25 To the contrary, in the PSLRA, Congress adopted the principle of Central Bank that elements of § 10(b) primary liability must be satisfied by reference to the conduct of the particular defendant. Specifically, the PSLRA required that “the act or omission of the defendant alleged to violate this chapter caused the loss for which the plaintiff seeks to recover damages.” 15 U.S.C. § 78u-4(b)(4) (emphasis added). As we show infra, at 29-30, “scheme” liability cannot be reconciled with defendant-by-defendant loss causation. 3. Sarbanes-Oxley: In the Sarbanes-Oxley Act enacted in 2002, Congress again rejected allowing private civil plaintiffs to use § 10(b) to sue secondary actors. Members of Congress proposed “to give the victims of fraud the right to sue those who aid issuers in misleading and defrauding the public.” H.R. Rep. No. 107-414, at 53 (2002). Congress was urged to “undo the Central Bank case and bring back aiding and abetting.” Hearing on H.R. 3763 Before the H. Comm. on Fin. Servs., 107th Cong. 63 (2002).13 It was broadly asserted that “when a person adds substantial value to a fraudulent course of conduct—in other words, contributes in a substantive way to its success—then liability is necessary and appropriate to achieve both deterrence and compensation.” Id. at 485-86. Congress rejected these proposals for expanding the § 10(b) implied private cause of action. Instead, Congress empowered the SEC to direct to shareholders any proceeds it obtained from the secondary actors it sued under § 20(e). 15 U.S.C. § 7246(a). From 2002 to 2006, the SEC recovered $8 billion, including from aiders 13
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).
