SMU Law Review
Texas federal courts have continued to narrow the application of Texas securities laws. The Fifth Circuit applied the federal class action preemption test of Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) after consolidation in federal court, but permitted unconsolidated state actions to continue unpreempted. The Fifth Circuit also determined that the stringent federal pleading rules apply to state law actions filed in federal court. The Southern District of Texas narrowed aider and abetter liability in the secondary market by imposing a privity requirement for the primary perpetrator under the Texas Securities Act (“TSA”) and requiring a duty to disclose by the aider and abetter under the Texas Stock Fraud Act (“TSFA”).
Federal courts also narrowed the application of the federal securities laws in Texas. The Fifth Circuit rejected a private cause of action for issuer damages for reporting violations during a tender offer and imposed a scienter requirement for terminated employees seeking damages under Sarbanes-Oxley whistleblower lawsuits. The Supreme Court narrowed the ability to impose primary liability on aiders and abetters by rejecting scheme liability.
George Lee Flint, Jr., Texas Annual Survey: Securities Regulation, 62 S.M.U. L. Rev. 1435 (2009).