined. Stevens, J., filed a
dissenting opinion, in which Souter and Ginsburg, JJ., joined, post,
p. 167. Breyer, J., took no part in the consideration or decision of the
case.
Stanley M. Grossman argued the cause for petitioner.
With him on the briefs were Marc I. Gross and Joshua B.
Silverman.
Stephen M. Shapiro argued the cause for respondents.
With him on the brief were Andrew J. Pincus, Timothy S.
Bishop, John P. Schmitz, Charles Rothfeld, J. Brett Busby,
Oscar N. Persons, Susan E. Hurd, Stephen M. Sacks, and
John C. Massaro.
Deputy Solicitor General Hungar argued the cause for
the United States as amicus curiae urging affirmance.

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151 Cite as: 552 U. S. 148 (2008)
Counsel
With him on the brief were Solicitor General Clement and
Kannon K. Shanmugam.*
*Briefs of amici curiae urging reversal were filed for the State of Ar
kansas et al. by Dustin McDaniel, Attorney General of Arkansas, and
Stanley D. Bernstein, and by the Attorneys General for their respective
States as follows: Stuart Rabner of New Jersey and Patrick C. Lynch of
Rhode Island; for the State of Ohio et al. by Marc Dann, Attorney General
of Ohio, Elise W. Porter, Acting Solicitor General, Christopher R. Geidner
and Robert J. Krummen, Deputy Solicitors, Beth A. Finnerty, Randall W.
Knutti, and Andrea L. Seidt, Assistant Attorneys General, by Greg Ab
bott, Attorney General of Texas, and David C. Mattax, and by the Attor
neys General for their respective jurisdictions as follows: Talis J. Colberg
of Alaska, Terry Goddard of Arizona, Richard Blumenthal of Connecticut,
Linda Singer of the District of Columbia, Mark J. Bennett of Hawaii, Lisa
Madigan of Illinois, Thomas J. Miller of Iowa, Gregory D. Stumbo of
Kentucky, G. Steven Rowe of Maine, Douglas F. Gansler of Maryland,
Martha Coakley of Massachusetts, Michael A. Fox of Michigan, Lori
Swanson of Minnesota, Jim Hood of Mississippi, Jeremiah W. (Jay) Nixon
of Missouri, Mike McGrath of Montana, Catherine Cortez Masto of Ne
vada, Kelly A. Ayotte of New Hampshire, Gary King of New Mexico, An
drew Cuomo of New York, Wayne Stenehjem of North Dakota, W. A. Drew
Edmondson of Oklahoma, Hardy Myers of Oregon, Roberto J. Sa´ nchez-
Ramos of Puerto Rico, Henry McMaster of South Carolina, Robert E.
Cooper, Jr., of Tennessee, Mark L. Shurtleff of Utah, William H. Sorrell
of Vermont, Darrell V. McGraw, Jr., of West Virginia, and J. B. Van Hollen
of Wisconsin; for AARP et al. by Deborah Zuckerman, Jonathan W.
Cuneo, Robert J. Cynkar, Michael G. Lenett, and Matthew Wiener; for the
American Association for Justice by Louis M. Bograd; for the California
State Teachers’ Retirement System by Steven N. Williams and Joseph W.
Cotchett; for Change to Win et al. by Patrick J. Szymanski; for Former
SEC Commissioners by Arthur R. Miller and Meyer Eisenberg; for the
Los Angeles County Employees Retirement Association et al. by Stuart
M. Grant, David L. Muir, and Peter H. Mixon, by Mr. Blumenthal, Attor
ney General of Connecticut, and by Michael A. Cardozo; for the New York
State Teachers’ Retirement System et al. by Max W. Berger; for the North
American Securities Administrators Association, Inc., by Alfred E. T.
Rusch; for the Honorable John Conyers, Jr., et al. by James Segel and
Lawranne Stewart; and for James D. Cox et al. by Jill E. Fisch, pro se.
Briefs of amici curiae urging affirmance were filed for the American
Bankers Association et al. by H. Rodgin Cohen, David H. Braff, Robert J.

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152 STONERIDGE INVESTMENT PARTNERS, LLC v.
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Opinion of the Court
Justice Kennedy delivered the opinion of the Court.
We consider the reach of the private right of action the
Court has found implied in § 10(b) of the Securities Exchange
Act of 1934, 48 Stat. 891, as amended, 15 U. S. C. § 78j(b), and
SEC Rule 10b–5, 17 CFR § 240.10b–5 (2007). In this suit
investors alleged losses after purchasing common stock.
They sought to impose liability on entities who, acting both
as customers and suppliers, agreed to arrangements that al
lowed the investors’ company to mislead its auditor and issue
Giuffra, Jr., Marc De Leeuw, Jeffrey T. Scott, and Steven J. Purcell; for
the American Institute of Certified Public Accountants by Lawrence S.
Robbins, Gary A. Orseck, Kathryn S. Zecca, and Richard I. Miller; for
the American Insurance Association et al. by John E. McKeever; for the
Attorneys’ Liability Assurance Society, Inc., by John K. Villa, Richard A.
Olderman, and Mark D. Nozette; for the Business Roundtable by Seth
P. Waxman, Louis R. Cohen, Stuart F. Delery, Robert B. McCaw, and
Christopher J. Meade; for the Chamber of Commerce of the United States
of America by Carter G. Phillips, Richard D. Bernstein, Daniel A. Mc-
Laughlin, Robert N. Hochman, Jacqueline G. Cooper, Robin S. Conrad,
and Amar D. Sarwal; for the Defense Research Institute by Jerrold J.
Ganzfried and Fiona A. Philip; for Former SEC Commissioners and Offi
cials et al. by Mark A. Perry and Amanda M. Rose; for Merrill Lynch &
Co., Inc., by Dick Thornburgh, Paul Gonson, and Glenn R. Reichardt; for
the NASDAQ Stock Market, Inc., et al. by Kathleen M. Sullivan, Daniel
H. Bromberg, and Elizabeth B. Wydra; for the National Association of
Manufacturers by George M. Newcombe, Michael J. Chepiga, Jan S.
Amundson, and Quentin Riegel; for the Organization for International
Investment et al. by Stuart J. Baskin and Herbert S. Washer; for the
Securities Industry and Financial Markets Association et al. by Walter
Dellinger, Jonathan Rosenberg, William J. Sushon, B. Andrew Bednark,
and Kevin M. Carroll; for the Washington Legal Foundation by Kenneth
W. Starr, Robert R. Gasaway, Ashley C. Parrish, Daniel J. Popeo, and
Richard A. Samp; and for Richard I. Beattie et al. by Richard W. Clary.
Briefs of amici curiae were filed for the Council of Institutional Inves
tors by Mark C. Hansen and Priya R. Aiyar; for Regents of the Univer
sity of California by William S. Lerach, Patrick J. Coughlin, Byron S.
Georgiou, Eric Alan Isaacson, and Joseph D. Daley; and for Charles W.
Adams et al. by Mr. Adams and William von Glahn, both pro se.

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Opinion of the Court
a misleading financial statement affecting the stock price.
We conclude the implied right of action does not reach the
customer/supplier companies because the investors did not
rely upon their statements or representations. We affirm
the judgment of the Court of Appeals.
I
This class-action suit by investors was filed against Char
ter Communications, Inc., in the United States District
Court for the Eastern District of Missouri. Stoneridge In
vestment Partners, LLC, a limited liability company orga
nized under the laws of Delaware, was the lead plaintiff and
is petitioner here.
Charter issued the financial statements and the securities
in question. It was a named defendant along with some of
its executives and Arthur Andersen LLP, Charter’s inde
pendent auditor during the period in question. We are con
cerned, though, with two other defendants, respondents
here. Respondents are Scientific-Atlanta, Inc., and Mo
torola, Inc. They were suppliers, and later customers, of
Charter.
For purposes of this proceeding, we take these facts, al
leged by petitioner, to be true. Charter, a cable operator,
engaged in a variety of fraudulent practices so its quarterly
reports would meet Wall Street expectations for cable sub
scriber growth and operating cashflow. The fraud included
misclassification of its customer base; delayed reporting of
terminated customers; improper capitalization of costs that
should have been shown as expenses; and manipulation of
the company’s billing cutoff dates to inflate reported reve
nues. In late 2000, Charter executives realized that, despite
these efforts, the company would miss projected operating
cashflow numbers by $15 to $20 million. To help meet the
shortfall, Charter decided to alter its existing arrangements
with respondents, Scientific-Atlanta and Motorola. Peti

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Opinion of the Court
tioner’s theory as to whether Arthur Andersen was alto
gether misled or, on the other hand, knew the structure of
the contract arrangements and was complicit to some degree,
is not clear at this stage of the case. The point, however, is
neither controlling nor significant for our present disposition,
and in our decision we assume it was misled.
Respondents supplied Charter with the digital cable con
verter (set-top) boxes that Charter furnished to its custom
ers. Charter arranged to overpay respondents $20 for each
set-top box it purchased until the end of the year, with the
understanding that respondents would return the overpay
ment by purchasing advertising from Charter. The transac
tions, it is alleged, had no economic substance; but, because
Charter would then record the advertising purchases as rev
enue and capitalize its purchase of the set top boxes, in viola
tion of generally accepted accounting principles, the transac
tions would enable Charter to fool its auditor into approving
a financial statement showing it met projected revenue and
operating cashflow numbers. Respondents agreed to the
arrangement.
So that Arthur Andersen would not discover the link be
tween Charter’s increased payments for the boxes and the
advertising purchases, the companies drafted documents to
make it appear the transactions were unrelated and con
ducted in the ordinary course of business. Following a re
quest from Charter, Scientific-Atlanta sent documents to
Charter stating—falsely—that it had increased production
costs. It raised the price for set-top boxes for the rest of
2000 by $20 per box. As for Motorola, in a written contract
Charter agreed to purchase from Motorola a specific number
of set-top boxes and pay liquidated damages of $20 for each
unit it did not take. The contract was made with the expec
tation Charter would fail to purchase all the units and pay
Motorola the liquidated damages.
To return the additional money from the set top box sales,
Scientific-Atlanta and Motorola signed contracts with Char

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ter to purchase advertising time for a price higher than fair
value. The new set-top box agreements were backdated to
make it appear that they were negotiated a month before the
advertising agreements. The backdating was important to
convey the impression that the negotiations were unconnec
ted, a point Arthur Andersen considered necessary for sepa
rate treatment of the transactions. Charter recorded the
advertising payments to inflate revenue and operating cash
flow by approximately $17 million. The inflated number was
shown on financial statements filed with the Securities and
Exchange Commission (SEC) and reported to the public.
Respondents had no role in preparing or disseminating
Charter’s financial statements. And their own financial
statements booked the transactions as a wash, under gener
ally accepted accounting principles. It is alleged respond
ents knew or were in reckless disregard of Charter’s inten
tion to use the transactions to inflate its revenues and knew
the resulting financial statements issued by Charter would
be relied upon by research analysts and investors.
Petitioner filed a securities fraud class action on behalf of
purchasers of Charter stock alleging that, by participating
in the transactions, respondents violated § 10(b) of the Secu
rities Exchange Act of 1934 and SEC Rule 10b–5.
The District Court granted respondents’ motion to dismiss
for failure to state a claim on which relief can be granted.
The United States Court of Appeals for the Eighth Circuit
affirmed. In re Charter Communications, Inc., Securities
Litigation, 443 F. 3d 987 (2006). In its view the allegations
did not show that respondents made misstatements relied
upon by the public or that they violated a duty to disclose;
and on this premise it found no violation of § 10(b) by re
spondents. Id., at 992. At most, the court observed, re
spondents had aided and abetted Charter’s misstatement of
its financial results; but, it noted, there is no private right of
action for aiding and abetting a § 10(b) violation. See Cen
tral Bank of Denver, N. A. v. First Interstate Bank of Den

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Opinion of the Court
ver, N. A., 511 U. S. 164, 191 (1994). The court also affirmed
the District Court’s denial of petitioner’s motion to amend
the complaint, as the revised pleading would not change the
court’s conclusion on the merits. 443 F. 3d, at 993.
Decisions of the Courts of Appeals are in conflict respect
ing when, if ever, an injured investor may rely upon § 10(b)
to recover from a party that neither makes a public misstate
ment nor violates a duty to disclose but does participate in
a scheme to violate § 10(b). Compare Simpson v. AOL Time
Warner Inc., 452 F. 3d 1040 (CA9 2006), with Regents of
Univ. of Cal. v. Credit Suisse First Boston (USA), Inc., 482
F. 3d 372 (CA5 2007). We granted certiorari. 549 U. S.
1304 (2007).
II
Section 10(b) of the Securities Exchange Act makes it
“unlawful for any person, directly or indirectly, by the
use of any means or instrumentality of interstate com
merce or of the mails, or of any facility of any national
securities exchange
. . . . .
“[t]o use or employ, in connection with the purchase or
sale of any security . . . any manipulative or deceptive
device or contrivance in contravention of such rules and
regulations as the Commission may prescribe as neces
sary or appropriate in the public interest or for the pro
tection of investors.” 15 U. S. C. § 78j.
The SEC, pursuant to this section, promulgated Rule 10b–5,
which makes it unlawful
“(a) To employ any device, scheme, or artifice to
defraud,
“(b) To make any untrue statement of a material fact
or to omit to state a material fact necessary in order to
make the statements made, in the light of the circum
stances under which they were made, not misleading, or

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“(c) To engage in any act, practice, or course of busi
ness which operates or would operate as a fraud or de
ceit upon any person,
“in connection with the purchase or sale of any secu
rity.” 17 CFR § 240.10b–5.
Rule 10b–5 encompasses only conduct already prohibited by
§ 10(b). United States v. O’Hagan, 521 U. S. 642, 651 (1997).
Though the text of the Securities Exchange Act does not
provide for a private cause of action for § 10(b) violations,
the Court has found a right of action implied in the words of
the statute and its implementing regulation. Superintend
ent of Ins. of N. Y. v. Bankers Life & Casualty Co., 404 U. S.
6, 13, n. 9 (1971). In a typical § 10(b) private action a plain
tiff must prove (1) a material misrepresentation or omission
by the defendant; (2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale of a
security; (4) reliance upon the misrepresentation or omission;
(5) economic loss; and (6) loss causation. See Dura Pharma
ceuticals, Inc. v. Broudo, 544 U. S. 336, 341–342 (2005).
In Central Bank, the Court determined that § 10(b) liabil
ity did not extend to aiders and abettors. The Court found
the scope of § 10(b) to be delimited by the text, which makes
no mention of aiding and abetting liability. 511 U. S., at 177.
The Court doubted the implied § 10(b) action should extend
to aiders and abettors when none of the express causes of
action in the securities Acts included that liability. Id., at
180. It added the following:
“Were we to allow the aiding and abetting action pro
posed in this case, the defendant could be liable without
any showing that the plaintiff relied upon the aider and
abettor’s statements or actions. See also Chiarella [v.
United States, 445 U. S. 222, 228 (1980)]. Allowing
plaintiffs to circumvent the reliance requirement would
disregard the careful limits on 10b–5 recovery mandated
by our earlier cases.” Ibid.

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158 STONERIDGE INVESTMENT PARTNERS, LLC v.
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Opinion of the Court
The decision in Central Bank led to calls for Congress to
create an express cause of action for aiding and abetting
within the Securities Exchange Act. Then-SEC Chairman
Arthur Levitt, testifying before the Senate Securities Sub
committee, cited Central Bank and recommended that aid
ing and abetting liability in private claims be established.
S. Hearing No. 103–759, pp. 13–14 (1994). Congress did not
follow this course. Instead, in § 104 of the Private Securities
Litigation Reform Act of 1995 (PSLRA), 109 Stat. 757, it
directed prosecution of aiders and abettors by the SEC. 15
U. S. C. § 78t(e).
The § 10(b) implied private right of action does not extend
to aiders and abettors. The conduct of a secondary actor
must satisfy each of the elements or preconditions for liabil
ity; and we consider whether the allegations here are suffi
cient to do so.
III
The Court of Appeals concluded petitioner had not alleged
that respondents engaged in a deceptive act within the reach
of the § 10(b) private right of action, noting that only mis
statements, omissions by one who has a duty to disclose, and
manipulative trading practices (where “manipulative” is a
term of art, see, e. g., Santa Fe Industries, Inc. v. Green, 430
U. S. 462, 476–477 (1977)) are deceptive within the meaning
of the Rule. 443 F. 3d, at 992. If this conclusion were read
to suggest there must be a specific oral or written statement
before there could be liability under § 10(b) or Rule 10b–5,
it would be erroneous. Conduct itself can be deceptive, as
respondents concede. In this case, moreover, respondents’
course of conduct included both oral and written statements,
such as the backdated contracts agreed to by Charter and
respondents.
A different interpretation of the holding from the Court of
Appeals opinion is that the court was stating only that any
deceptive statement or act respondents made was not action
able because it did not have the requisite proximate relation

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to the investors’ harm. That conclusion is consistent with
our own determination that respondents’ acts or statements
were not relied upon by the investors and that, as a result,
liability cannot be imposed upon respondents.
A
Reliance by the plaintiff upon the defendant’s deceptive
acts is an essential element of the § 10(b) private cause of
action. It ensures that, for liability to arise, the “requisite
causal connection between a defendant’s misrepresentation
and a plaintiff ’s injury” exists as a predicate for liability.
Basic Inc. v. Levinson, 485 U. S. 224, 243 (1988); see also
Affiliated Ute Citizens of Utah v. United States, 406 U. S.
128, 154 (1972) (requiring “causation in fact”). We have
found a rebuttable presumption of reliance in two different
circumstances. First, if there is an omission of a material
fact by one with a duty to disclose, the investor to whom the
duty was owed need not provide specific proof of reliance.
Id., at 153–154. Second, under the fraud-on-the-market doc
trine, reliance is presumed when the statements at issue be
come public. The public information is reflected in the mar
ket price of the security. Then it can be assumed that an
investor who buys or sells stock at the market price relies
upon the statement. Basic, supra, at 247.
Neither presumption applies here. Respondents had no
duty to disclose; and their deceptive acts were not communi
cated to the public. No member of the investing public had
knowledge, either actual or presumed, of respondents’ decep
tive acts during the relevant times. Petitioner, as a result,
cannot show reliance upon any of respondents’ actions except
in an indirect chain that we find too remote for liability.
B
Invoking what some courts call “scheme liability,” see,
e. g., In re Enron Corp. Securities, Derivative, & “ERISA”
Litigation, 439 F. Supp. 2d 692, 723 (SD Tex. 2006), peti

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tioner nonetheless seeks to impose liability on respondents
even absent a public statement. In our view this approach
does not answer the objection that petitioner did not in fact
rely upon respondents’ own deceptive conduct.
Liability is appropriate, petitioner contends, because re
spondents engaged in conduct with the purpose and effect of
creating a false appearance of material fact to further a
scheme to misrepresent Charter’s revenue. The argument
is that the financial statement Charter released to the public
was a natural and expected consequence of respondents’ de
ceptive acts; had respondents not assisted Charter, Charter’s
auditor would not have been fooled, and the financial state
ment would have been a more accurate reflection of Char
ter’s financial condition. That causal link is sufficient, peti
tioner argues, to apply Basic’s presumption of reliance to
respondents’ acts. See, e. g., Simpson, 452 F. 3d, at 1051–
1052; In re Parmalat Securities Litigation, 376 F. Supp. 2d
472, 509 (SDNY 2005).
In effect petitioner contends that in an efficient market
investors rely not only upon the public statements relating
to a security but also upon the transactions those statements
reflect. Were this concept of reliance to be adopted, the im
plied cause of action would reach the whole marketplace in
which the issuing company does business; and there is no
authority for this rule.
As stated above, reliance is tied to causation, leading to
the inquiry whether respondents’ acts were immediate or re
mote to the injury. In considering petitioner’s arguments,
we note § 10(b) provides that the deceptive act must be “in
connection with the purchase or sale of any security.” 15
U. S. C. § 78j(b). Though this phrase in part defines the stat
ute’s coverage rather than causation (and so we do not evalu
ate the “in connection with” requirement of § 10(b) in this
case), the emphasis on a purchase or sale of securities does
provide some insight into the deceptive acts that concerned
the enacting Congress. See Black, Securities Commentary:

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The Second Circuit’s Approach to the ‘In Connection With’
Requirement of Rule 10b–5, 53 Brooklyn L. Rev. 539, 541
(1987) (“[W]hile the ‘in connection with’ and causation re
quirements are analytically distinct, they are related to each
other, and discussion of the first requirement may merge
with discussion of the second”). In all events we conclude
respondents’ deceptive acts, which were not disclosed to the
investing public, are too remote to satisfy the requirement
of reliance. It was Charter, not respondents, that misled
its auditor and filed fraudulent financial statements; nothing
respondents did made it necessary or inevitable for Charter
to record the transactions as it did.
Petitioner invokes the private cause of action under § 10(b)
and seeks to apply it beyond the securities markets—the
realm of financing business—to purchase and supply con
tracts—the realm of ordinary business operations. The lat
ter realm is governed, for the most part, by state law. It is
true that if business operations are used, as alleged here, to
affect securities markets, the SEC enforcement power may
reach the culpable actors. It is true as well that a dynamic,
free economy presupposes a high degree of integrity in all of
its parts, an integrity that must be underwritten by rules
enforceable in fair, independent, accessible courts. Were
the implied cause of action to be extended to the practices
described here, however, there would be a risk that the fed
eral power would be used to invite litigation beyond the im
mediate sphere of securities litigation and in areas already
governed by functioning and effective state-law guarantees.
Our precedents counsel against this extension. See Marine
Bank v. Weaver, 455 U. S. 551, 556 (1982) (“Congress, in
enacting the securities laws, did not intend to provide a
broad federal remedy for all fraud”); Santa Fe, 430 U. S., at
479–480 (“There may well be a need for uniform federal fi
duciary standards . . . . But those standards should not be
supplied by judicial extension of § 10(b) and Rule 10b–5 to
‘cover the corporate universe’ ” (quoting Cary, Federalism

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and Corporate Law: Reflections Upon Delaware, 83 Yale L. J.
663, 700 (1974))). Though § 10(b) is “not ‘limited to preserv
ing the integrity of the securities markets,’ ” Bankers Life,
404 U. S., at 12, it does not reach all commercial transactions
that are fraudulent and affect the price of a security in
some attenuated way.
These considerations answer as well the argument that if
this were a common-law action for fraud there could be
a finding of reliance. Even if the assumption is correct,
it is not controlling. Section 10(b) does not incorporate
common-law fraud into federal law. See, e. g., SEC v. Zand
ford, 535 U. S. 813, 820 (2002) (“[Section 10(b)] must not be
construed so broadly as to convert every common-law fraud
that happens to involve securities into a violation”); Central
Bank, 511 U. S., at 184 (“Even assuming . . . a deeply rooted
background of aiding and abetting tort liability, it does not
follow that Congress intended to apply that kind of liability
to the private causes of action in the securities Acts”); see
also Dura, 544 U. S., at 341. Just as § 10(b) “is surely badly
strained when construed to provide a cause of action . . . to
the world at large,” Blue Chip Stamps v. Manor Drug
Stores, 421 U. S. 723, 733, n. 5 (1975), it should not be inter
preted to provide a private cause of action against the entire
marketplace in which the issuing company operates.
Petitioner’s theory, moreover, would put an unsupportable
interpretation on Congress’ specific response to Central
Bank in § 104 of the PSLRA. Congress amended the se
curities laws to provide for limited coverage of aiders and
abettors. Aiding and abetting liability is authorized in ac
tions brought by the SEC but not by private parties. See
15 U. S. C. § 78t(e). Petitioner’s view of primary liability
makes any aider and abettor liable under § 10(b) if he or she
committed a deceptive act in the process of providing assist
ance. Reply Brief for Petitioner 6, n. 2; Tr. of Oral Arg. 24.
Were we to adopt this construction of § 10(b), it would revive
in substance the implied cause of action against all aiders

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and abettors except those who committed no deceptive act in
the process of facilitating the fraud; and we would undermine
Congress’ determination that this class of defendants should
be pursued by the SEC and not by private litigants. See
Alexander v. Sandoval, 532 U. S. 275, 290 (2001) (“The ex
press provision of one method of enforcing a substantive rule
suggests that Congress intended to preclude others”); FDA
v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 143
(2000) (“At the time a statute is enacted, it may have a range
of plausible meanings. Over time, however, subsequent acts
can shape or focus those meanings”); see also Seatrain Ship
building Corp. v. Shell Oil Co., 444 U. S. 572, 596 (1980)
(“[W]hile the views of subsequent Congresses cannot over
ride the unmistakable intent of the enacting one, such views
are entitled to significant weight, and particularly so when
the precise intent of the enacting Congress is obscure” (cita
tions omitted)).
This is not a case in which Congress has enacted a regula
tory statute and then has accepted, over a long period of
time, broad judicial authority to define substantive standards
of conduct and liability. Cf. Leegin Creative Leather Prod
ucts, Inc. v. PSKS, Inc., 551 U. S. 877, 899 (2007). And in
accord with the nature of the cause of action at issue here,
we give weight to Congress’ amendment to the Act restoring
aiding and abetting liability in certain cases but not others.
The amendment, in our view, supports the conclusion that
there is no liability.
The practical consequences of an expansion, which the
Court has considered appropriate to examine in circum
stances like these, see Virginia Bankshares, Inc. v. Sand
berg, 501 U. S. 1083, 1104–1105 (1991); Blue Chip, 421 U. S.,
at 737, provide a further reason to reject petitioner’s ap
proach. In Blue Chip, the Court noted that extensive dis
covery and the potential for uncertainty and disruption in a
lawsuit allow plaintiffs with weak claims to extort settle
ments from innocent companies. Id., at 740–741. Adoption

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of petitioner’s approach would expose a new class of defend
ants to these risks. As noted in Central Bank, contracting
parties might find it necessary to protect against these
threats, raising the costs of doing business. See 511 U. S.,
at 189. Overseas firms with no other exposure to our secu
rities laws could be deterred from doing business here. See
Brief for Organization for International Investment et al. as
Amici Curiae 17–20. This, in turn, may raise the cost of
being a publicly traded company under our law and shift
securities offerings away from domestic capital markets.
Brief for NASDAQ Stock Market, Inc., et al. as Amici Cu
riae 12–14.
C
The history of the § 10(b) private right and the careful ap
proach the Court has taken before proceeding without con
gressional direction provide further reasons to find no liabil
ity here. The § 10(b) private cause of action is a judicial
construct that Congress did not enact in the text of the rele
vant statutes. See Lampf, Pleva, Lipkind, Prupis & Peti
grow v. Gilbertson, 501 U. S. 350, 358–359 (1991); Blue Chip,
supra, at 729. Though the rule once may have been other
wise, see J. I. Case Co. v. Borak, 377 U. S. 426, 432–433 (1964),
it is settled that there is an implied cause of action only if
the underlying statute can be interpreted to disclose the in
tent to create one, see, e. g., Alexander, supra, at 286–287;
Virginia Bankshares, supra, at 1102; Touche Ross & Co. v.
Redington, 442 U. S. 560, 575 (1979). This is for good rea
son. In the absence of congressional intent the Judiciary’s
recognition of an implied private right of action
“necessarily extends its authority to embrace a dispute
Congress has not assigned it to resolve. This runs con
trary to the established principle that ‘[t]he jurisdiction
of the federal courts is carefully guarded against expan
sion by judicial interpretation . . . ,’ American Fire &
Cas[ualty] Co. v. Finn, 341 U. S. 6, 17 (1951), and con

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flicts with the authority of Congress under Art. III to
set the limits of federal jurisdiction.” Cannon v. Uni
versity of Chicago, 441 U. S. 677, 746–747 (1979) (Powell,
J., dissenting) (citations and footnote omitted).
The determination of who can seek a remedy has significant
consequences for the reach of federal power. See Wilder
v. Virginia Hospital Assn., 496 U. S. 498, 509, n. 9 (1990)
(requirement of congressional intent “reflects a concern,
grounded in separation of powers, that Congress rather than
the courts controls the availability of remedies for violations
of statutes”).
Concerns with the judicial creation of a private cause of
action caution against its expansion. The decision to extend
the cause of action is for Congress, not for us. Though it
remains the law, the § 10(b) private right should not be ex
tended beyond its present boundaries. See Virginia Bank
shares, supra, at 1102 (“[T]he breadth of the [private right
of action] once recognized should not, as a general matter,
grow beyond the scope congressionally intended”); see also
Central Bank, supra, at 173 (determining that the scope of
conduct prohibited is limited by the text of § 10(b)).
This restraint is appropriate in light of the PSLRA, which
imposed heightened pleading requirements and a loss causa
tion requirement upon “any private action” arising from the
Securities Exchange Act. See 15 U. S. C. § 78u–4(b). It is
clear these requirements touch upon the implied right of ac
tion, which is now a prominent feature of federal securities
regulation. See Merrill Lynch, Pierce, Fenner & Smith
Inc. v. Dabit, 547 U. S. 71, 81–82 (2006); Dura, 544 U. S., at
345–346; see also S. Rep. No. 104–98, pp. 4–5 (1995) (recog
nizing the § 10(b) implied cause of action, and indicating the
PSLRA was intended to have “Congress . . . reassert its
authority in this area”); id., at 26 (indicating the pleading
standards covered § 10(b) actions). Congress thus ratified
the implied right of action after the Court moved away from
a broad willingness to imply private rights of action. See

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Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456
U. S. 353, 381–382, and n. 66 (1982); cf. Borak, supra, at 433.
It is appropriate for us to assume that when § 78u–4 was
enacted, Congress accepted the § 10(b) private cause of ac
tion as then defined but chose to extend it no further.
IV
Secondary actors are subject to criminal penalties, see,
e. g., 15 U. S. C. § 78ff, and civil enforcement by the SEC,
see, e. g., § 78t(e). The enforcement power is not toothless.
Since September 30, 2002, SEC enforcement actions have
collected over $10 billion in disgorgement and penalties,
much of it for distribution to injured investors. See SEC,
2007 Performance and Accountability Report, p. 26, http://
www.sec.gov/about/secpar2007.shtml (as visited Jan. 2, 2008,
and available in Clerk of Court’s case file). And in this case
both parties agree that criminal penalties are a strong deter
rent. See Brief for Respondents 48; Reply Brief for Peti
tioner 17. In addition some state securities laws permit
state authorities to seek fines and restitution from aiders and
abettors. See, e. g., Del. Code Ann., Tit. 6, § 7325 (2005).
All secondary actors, furthermore, are not necessarily im
mune from private suit. The securities statutes provide an
express private right of action against accountants and un
derwriters in certain circumstances, see 15 U. S. C. § 77k, and
the implied right of action in § 10(b) continues to cover
secondary actors who commit primary violations, Central
Bank, 511 U. S., at 191.
Here respondents were acting in concert with Charter in
the ordinary course as suppliers and, as matters then evolved
in the not so ordinary course, as customers. Unconventional
as the arrangement was, it took place in the marketplace for
goods and services, not in the investment sphere. Charter
was free to do as it chose in preparing its books, conferring
with its auditor, and preparing and then issuing its financial
statements. In these circumstances the investors cannot be

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said to have relied upon any of respondents’ deceptive acts
in the decision to purchase or sell securities; and as the requi
site reliance cannot be shown, respondents have no liability
to petitioner under the implied right of action. This conclu
sion is consistent with the narrow dimensions we must give
to a right of action Congress did not authorize when it first
enacted the statute and did not expand when it revisited
the law.
The judgment of the Court of Appeals is affirmed, and the
case is remanded for further proceedings consistent with
this opinion.
It is so ordered.
Justice Breyer took no part in the consideration or deci
sion of this case.
Justice Stevens, with whom Justice Souter and Jus
tice Ginsburg join, dissenting.
Charter Communications, Inc., inflated its revenues by $17
million in order to cover up a $15 to $20 million expected
cashflow shortfall. It could not have done so absent the
knowingly fraudulent actions of Scientific-Atlanta, Inc., and
Motorola, Inc. Investors relied on Charter’s revenue state
ments in deciding whether to invest in Charter and in doing
so relied on respondents’ fraud, which was itself a “deceptive
device” prohibited by § 10(b) of the Securities Exchange Act
of 1934. 15 U. S. C. § 78j(b). This is enough to satisfy the
requirements of § 10(b) and enough to distinguish this case
from Central Bank of Denver, N. A. v. First Interstate Bank
of Denver, N. A., 511 U. S. 164 (1994).
The Court seems to assume that respondents’ alleged con
duct could subject them to liability in an enforcement pro
ceeding initiated by the Government, ante, at 166, but never
theless concludes that they are not subject to liability in a
private action brought by injured investors because they are,
at most, guilty of aiding and abetting a violation of § 10(b),

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rather than an actual violation of the statute. While that
conclusion results in an affirmance of the judgment of the
Court of Appeals, it rests on a rejection of that court’s rea
soning. Furthermore, while the Court frequently refers to
petitioner’s attempt to “expand” the implied cause of ac
tion 1—a conclusion that begs the question of the contours of
that cause of action—it is today’s decision that results in a
significant departure from Central Bank.
The Court’s conclusion that no violation of § 10(b) giving
rise to a private right of action has been alleged in this case
rests on two faulty premises: (1) the Court’s overly broad
reading of Central Bank, and (2) the view that reliance re
quires a kind of super-causation—a view contrary to both
the Securities and Exchange Commission’s (SEC) position in
a recent Ninth Circuit case 2 and our holding in Basic Inc.
v. Levinson, 485 U. S. 224 (1988). These two points merit
separate discussion.
I
The Court of Appeals incorrectly based its decision on the
view that “[a] device or contrivance is not ‘deceptive,’ within
the meaning of § 10(b), absent some misstatement or a failure
to disclose by one who has a duty to disclose.” In re Charter
Communications, Inc., Securities Litigation, 443 F. 3d 987,
992 (CA8 2006). The Court correctly explains why the stat
ute covers nonverbal as well as verbal deceptive conduct.
Ante, at 158. The allegations in this case—that respondents
1 See ante, at 161 (“[w]ere the implied cause of action to be extended to
the practices described here . . . ”); ante, at 163 (“[t]he practical con
sequences of an expansion”); ante, at 165 (“Concerns with the judicial
creation of a private cause of action caution against its expansion. The
decision to extend the cause of action is for the Congress, not for us”).
2 See Brief for SEC as Amicus Curiae in Simpson v. AOL Time Warner
Inc., No. 04–55665 (CA9), p. 21 (“The reliance requirement is satisfied
where a plaintiff relies on a material deception flowing from a defendant’s
deceptive act, even though the conduct of other participants in the fraudu
lent scheme may have been a subsequent link in the causal chain leading
to the plaintiff ’s securities transaction”).

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produced documents falsely claiming costs had risen and
signed contracts they knew to be backdated in order to dis
guise the connection between the increase in costs and the
purchase of advertising—plainly describe “deceptive de
vices” under any standard reading of the phrase.
What the Court fails to recognize is that this case is criti
cally different from Central Bank because the bank in that
case did not engage in any deceptive act and, therefore, did
not itself violate § 10(b). The Court sweeps aside any dis
tinction, remarking that holding respondents liable would
“revive in substance the implied cause of action against all
aiders and abettors except those who committed no decep
tive act in the process of facilitating the fraud.” Ante,
at 162–163. But the fact that Central Bank engaged in no
deceptive conduct whatsoever—in other words, that it was
at most an aider and abettor—sharply distinguishes Central
Bank from cases that do involve allegations of such conduct.
511 U. S., at 167 (stating that the question presented was
“whether private civil liability under § 10(b) extends as well
to those who do not engage in the manipulative or deceptive
practice, but who aid and abet the violation”).
The Central Bank of Denver was the indenture trustee for
bonds issued by a public authority and secured by liens on
property in Colorado Springs. After default, purchasers of
$2.1 million of those bonds sued the underwriters, alleging
violations of § 10(b); they also named Central Bank as a de
fendant, contending that the bank’s delay in reviewing a sus
picious appraisal of the value of the security made it liable
as an aider and abettor. Id., at 167–168. The facts of this
case would parallel those of Central Bank if respondents
had, for example, merely delayed sending invoices for set-top
boxes to Charter. Conversely, the facts in Central Bank
would mirror those in the case before us today if the bank
had knowingly purchased real estate in wash transactions
at above-market prices in order to facilitate the appraiser’s
overvaluation of the security. Central Bank, thus, poses no

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obstacle to petitioner’s argument that it has alleged a cause
of action under § 10(b).
II
The Court’s next faulty premise is that petitioner is re
quired to allege that Scientific-Atlanta and Motorola made it
“necessary or inevitable for Charter to record the transac
tions as it did,” ante, at 161, in order to demonstrate reliance.
Because the Court of Appeals did not base its holding on
reliance grounds, see 443 F. 3d, at 992, the fairest course to
petitioner would be for the majority to remand to the Court
of Appeals to determine whether petitioner properly alleged
reliance, under a correct view of what § 10(b) covers.3 Be
cause the Court chooses to rest its holding on an absence of
reliance, a response is required.
In Basic Inc., 485 U. S., at 243, we stated that “[r]eliance
provides the requisite causal connection between a defend
ant’s misrepresentation and a plaintiff ’s injury. ” The
Court’s view of the causation required to demonstrate reli
ance is unwarranted and without precedent.
In Basic Inc., we held that the “fraud-on-the-market” the
ory provides adequate support for a presumption in private
securities actions that shareholders (or former shareholders)
in publicly traded companies rely on public material mis
statements that affect the price of the company’s stock. Id.,
at 248. The holding in Basic is surely a sufficient response
to the argument that a complaint alleging that deceptive acts
3 Though respondents did argue to the Court of Appeals that reliance
was lacking, see Brief for Appellee Motorola, Inc., in No. 05–1974 (CA8),
p. 15, that argument was quite short and was based on an erroneously
broad reading of Central Bank of Denver, N. A. v. First Interstate Bank
of Denver, N. A., 511 U. S. 164 (1994), as discussed, supra, at 169 and this
page. The Court of Appeals mentioned reliance only once, stating that
respondents “did not issue any misstatement relied upon by the investing
public.” 443 F. 3d, at 992. Furthermore, that statement was made in
the context of the Court of Appeals’ holding that a deceptive act must be
a misstatement or omission—a holding which the Court unanimously
rejects.

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which had a material effect on the price of a listed stock
should be dismissed because the plaintiffs were not subjec
tively aware of the deception at the time of the securities’
purchase or sale. This Court has not held that investors
must be aware of the specific deceptive act which violates
§ 10b to demonstrate reliance.
The Court is right that a fraud-on-the-market presumption
coupled with its view on causation would not support peti
tioner’s view of reliance. The fraud-on-the-market pre
sumption helps investors who cannot demonstrate that they,
themselves, relied on fraud that reached the market. But
that presumption says nothing about causation from the
other side: what an individual or corporation must do in
order to have “caused” the misleading information that
reached the market. The Court thus has it backwards when
it first addresses the fraud-on-the-market presumption,
rather than the causation required. See ante, at 159. The
argument is not that the fraud-on-the-market presumption is
enough standing alone, but that a correct view of causation
coupled with the presumption would allow petitioner to
plead reliance.
Lower courts have correctly stated that the causation nec
essary to demonstrate reliance is not a difficult hurdle to
clear in a private right of action under § 10(b). Reliance is
often equated with “ ‘transaction causation.’ ” Dura Phar
maceuticals, Inc. v. Broudo, 544 U. S. 336, 341, 342 (2005).
Transaction causation, in turn, is often defined as requiring
an allegation that but for the deceptive act, the plaintiff
would not have entered into the securities transaction. See,
e. g., Lentell v. Merrill Lynch & Co., 396 F. 3d 161, 172 (CA2
2005); Binder v. Gillespie, 184 F. 3d 1059, 1065–1066 (CA9
1999).
Even if but-for causation, standing alone, is too weak to
establish reliance, petitioner has also alleged that respond
ents proximately caused Charter’s misstatement of income;
petitioner has alleged that respondents knew their deceptive

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acts would be the basis for statements that would influence
the market price of Charter stock on which shareholders
would rely. Second Amended Consolidated Class Action
Complaint ¶¶ 8, 98, 100, 109, App. 19a, 55a–56a, 59a. Thus,
respondents’ acts had the foreseeable effect of causing peti
tioner to engage in the relevant securities transactions.
The Restatement (Second) of Torts § 533, pp. 72–73 (1977),
provides that “[t]he maker of a fraudulent misrepresentation
is subject to liability . . . if the misrepresentation, although
not made directly to the other, is made to a third person and
the maker intends or has reason to expect that its terms will
be repeated or its substance communicated to the other.”
The sham transactions described in the complaint in this case
had the same effect on Charter’s profit and loss statement as
a false entry directly on its books that included $17 million
of gross revenues that had not been received. And respond
ents are alleged to have known that the outcome of their
fraudulent transactions would be communicated to investors.
The Court’s view of reliance is unduly stringent and un
moored from authority. The Court first says that if petition
er’s concept of reliance is adopted the implied cause of action
“would reach the whole marketplace in which the issuing
company does business.” Ante, at 160. The answer to that
objection is, of course, that liability only attaches when the
company doing business with the issuing company has itself
violated § 10(b).4 The Court next relies on what it views as
a strict division between the “realm of financing business”
and the “ordinary business operations.” Ante, at 161. But
petitioner’s position does not merge the two: A corporation
engaging in a business transaction with a partner who trans
mits false information to the market is only liable where the
4 Because the kind of sham transactions alleged in this complaint are
unquestionably isolated departures from the ordinary course of business
in the American marketplace, it is hyperbolic for the Court to conclude
that petitioner’s concept of reliance would authorize actions “against the
entire marketplace in which the issuing company operates.” Ante, at 162.

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corporation itself violates § 10(b). Such a rule does not in
vade the province of “ordinary” business transactions.
The majority states that “[s]ection 10(b) does not incorpo
rate common-law fraud into federal law,” citing SEC v. Zand
ford, 535 U. S. 813 (2002). Ante, at 162. Of course, not
every common-law fraud action that happens to touch upon
securities is an action under § 10(b), but the Court’s opinion
in Zandford did not purport to jettison all reference to
common-law fraud doctrines from § 10(b) cases. In fact, our
prior cases explained that to the extent that “the antifraud
provisions of the securities laws are not coextensive with
common-law doctrines of fraud,” it is because common
law fraud doctrines might be too restrictive. Herman &
MacLean v. Huddleston, 459 U. S. 375, 388–389 (1983).
“Indeed, an important purpose of the federal securities stat
utes was to rectify perceived deficiencies in the available
common-law protections by establishing higher standards of
conduct in the securities industry.” Id., at 389. I, thus, see
no reason to abandon common-law approaches to causation
in § 10(b) cases.
Finally, the Court relies on the course of action Congress
adopted after our decision in Central Bank to argue that
siding with petitioner on reliance would run contrary to con
gressional intent. Senate hearings on Central Bank were
held within one month of our decision.5 Less than one year
later, Senators Dodd and Domenici introduced S. 240, which
became the Private Securities Litigation Reform Act of 1995
(PSLRA), 109 Stat. 737.6 Congress stopped short of undo
ing Central Bank entirely, instead adopting a compromise
which restored the authority of the SEC to enforce aiding
and abetting liability.7 A private right of action based on
5 See S. Rep. No. 104–98, p. 2 (1995) (hereinafter S. Rep.).
6 Id., at 1.
7 The opinion in Central Bank discussed only private remedies, but its
rationale—that the text of § 10(b) did not cover aiding and abetting—obvi
ously limited the authority of public enforcement agencies. See 511 U. S.,

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aiding and abetting violations of § 10(b) was not, however,
included in the PSLRA,8 despite support from Senator Dodd
and members of the Senate Subcommittee on Securities.9
This compromise surely provides no support for extending
Central Bank in order to immunize an undefined class of ac
tual violators of § 10(b) from liability in private litigation.
Indeed, as Members of Congress—including those who re
jected restoring a private cause of action against aiders and
abettors—made clear, private litigation under § 10(b) contin
ues to play a vital role in protecting the integrity of our
securities markets.10 That Congress chose not to restore
at 199–200 (Stevens, J., dissenting); see also S. Rep., at 19 (“The Commit
tee does, however, grant the SEC express authority to bring actions seek
ing injunctive relief or money damages against persons who knowingly
aid and abet primary violators of the securities laws”).
8 PSLRA, § 104, 109 Stat. 757; see also S. Rep., at 19 (“The Committee
believes that amending the 1934 Act to provide explicitly for private aiding
and abetting liability actions under Section 10(b) would be contrary to
S. 240’s goal of reducing meritless securities litigation”).
9 See id., at 51 (additional views of Sen. Dodd) (“I am pleased that the
Committee bill grants the Securities and Exchange Commission explicit
authority to bring actions against those who knowingly aid and abet pri
mary violators. However, I remain concerned about liability in private
actions and will continue work with other Committee members on this
issue as we move to floor consideration”). Senators Sarbanes, Boxer, and
Bryan also submitted additional views in which they stated that “[w]hile
the provision in the bill is of some help, the deterrent effect of the securi
ties laws would be strengthened if aiding and abetting liability were re
stored in private actions as well.” Id., at 49.
10 Id., at 8 (“The success of the U. S. securities markets is largely the
result of a high level of investor confidence in the integrity and efficiency
of our markets. The SEC enforcement program and the availability of
private rights of action together provide a means for defrauded investors
to recover damages and a powerful deterrent against violations of the
securities laws”); see also Bateman Eichler, Hill Richards, Inc. v. Berner,
472 U. S. 299, 310 (1985) (“Moreover, we repeatedly have emphasized that
implied private actions provide ‘a most effective weapon in the enforce
ment’ of the securities laws and are ‘a necessary supplement to Commis
sion action’ ”); Brief for Former SEC Commissioners as Amici Curiae 4
(“[L]iability [of the kind at issue here] neither results in undue liability

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175 Cite as: 552 U. S. 148 (2008)
Stevens, J., dissenting
the aiding and abetting liability removed by Central Bank
does not mean that Congress wanted to exempt from liability
the broader range of conduct that today’s opinion excludes.
The Court is concerned that such liability would deter
overseas firms from doing business in the United States or
“shift securities offerings away from domestic capital mar
kets.” Ante, at 164. But liability for those who violate
§ 10(b) “will not harm American competitiveness; in fact, in
vestor faith in the safety and integrity of our markets is their
strength. The fact that our markets are the safest in the
world has helped make them the strongest in the world.”
Brief for Former SEC Commissioners as Amici Curiae 9.
Accordingly, while I recognize that the Central Bank opin
ion provides a precedent for judicial policymaking decisions
in this area of the law, I respectfully dissent from the Court’s
continuing campaign to render the private cause of action
under § 10(b) toothless. I would reverse the decision of the
Court of Appeals.
III
While I would reverse for the reasons stated above, I must
also comment on the importance of the private cause of ac
tion that Congress implicitly authorized when it enacted the
Securities Exchange Act of 1934. A theme that underlies
the Court’s analysis is its mistaken hostility toward the
§ 10(b) private cause of action.11 Ante, at 164–165. The
Court’s current view of implied causes of action is that they
exposure for non-issuers, nor an undue burden upon capital formation.
Holding liable wrongdoers who actively engage in fraudulent conduct that
lacks a legitimate business purpose does not hinder, but rather enhances,
the integrity of our markets and our economy. We believe that the integ
rity of our securities markets is their strength. Investors, both domestic
and foreign, trust that fraud is not tolerated in our nation’s securities
markets and that strong remedies exist to deter and protect against fraud
and to recompense investors when it occurs”).
11 The Court does concede that Congress has now ratified the private
cause of action in the PSLRA. See ante, at 165.

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176 STONERIDGE INVESTMENT PARTNERS, LLC v.
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are merely a “relic” of our prior “heady days.” Correc
tional Services Corp. v. Malesko, 534 U. S. 61, 75 (2001)
(Scalia, J., concurring). Those “heady days” persisted for
200 years.
During the first two centuries of this Nation’s history
much of our law was developed by judges in the common-law
tradition. A basic principle animating our jurisprudence
was enshrined in state constitution provisions guaranteeing,
in substance, that “every wrong shall have a remedy.” 12
12 Today, the guarantee of a remedy for every injury appears in nearly
three-quarters of state constitutions. Ala. Const., Art. I, § 13; Ark.
Const., Art. 2, § 13; Colo. Const., Art. II, § 6; Conn. Const., Art. I, § 10; Del.
Const., Art. I, § 9; Fla. Const., Art. I, § 21; Idaho Const., Art. I, § 18; Ill.
Const., Art. I, § 12; Ind. Const., Art. I, § 12; Kan. Const., Bill of Rights,
§ 18; Ky. Const., § 14; La. Const., Art. I, § 22; Me. Const., Art. I, § 19; Md.
Const., Declaration of Rights, Art. 19; Mass. Const., pt. I, Art. 11; Minn.
Const., Art. 1, § 8; Miss. Const., Art. III, § 24; Mo. Const., Art. I, § 14;
Mont. Const., Art. II, § 16; Neb. Const., Art. I, § 13; N. H. Const., pt. I,
Art. 14; N. C. Const., Art. I, § 18; N. D. Const., Art. I, § 9; Ohio Const.,
Art. I, § 16; Okla. Const., Art. 2, § 6; Ore. Const., Art. I, § 10; Pa. Const.,
Art. I, § 11; R. I. Const., Art. I, § 5; S. C. Const., Art. I, § 9; S. D. Const.,
Art. VI, § 20; Tenn. Const., Art. I, § 17; Tex. Const., Art. I, § 13; Utah
Const., Art. I, § 11; Vt. Const., ch. I, Art. 4; W. Va. Const., Art. III, § 17;
Wis. Const., Art. I, § 9; Wyo. Const., Art. I, § 8; see also Phillips, The
Constitutional Right to a Remedy, 78 N. Y. U. L. Rev. 1309, 1310, n. 6
(2003) (hereinafter Phillips).
The concept of a remedy for every wrong most clearly emerged from
Sir Edward Coke’s scholarship on Magna Carta. See 1 Second Part of the
Institutes of the Laws of England (1797). At the time of the ratification of
the United States Constitution, Delaware, Massachusetts, Maryland, New
Hampshire, and North Carolina had all adopted constitutional provisions
reflecting the provision in Coke’s scholarship. Del. Declaration of Rights
and Fundamental Rules § 12 (1776), reprinted in 2 W. Swindler, Sources
and Documents of United States Constitutions 198 (1973) (hereinafter
Swindler); Mass. Const., pt. I, Art. XI (1780), reprinted in 3 Federal and
State Constitutions, Colonial Charters, and Other Organic Laws 1891 (F.
Thorpe ed. 1909) (reprinted 1993) (hereinafter Thorpe); Md. Const., Decla
ration of Rights, Art. XVII (1776), in id., at 1688; N. H. Const., Art. XIV
(1784), in 4 id., at 2455; N. C. Const., Declaration of Rights, Art. XIII
(1776), in 5 id., at 2787, 2788; see also Phillips 1323–1324. Pennsylvania’s
Constitution of 1790 contains a guarantee. Pa. Const., Art. IX, § 11, in 5

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177 Cite as: 552 U. S. 148 (2008)
Stevens, J., dissenting
Fashioning appropriate remedies for the violation of rules of
law designed to protect a class of citizens was the routine
business of judges. See Marbury v. Madison, 1 Cranch 137,
166 (1803). While it is true that in the early days state law
was the source of most of those rules, throughout our his
tory—until 1975—the same practice prevailed in federal
courts with regard to federal statutes that left questions of
remedy open for judges to answer. In Texas & Pacific R.
Co. v. Rigsby, 241 U. S. 33, 39 (1916), this Court stated the
following:
“A disregard of the command of the statute is a wrongful
act, and where it results in damage to one of the class
for whose especial benefit the statute was enacted, the
right to recover the damages from the party in default
is implied, according to a doctrine of the common law
expressed in 1 Com. Dig., tit. Action upon Statute (F),
in these words: ‘So, in every case, where a statute
enacts, or prohibits a thing for the benefit of a person,
he shall have a remedy upon the same statute for the
thing enacted for his advantage, or for the recompense
of a wrong done to him contrary to the said law.’ (Per
Holt, C. J., Anon., 6 Mod. 26, 27.)”
Judge Friendly succinctly described the post-Rigsby, pre
1975 practice in his opinion in Leist v. Simplot, 638 F. 2d 283,
298–299 (CA2 1980):
“Following Rigsby the Supreme Court recognized im
plied causes of action on numerous occasions, see, e. g.,
Wyandotte Transportation Co. v. United States, 389
U. S. 191 . . . (1967) (sustaining implied cause of action
by United States for damages under Rivers and Harbors
Act for removing negligently sunk vessel despite ex
press remedies of in rem action and criminal penalties);
United States v. Republic Steel Corp., 362 U. S. 482 . . .
(1960) (sustaining implied cause of action by United
Thorpe 3101. Connecticut’s 1818 Constitution, Art. I, § 12, contained such
a provision. Reprinted in 2 Swindler 145.

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States for an injunction under the Rivers and Harbors
Act); Tunstall v. Locomotive Firemen & Enginemen,
323 U. S. 210 . . . (1944) (sustaining implied cause of ac
tion by union member against union for discrimination
among members despite existence of Board of Media
tion); Sullivan v. Little Hunting Park, Inc., 396 U. S.
229 . . . (1969) (sustaining implied private cause of action
under 42 U. S. C. § 1982); Allen v. State Board of Elec
tions, 393 U. S. 544 . . . (1969) (sustaining implied private
cause of action under § 5 of the Voting Rights Act de
spite the existence of a complex regulatory scheme and
explicit rights of action in the Attorney General); and,
of course, the aforementioned decisions under the secu
rities laws. As the Supreme Court itself has recog
nized, the period of the 1960’s and early 1970’s was one
in which the ‘Court had consistently found implied reme
dies.’ Cannon v. University of Chicago, 441 U. S. 677,
698 . . . (1979).”
In a law-changing opinion written by Justice Brennan in
1975, the Court decided to modify its approach to private
causes of action. Cort v. Ash, 422 U. S. 66 (constraining
courts to use a strict four-factor test to determine whether
Congress intended a private cause of action). A few years
later, in Cannon v. University of Chicago, 441 U. S. 677
(1979), we adhered to the strict approach mandated by Cort
v. Ash in 1975, but made it clear that “our evaluation of con
gressional action in 1972 must take into account its contem
porary legal context.” 441 U. S., at 698–699. That context
persuaded the majority that Congress had intended the
courts to authorize a private remedy for members of the pro
tected class.
Until Central Bank, the federal courts continued to en
force a broad implied cause of action for the violation of stat
utes enacted in 1933 and 1934 for the protection of investors.
As Judge Friendly explained:

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“During the late 1940’s, the 1950’s, the 1960’s and the
early 1970’s there was widespread, indeed almost gen
eral, recognition of implied causes of action for dam
ages under many provisions of the Securities Exchange
Act, including not only the antifraud provisions, §§ 10
and 15(c)(1), see Kardon v. National Gypsum Co., 69
F. Supp. 512, 513–14 (E.D.Pa.1946); Fischman v. Ray
theon Mfg. Co., 188 F. 2d 783, 787 (2 Cir. 1951) (Frank,
J.); Fratt v. Robinson, 203 F. 2d 627, 631–33 (9 Cir.
1953), but many others. These included the provision,
§ 6(a)(1), requiring securities exchanges to enforce com
pliance with the Act and any rule or regulation made
thereunder, see Baird v. Franklin, 141 F. 2d 238, 239,
240, 244–45 (2 Cir.), cert. denied, 323 U. S. 737 . . . (1944),
and provisions governing the solicitation of proxies, see
J. I. Case Co. v. Borak, 377 U. S. 426, 431–35 . . .
(1964). . . . Writing in 1961, Professor Loss remarked
with respect to violations of the antifraud provisions
that with one exception ‘not a single judge has ex
pressed himself to the contrary.’ 3 Securities Regula
tion 1763–64. See also Bromberg & Lowenfels, [Securi
ties Fraud & Commodities Fraud] § 2.2 (462) [(1979)]
(describing 1946–1974 as the ‘expansion era’ in implied
causes of action under the securities laws). When dam
age actions for violation of § 10(b) and Rule 10b–5
reached the Supreme Court, the existence of an implied
cause of action was not deemed worthy of extended
discussion. Superintendent of Insurance v. Bankers
Life & Casualty Co., 404 U. S. 6 . . . (1971).” Leist, 638
F. 2d, at 296–297 (footnote omitted).
In light of the history of court-created remedies and spe
cifically the history of implied causes of action under § 10(b),
the Court is simply wrong when it states that Congress did
not impliedly authorize this private cause of action “when it
first enacted the statute.” Ante, at 167. Courts near in

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180 STONERIDGE INVESTMENT PARTNERS, LLC v.
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time to the enactment of the securities laws recognized that
the principle in Rigsby applied to the securities laws.13
Congress enacted § 10(b) with the understanding that federal
courts respected the principle that every wrong would have
a remedy. Today’s decision simply cuts back further on Con
gress’ intended remedy. I respectfully dissent.
13 See, e. g., Slavin v. Germantown Fire Ins. Co., 174 F. 2d 799 (CA3
1949); Baird v. Franklin, 141 F. 2d 238, 244–245 (CA2) (“The fact that the
statute provides no machinery or procedure by which the individual right
of action can proceed is immaterial. It is well established that members
of a class for whose protection a statutory duty is created may sue for
injuries resulting from its breach and that the common law will supply a
remedy if the statute gives none”), cert. denied, 323 U. S. 737 (1944); Kar
don v. National Gypsum Co., 69 F. Supp. 512, 514 (ED Pa. 1946) (“[T]he
right to recover damages arising by reason of violation of a statute . . . is
so fundamental and so deeply ingrained in the law that where it is not
expressly denied the intention to withhold it should appear very clearly
and plainly”).