511 U.S. 164 (1994)
In 1986 and 1988, the Colorado Springs-Stetson Hills Public Building Authority issued a total of $26 million in bonds to finance public improvements at Stetson Hills, a planned residential and commercial development in Colorado Springs.1 Petitioner Central Bank of Denver served as indenture trustee for the bond issues.2 The bonds were secured by landowner assessment liens covering about 250 acres for the 1986 issue and 272 acres for the 1988 issue.3 The bond covenants required that the land subject to the liens be worth at least 160% of the bonds' outstanding principal and interest, and AmWest Development, the developer, was to provide Central Bank with annual reports containing evidence that this test was met.4
In January 1988, AmWest provided Central Bank with an updated appraisal of the land securing the 1986 bonds and proposed for the 1988 bonds, showing values almost unchanged from 1986.5 A senior underwriter for the 1986 bonds soon expressed concern that declining property values in Colorado Springs meant the 160% test might not be met, given the appraisal was over 16 months old.6 Central Bank asked its in-house appraiser to review the 1988 appraisal, who found the values optimistic and suggested retaining an outside appraiser for an independent review.7
After an exchange of letters with AmWest in early 1988, Central Bank agreed to delay the independent review until the end of the year, six months after the June 1988 closing on the bond issue.8 Before the review was complete, the Authority defaulted on the 1988 bonds.9 Respondents First Interstate Bank of Denver and Jack K. Naber, who had purchased $2.1 million of the 1988 bonds, sued the Authority, underwriters, an AmWest director, and Central Bank for violations of § 10(b) of the Securities Exchange Act of 1934, alleging Central Bank was secondarily liable for aiding and abetting the fraud.10
The United States District Court for the District of Colorado granted summary judgment to Central Bank.11 The United States Court of Appeals for the Tenth Circuit reversed, finding genuine issues of material fact on recklessness and substantial assistance.12 The Supreme Court granted certiorari to resolve the question of aiding and abetting liability under § 10(b).13
Whether private civil liability under § 10(b) of the Securities Exchange Act of 1934 extends to those who aid and abet a violation but do not themselves engage in the manipulative or deceptive practice?14
Section 10(b) prohibits only manipulative or deceptive acts in connection with the purchase or sale of securities and does not extend to aiding and abetting liability.15
No. Central Bank served as indenture trustee for the bond issues.16 After receiving the underwriter's letter expressing concern over the 160 percent test, Central Bank delayed the independent appraisal review until after the bond closing.17 Yet the complaint alleged only that Central Bank was secondarily liable under § 10(b) for aiding and abetting the fraud rather than committing any manipulative or deceptive act itself.18 The text of the statute reaches only primary violations involving manipulation or deception.19
Central Bank's conduct in postponing the review therefore falls outside the scope of conduct prohibited by § 10(b).20
Private civil liability under § 10(b) does not extend to aiders and abettors who do not themselves engage in the manipulative or deceptive practice.21
Related opinions on this issue
Joined by Blackmun, Souter, And Ginsburg, Jj.
Justice Stevens dissented.22 In hundreds of judicial and administrative proceedings in every Circuit, courts and the SEC concluded that aiders and abettors are subject to liability under § 10(b) and Rule 10b-5.23 All eleven courts of appeals to consider the question recognized a private cause of action against aiders and abettors.24
The long history of judicial recognition of aiding and abetting liability supported retaining private actions against aiders and abettors.25 In its comprehensive revision of the Exchange Act in 1975, Congress left untouched the sizable body of case law approving aiding and abetting liability in private actions under § 10(b) and Rule 10b-5.26 The broad remedial language of the statute encompasses any person who violates the antifraud rules directly or indirectly.27
The majority's textual approach would cast doubt on other established forms of secondary liability such as respondeat superior and conspiracy.28