In an opinion yesterday, Judge Forrest denied a motion to dismiss by the investment bank Macquarie, which argued (see here and here) that, based on Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (June 13, 2011), the allegedly false prospectus at issue was “made” by the issuer (a company called Puda Coal), not the underwriter (Macquarie).  There a few lower court decisions on this issue, but Judge Forrest found that Janus did not bar the plaintiffs’ claims here:
Continue Reading Judge Forrest Interprets Janus to Allow Underwriter, Not Just Issuer, to Face Claims for Allegedly False Prospectus

In an opinion today, Judge Forrest granted summary judgment to two affiliated accounting firms in a securities fraud suit arising from what Judge Forrest described as an accounting firm’s “worst nightmare”:

An accounting firm’s worst nightmare might be to wake up one morning and discover that the company that one of its teams had audited for the past several years had in fact disappeared, and that what the team had been auditing had been merely a mirage. A twist that could serve only to heighten this distress might be the discovery that the company had been stolen a few years prior — its operations and related revenues transferred away — but that the engagement team had not discovered this fact. The team had issued a “clean opinion.” The accounting error in such a case would be fundamental: all aspects of the financial position of the company would have been entirely misstated, because the operations on which it was based were long gone. This scenario is not the storyline for an auditor’s version of a horror film; it is what happened here.

Continue Reading Judge Forrest Grants Summary Judgment to Auditors in Case of Missing Subsidiary