A Framework for Analyzing Attorney Liability Under Section 10(b) and Rule 10b-5

This article analyzes recent developments in the law of secondary party liability under the general antifraud provision of the Securities Exchange Act of 1934, section 10(b), and its corresponding Securities and Exchange Commission rule, Rule 10b-5. The article focuses on a specific type of secondary party, securities lawyers, who make their living representing securities issuers and face a myriad of challenges in doing so. Among those challenges are defrauded investors seeking recovery of their losses from both the issuer of the failed investment securities and from the lawyers who represent the issuer.These securities fraud actions against lawyers raise serious questions about the proper scope of liability under the federal securities laws. The recent developments discussed in the article indicate that the standard for secondary party liability is increasingly becoming one that attorneys acting in the traditional role of adviser and draftsperson to securities issuers will not satisfy.