Opinion ID: 480623
Heading Depth: 1
Heading Rank: 2

Heading: anchor's lack of power

Text: 8 Under Section 15 of the Securities Act of 1933 (15 U.S.C. Sec. 77o ) 2 and Section 20 of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78t(a)), 3 secondary liability is imposed upon controlling persons. To establish that a defendant is a controlling person, a plaintiff must show that: (1) the defendant had actual power or influence over the alleged controlled person, and (2) the defendant was a culpable participant in the alleged illegal activity. Kersh v. General Council, 804 F.2d 546, 549 (9th Cir.1986) (citing Christoffel v. E.F. Hutton & Co., Inc., 588 F.2d 665, 668 (9th Cir.1978)). Whether a defendant has power or influence over an allegedly controlled person is a question of fact. Kersh, 804 F.2d at 548. 9 Claimants argue Anchor had actual control over CTS personnel. As evidence of Anchor's control, claimants point to the fact that Anchor had principals in the CTS office. 4 However, we find this insufficient to establish control. The principals were directed to follow the internal rules requiring Anchor approval of the securities sold. The tax shelters involved here had never been approved by Anchor, nor were they submitted for Anchor's approval. The sales were off-book, with no commissions, revenues or indirect benefits received by Anchor and its name was not used in the sales. The CTS office was operated independently from Anchor and no nexus existed between CTS and Anchor with respect to the Audio and Jerden tax shelters. 5 While Anchor may have licensed the sellers of the shelters, without more, this is insufficient to establish control. Kersh at 550. Anchor did not participate in the tax shelter sales and had no actual power over their licensees.