By Thomas Przybylowski, Securities Litigation Attorney
At a Glance
- Plaintiffs often name the auditor, the underwriters, and the outside directors alongside the company itself, but private securities law does not treat helping a fraud the same as committing one.
- Since Central Bank of Denver v. First Interstate Bank (1994), private plaintiffs cannot sue for aiding and abetting a Rule 10b-5 violation, and the Supreme Court reinforced that limit in Stoneridge Investment Partners v. Scientific-Atlanta (2008).
- Under Janus Capital Group v. First Derivative Traders (2011), only the party with ultimate authority over a statement can be its “maker” for Rule 10b-5 purposes, which is often fatal to claims against auditors and directors who reviewed a disclosure but did not control it.
- Section 11 of the Securities Act is different: underwriters and directors who sign a registration statement face something close to strict liability, but they also get a due diligence defense that plaintiffs often underestimate.
- The SEC is not bound by any of these private-plaintiff limits, and it has identified gatekeeper conduct by auditors and underwriters, especially in cross-border offerings, as an enforcement priority heading into 2026.
Every securities complaint names the company. Most name the executives who signed the certifications. A growing number also named the auditor who issued the opinion, the underwriters who priced the offering, and the outside directors who sat on the audit committee. Naming them is easy. Making the claims against them hold up is a different matter, and it is where a lot of complaints that look formidable on the page start to come apart.
I have represented investors bringing these claims and the gap between what a complaint alleges about a gatekeeper and what the law actually lets a plaintiff prove is one of the more consistently misunderstood parts of securities litigation. Here is how that gap works, and why gatekeeper claims tend to succeed or fail on a narrower set of facts than people expect.
Naming Everyone Is Not the Same as Proving Anything
The instinct to name every professional who touched a transaction is understandable. If a company’s financial statements turn out to be fraudulent, the auditor presumably reviewed them. If a securities offering later collapses, the underwriters presumably vetted it. If a board later looks like it missed something obvious, the outside directors presumably should have caught it. All of that can be true and still not add up to liability, because federal securities law draws a sharp line between the party that committed the fraud and everyone who was merely positioned to catch it.
That line exists for a reason connected to the same policy concerns that shape the rest of securities litigation: Congress built this framework to punish deliberate fraud, not to turn every professional who touches a company’s disclosures into an insurer against management’s misconduct. The line is not always intuitive, and it looks different depending on which statute a plaintiff invokes.
Why Helping a Fraud Is Not the Same as Committing One
For a long stretch of securities litigation history, plaintiffs regularly sued anyone who arguably assisted a fraud under a theory of aiding and abetting. That changed in 1994, when the Supreme Court decided Central Bank of Denver v. First Interstate Bank, holding that private plaintiffs cannot maintain an aiding-and-abetting claim under Section 10(b) of the Exchange Act. Only a party that itself committed a manipulative or deceptive act, the “primary violator,” can be sued by private plaintiffs. Congress responded by giving the SEC its own express authority to pursue aiding and abetting, but that fix runs only to the government. Private plaintiffs got nothing back.
Plaintiffs then tried a workaround: instead of alleging aiding and abetting, they alleged that a gatekeeper or business partner participated in a “scheme” to defraud investors, framing it as primary conduct rather than secondary assistance. The Supreme Court closed that door too, in Stoneridge Investment Partners v. Scientific-Atlanta. The Court held that even a company that structured transactions specifically to help an issuer inflate its earnings was not liable to that issuer’s investors, because those investors did not rely on anything the scheme participant itself said or did. They relied on the issuer’s own financial statements. Deceptive conduct that never reaches investors in the defendant’s own words, the Court reasoned, cannot support the reliance a private Rule 10b-5 claim requires.
Between those two decisions, most of what plaintiffs’ counsel would instinctively describe as helping a fraud alone is simply not actionable by private investors under Rule 10b-5, no matter how central that help was to the fraud working.
The “Maker” Problem for Auditors and Directors
The Central Bank and Stoneridge decisions deal with parties on the periphery of fraud. A harder question comes up when a gatekeeper is closer to the disclosure itself, such as an auditor who signs an opinion or a director who is quoted in a press release. The Supreme Court addressed that scenario in Janus Capital Group v. First Derivative Traders, holding that only the person or entity with ultimate authority over a statement, including its content and whether and how to communicate it, can be treated as having “made” that statement for Rule 10b-5 purposes.
That definition does real work against gatekeepers. An auditor typically does not control what a company says in its earnings release, even when the auditor’s work informs it. An outside director typically does not draft the disclosure a company files, even when the director reviewed and approved it. Under Janus, participating in the process that produces a misstatement is not the same as making it, and plaintiffs who cannot point to actual authorship or control over the specific statement at issue tend to lose Rule 10b-5 claims against these defendants even when the underlying disclosure was false.
Related Reading
For more from Thomas Przybylowski on how securities claims are built and evaluated, see SEC and Crypto Regulation: What Companies Need to Know and What Institutional Investors Look for in Securities Litigation Counsel.
Section 11 Plays by Different Rules
Everything above concerns Rule 10b-5 under the Exchange Act, which requires scienter and, after Janus, requires that the defendant made the statement. Section 11 of the Securities Act is a different framework entirely, and it is the one that exposes underwriters and directors to meaningful liability with some regularity.
Section 11 imposes something close to strict liability on the signers of a registration statement, including the company’s directors and the underwriters, for material misstatements or omissions in that document. Unlike a Rule 10b-5 claim, a Section 11 plaintiff does not need to prove science or even that they relied on the specific misstatement. That is significant exposure for underwriters and directors, and it is a large part of why gatekeeper litigation clusters around IPOs and other registered offerings rather than ordinary secondary-market trading.
The counterweight is the due diligence defense. A defendant other than the issuer itself can avoid Section 11 liability by showing it conducted a reasonable investigation and had reasonable grounds to believe the registration statement was accurate. For underwriters, that defense turns on the diligence process documented before the deal closed, not on assurances given after the fact. Underwriters that can point to a real diligence file, management interviews, comfort letters, and follow-up on red flags tend to fare far better than those relying on the argument that they trusted the company’s representations. It is also part of why underwriters are typically indemnified by the issuer in the underwriting agreement, which shifts much of the ultimate financial exposure back to the company even when a Section 11 claim survives.
The SEC Plays by a Different Set of Rules Entirely
Everything discussed so far concerns private litigation. The SEC is not bound by Central Bank, Stoneridge, or the private-right-of-action limits that come with Rule 10b-5, and it has been signaling that gatekeepers are squarely in its sights heading into 2026. The Commission’s enforcement priorities specifically flag auditors and underwriters, with particular attention to cross-border offerings, including situations where a U.S. audit firm’s foreign affiliate allowed a client to complete its own audit testing, and situations where underwriters proceeded with an offering despite red flags in an issuer’s disclosures.
For companies and the gatekeepers who work with them, that means the practical risk calculus has shifted even where private liability remains hard to establish. A weak Rule 10b-5 case against an auditor may still translate into a serious SEC inquiry, and the diligence records that matter for a Section 11 defense are often the same records regulators ask for first.
The Bottom Line
Gatekeeper liability looks broad on the page and narrow in practice. Central Bank and Stoneridge took private aiding-and-abetting and scheme theories off the table. Janus narrowed Rule 10b-5 claims against anyone who did not have ultimate authority over the statement at issue. Section 11 remains the real exposure for underwriters and directors, but it comes with a due diligence defense that rewards documented process over after-the-fact assurances. And the SEC, unconstrained by any of those private-plaintiff limits, is treating gatekeeper conduct as a genuine enforcement priority regardless of how a private case would fare. Companies, auditors, underwriters, and directors who understand which of these frameworks applies to their situation are in a far better position than those who assume that any connection to a fraud means exposure to liability.
Frequently Asked Questions about Liability in Securities Litigation
Can investors sue an auditor for aiding and abetting securities fraud?
Not directly. Since Central Bank of Denver v. First Interstate Bank (1994), private plaintiffs cannot maintain an aiding-and-abetting claim under Section 10(b) of the Exchange Act. Only the SEC has express authority to pursue aiding and abetting; private investors must show the defendant was itself a primary violator.
What is “scheme liability,” and does it still work against gatekeepers?
Scheme liability was an attempt to plead a gatekeeper’s conduct as primary rather than secondary fraud. The Supreme Court largely foreclosed it in Stoneridge Investment Partners v. Scientific-Atlanta (2008), holding that investors must have relied on the defendant’s own statement or conduct, not merely on a scheme the defendant helped facilitate behind the scenes.
What does it mean for an auditor or director to “make” a false statement?
Under Janus Capital Group v. First Derivative Traders (2011), only the person or entity with ultimate authority over a statement, including whether and how to communicate it, can be its “maker” under Rule 10b-5. Reviewing, approving, or providing information for a disclosure is usually not enough if someone else had final control over its content.
Are underwriters and directors more exposed under the Securities Act than the Exchange Act?
Yes. Section 11 of the Securities Act imposes something close to strict liability on directors and underwriters who sign a registration statement, without requiring scienter. Their main protection is the due diligence defense, which depends on the investigation they actually documented before the offering closed.
Is the SEC limited by the same rules as private plaintiffs?
No. The SEC has its own statutory authority to pursue aiding and abetting and is not subject to the private-right-of-action limits from Central Bank, Stoneridge, or Janus. The Commission has identified gatekeeper conduct, including by auditors and underwriters in cross-border offerings, as an enforcement priority.
About the author
Thomas Przybylowski is a litigation attorney with extensive experience leading complex commercial litigation, securities fraud, and high-stakes disputes involving companies, investors, and the professionals who advise them. He previously practiced at Pomerantz LLP and Schulte Roth & Zabel LLP and was named a Super Lawyers® Rising Star in 2020 and 2021. He is admitted to practice in New York and New Jersey.