“ A person that plays a “part in preparing” a false registration statement may arguably be “using or employing” that false statement under § 10 (b) . But commercial counterparties play no “part in preparing” the issuer’s financial statements, and that is not the theory of “scheme” liability. Rather, “scheme” liability rests on the assertion that the implied § 10 (b) action extends to the commercial counterparty’s undisclosed transaction itself. ”

“ First, American issuers of securities would have to price their commercial transactions to reflect the substantial added risk of liability for their counterparties. Second, and even more important, to avoid litigation risk, both domestic and foreign companies would have significant incentives to do business with companies listed on foreign exchanges, or with private companies. The Chamber’s members would prefer that business choices be based on factors like price, efficiency, quality, and service, rather than litigation risk. ”

“ The Court should address the broader question of whether “scheme” liability is a basis for primary liability under the § 10 (b) implied cause of action, and not only whether a commercial counterparty’s participation in a commercial transaction could constitute 14 “deceptive” conduct in the abstract. Rejection of the broader argument is vital to the competitiveness of American businesses. See supra, at 6-8. Central Bank itself addressed reliance, which is an element of only the implied cause of action. ”

“ Allowing fraud on the market to satisfy reliance in a § 10 (b) action does not render § 18 (a) a practical nullity only because the class of defendants that can be sued in a § 10 (b) private civil action is narrower than the group that can be sued in the express § 18 (a) action. “Scheme” liability obliterates that essential limitation. No private plaintiff would sue a secondary actor under § 18 (a) , which requires actual reliance, if “scheme” liability allows a § 10 (b) claim against the same defendant for causing a misstatement without proving actual reliance. ”

“ The question presented in the amici brief of 32 state attorneys general offers a representative definition of “scheme” liability as a theory, i.e., shareholders can recover damages from actors who, acting with the requisite intent to deceive, actively engage in conduct that has the principal purpose and effect of creating a false appearance of fact in furtherance of a scheme to defraud the securities market, even when the actor has made no false statement or omission and otherwise owes no fiduciary duty to the shareholders. ”

“ Broudo, 544 U.S. 336 (2005) . “Scheme” liability is nothing but a label in search of a cause of action. In reality, it is aiding and abetting liability disguised behind a new name. The Chamber has a vital interest in the “scheme” liability theory. The “scheme” liability label, which emerged after this Court and Congress rejected aiding and abetting liability in private § 10 (b) actions, has been extended to commercial counterparties involved with an issuer merely through a commercial or financial transaction. It has no effective limiting principle, which is reason enough to reject the theory. ”

“ First, the standard of liability under § 10 (b) should be workable, predictable, and consistently applied so that businesses can plan their affairs with reasonable certainty. “Scheme” liability is wholly unworkable in implied § 10 (b) actions. Accordingly, the Chamber submits that the proper standard is as follows: a commercial counterparty is liable under § 10 (b) for deceptive “conduct” only when it has a duty to disclose to the issuer’s shareholders. ”

“ Ignoring § 18 (a) , however, the proponents of “scheme” liability seek to imply into § 10 (b) a cause of action that holds one defendant, usually a commercial counterparty, liable because another defendant, usually the issuer, makes a misstatement or material omission to the market. Section 18 (a) imposes liability on a defendant who “shall make or cause to be made” a statement that is “false or misleading with respect to any material fact” in “any application, report or document filed” pursuant to the 1934 Act, including the financial statements at issue here. ”

“ Petitioner and its amici incorrectly argue that there is no requirement of a duty to disclose when a non-speaking defendant engages in affirmative “conduct.” Pet. Br. at 28; Brief of Change to Win & the CtW Inv. Group (“CTW Br.”) , at 16, 18-23; Brief of N. Am. Sec. Adm’rs Ass’n, Inc. (“NASAA Br.”) , at 13-17 & n.2. This argument has already been rejected by Central Bank and this Court’s insider trading cases. In Central Bank, the Tenth Circuit had held that “the lack of a duty to disclose is not dispositive in this case.” ”

“ Massive litigation risk remains . . . .”) Ian Swanson, Foreign Executives Press For Reform Of Litigation in United States, The Hill, May 17, 2007, at 11; (“litigation is a greater disincentive to doing business in the U.S. than fears that a protectionist Congress might impose new barriers to foreign trade and investment”) ; Alan Beattie, London Named Top Financial Centre, Fin. Times, June 12, 2007, at 6 (the United States has been disadvantaged because of its “litigious and apparently arbitrary culture of regulation and policy”) . ”

“ United States, 522 U.S. 52, 65 (1997) (conspiracy requires “adopt [ing] the goal of furthering or facilitating the criminal endeavor”) . “Allegations of 5 ‘assisting,’ ‘participating in,’ ‘complicity in’ and similar synonyms . . . all fall within the prohibitive bar of Central Bank.” Shapiro v. Cantor, 123 F.3d 717, 720 (2d Cir. 1997) . If anything, “scheme” liability is more expansive than aiding and abetting. ”

“ Central Bank, 511 U.S. at 188 (quoting Pinter, 486 U.S. at 652) . The goals of the securities laws are ill served when large settlements are paid because of uncertainty. Rather, businesses need clear and understandable rules to follow. See Pinter, 486 U.S. at 654 n.29 (rejecting liability for “those who are only tangentially involved with” a securities transaction, because if “the test produces unpredictable results, it risks over-deterring” lawful activities) . “Scheme” liability is the antithesis of certainty. ”

“ The detrimental effect of those incentives on the competitiveness of American business is obvious: in the last decade, even after the PSLRA, 2,465 issuers have been named as defendants in securities fraud class actions out of approximately 6000 companies listed on the major U.S. exchanges. ”

“ Bear, Stearns & Co., 394 F.3d 540, 541 (7th Cir. 2005) (Easterbrook, J.) (§ 10 (b) private civil claim requires deceit against the plaintiff) ; Moss v. Morgan Stanley, Inc., 719 F.2d 5, 13, 16 (2d Cir. 1983) 13 (although investment bank employee was criminally convicted for § 10 (b) insider trading because of breach of duty to his employer and its client, a tender offeror, shareholders in target company had no § 10 (b) claim because “‘ [t] here is no “duty in the air” to which any plaintiff can attach his claim.’”) (citation omitted) ”

“ Central Bank, 511 U.S. at 180. It would be improper to apply the “indirectly” language of § 10 (b) to weaken the important reliance limit on the private damages action when the language of § 10 (b) does not itself create a private damages action in the first place. 29 transactions of commercial counterparties would normally not be publicly available information. Stoneridge illustrates this. The market knew about Charter’s financial statements but was unaware of any conduct by respondents. 2. “Scheme” Liability Is Incompatible With The PSLRA’s Loss Causation Requirement. ”

“ Former Senator Metzenbaum proposed “to restore aiding and abetting liability for those who contribute to fraud but are not the primary culprit.” Accounting and Investor Protection Issues Raised by Enron and Other Public Companies: Hearing Before the S. Comm. on Banking, Hous., & Urban Affairs, 107th Cong. 1037 (2002) . Senators Shelby and Durbin proposed to create express private liability against “persons that aid or abet violations” of § 10 (b) of the 1934 Act. 148 Cong. Rec. S6584 (daily ed. July 10, 2002) . 26 and abettors, for distribution to shareholders. ”