On June 13, 2011, the Supreme Court of the United States held in a 5-4 decision that an investment adviser to a mutual fund does not “make” the statements contained in that fund’s prospectus for purposes of Rule 10b-5 under the Securities Exchange Act of 1934. Instead, the court ruled in Janus Capital Group, Inc. v. First Derivative Traders, that false statements in a mutual fund’s prospectus are made by the fund and not the adviser, and that the adviser and its parent company cannot be held primarily liable and subject to a private action by the parent’s shareholders under Rule 10b-5.

Source: Investment Management Alert
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