20 1. Provisions Of The Original 1933 And 1934 Acts: When Congress wanted to create liability for employing fraudulent “schemes,” it did so expressly. Section 17(a) of the 1933 Act thus renders it unlawful “to employ any device, scheme, or artifice to defraud, or . . . to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.” 15 U.S.C. § 77q(a)(1), (3) (emphasis added). Thus, unlike § 10(b), subparts (1) and (3) of § 17(a) expressly cover defendants who employ a scheme or engage in a course of business, rather than use or employ a deceptive device itself.11 Section 17(a) reaches any sale in the primary and secondary markets. See Gustafson, 513 U.S. at 577-78; United States v. Naftalin, 441 U.S. 768, 777-78 (1979). The SEC has regularly used § 17(a) against secondary actors, see, e.g.,
11
It is particularly inappropriate to construe § 10(b) or Rule 10b-5 as if § 10(b) had used language included in § 17(a) but omitted from § 10(b). See Central Bank, 511 U.S. at 179-80, 184. The reach of Rule 10b-5 is limited by § 10(b). See, e.g., Santa Fe Indus., 430 U.S. at 473-74 (a “complaint states a cause of action under any part of Rule 10b-5 only if the conduct alleged can be fairly viewed as ‘manipulative or deceptive’ within the meaning of the statute”) (emphasis added); Hochfelder, 425 U.S. at 213-14 (Rule 10b-5’s “scope cannot exceed the power granted the [SEC] by Congress under § 10(b)”). This limit applies even when Rule 10b-5 uses the same language as § 17(a). Compare Aaron v. SEC, 446 U.S. 680, 695-97 (1980) (scienter not required under §§ 17(a)(2) & (3)), with Hochfelder, 425 U.S. at 212-14 (scienter required for all § 10(b) actions despite use of same language in Rule 10b-5(b) & (c) as in §§ 17(a)(2) & (3)). Moreover, the administrative history of Rule 10b-5 shows that it was promulgated merely to clarify that the SEC could sue defrauding purchasers in addition to defrauding sellers of stock. See Hochfelder, 425 U.S. at 212 n.32; Blue Chip Stamps, 421 U.S. at 766-67 (Blackmun, J., dissenting); Milton V. Freeman, Administrative Procedures, 22 Bus. Law. 891, 922 (1967); Milton V. Freeman, Foreword, 61 Fordham L. Rev. S1, S1-S2 (1993). There was no intent to create a private cause of action, much less one against secondary actors. See Hochfelder, 425 U.S. at 196 (“there is no indication that Congress or the Commission when adopting Rule 10b-5, contemplated such a remedy”).
