The First Circuit issued an en banc decision last week construing the meaning of the word "make" in SEC Rule 10b-5(b). SEC v. Tambone, 07-1384, http://www.ca1.uscourts.gov/
The issue was whether you can sue under Rule 10b-5(b) when the defendant broker doesn't utter false statements itself or draft a prospectus with false statements, but bandies the document with the false material in it about to investors. The relevant language in the rule is that one may not "make any untrue statement of a material fact … in connection with the purchase or sale of any security." The majority concluded that "make" is a narrower concept than the statute's reference to "use or employ," and doesn't include this type of conduct. The dissent (Judges Lipez and Torruella) disagreed, focusing on the statutory duty of an underwriter and concluding that this showed that the documentation it distributes constitutes implied statements from the underwriter that the underwriter has a reasonable basis to believe that the information in the prospectus is truthful and complete. The issue was one of first impression. While the statute gets at the broader "using" conduct, whether the conduct violates the rule matters for the purposes of private plaintiffs having the right to sue.