Opinion ID: 2816868
Heading Depth: 2
Heading Rank: 2

Heading: koch qua primary violator

Text: Koch next argues that he could not be charged as a primary violator under either the Exchange Act or the Advisers Act. His argument is premised on Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (2011), and the text of the Advisers Act. He misreads both. In Janus, the question before the Court was what individual or entity could be liable for “mak[ing] any untrue statement of a material fact” in violation of the Exchange Act regulations. 131 S. Ct. at 2301. It held that “the maker of a statement is the person or entity with ultimate authority over the statement” and not “[o]ne who prepares or publishes a statement on behalf of another.” Id. at 2302. Janus does not apply here, however, because Koch was not charged with making a statement. Rather, he was charged with marking the close, which is not a statement but “a form of market manipulation.” Order, 2014 WL 1998524, at . In other words, Koch violated the securities laws not because of what he said but because of what he did. Koch improperly conflates those who make statements (at issue in Janus) with those who employ manipulative practices (at issue here). Cf. Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 191 (1994) (“Any person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) . . . may be liable as a primary violator.” (emphasis added)). For this reason, Janus is inapplicable if the alleged Exchange Act violations turn not on statements but on manipulative conduct. See SEC v. Monterosso, 756 F.3d 1326, 1334 (11th Cir. 2014) (per curiam) (“Janus has no bearing” because “[t]he case against [appellants] did not rely on their ‘making’ false statements, but instead concerned their commission of deceptive acts”). 16 Koch’s argument regarding the Advisers Act’s text is also flawed. He claims that only advisers who are registered with the SEC can be primary violators under the Advisers Act. Because KAM, not Koch, is the only adviser registered with the SEC, he maintains that he cannot be a primary violator under the Advisers Act. The Advisers Act, however, draws no such distinction. That Act makes it unlawful for “any investment adviser” to “employ any device, scheme, or artifice to defraud any client or prospective client” or to “engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative.” 15 U.S.C. § 80b–6(1), (4) (emphasis added). The Advisers Act, in turn, defines investment adviser as “any person who, for compensation, engages in the business of advising others . . . as to the value of securities or as to the advisability of investing in, purchasing, or selling securities,” subject to exceptions not relevant here. Id. § 80b–2(a)(11) (emphasis added). The definition of investment adviser does not include whether one is registered or not with the SEC. Hence, Koch could be primarily liable for violating the Advisers Act irrespective of registration with the Commission. See United States v. Onsa, 523 F. App’x 63, 65 (2d Cir. 2013) (“[T]he structure of the [Advisers] Act demonstrates that individuals need not register, or even be required to register, in order to be an ‘investment adviser’ within the meaning of the Act.”). Accordingly, we hold that Koch was properly charged as a primary violator under both the Exchange Act and the Advisers Act.