Janus Capital Group, Inc. v. First Derivative Traders
United States Supreme Court
131 S.Ct. 2296 (2011)
Janus Capital Group (JCG) (defendant) created the Janus Investment Fund (JIF), a legally separate mutual fund family, and Janus Capital Management (JCM) (defendant), sharing JIF's officers, provided investment advisory services. JIF's prospectuses stated it discouraged market timing, but the New York Attorney General later alleged JCG had secretly arranged to allow it, triggering investor withdrawals and financial losses to JCG. First Derivative Traders (plaintiff), on behalf of JCG shareholders, sued JCG and JCM under SEC Rule 10b-5 for the misleading prospectus statements; the district court dismissed the claim against JCM for failing to allege JCM made the statements, but the Fourth Circuit reversed.
Whether a mutual fund investment adviser can be liable under Rule 10b-5 for false statements in its client mutual funds' prospectuses when the adviser lacks ultimate authority over those statements.