Opinion ID: 2105662
Heading Depth: 1
Heading Rank: 6

Heading: Can the State Seek Remedies Under Iowa Code Section 502.604(2) Against Aiders and Abettors of Securities Fraud?

Text: Iowa Code section 502.604(2) permits the State to [b]ring an action in the district court ... to enforce compliance with [chapter 502].... [U]pon a proper showing ... the court may enter an order of rescission, restitution, or disgorgement directed at any person who has engaged in an act constituting a violation of [chapter 502]. (Emphasis added.) McHose contends the italicized language permits the State to seek an order of rescission, restitution, or disgorgement against primary violators only and not against aiders and abettors. Essentially, McHose argues that because section 502.604(2) does not specifically mention remedies against aiders and abettors, none can be allowed. Such an interpretation would render substantially meaningless the chapter 502 enforcement provisions against aiders and abettors. The result would be contrary to chapter 502's underlying public policy to protect investors. We must therefore strive to reach an interpretation that is reasonable and consistent with this underlying policy. See Iowa Code § 4.6(1) (when interpreting statute court may consider object sought to be obtained) and (5) (when interpreting statute court may consider consequences of a particular construction). Section 502.503(1) makes aiders and abettors liable jointly and severally with and to the same extent as [the primary violator]. This is an expression of aider and abettor status similar to that found in the criminal law where aiders and abettors may be charged, tried, and punished as principals. See Iowa Code § 703.1 (criminal aiding and abetting provision). For purposes of criminal responsibility and punishment aiders and abettors are therefore primary violators. Likewise, when the legislature authorized the remedies of rescission, restitution, or disgorgement against any person who has engaged in an act constituting a violation of [chapter 502,] we think it was using such language broadly to include both aiders and abettors and primary violators. Iowa Code § 502.604(2). Otherwise, the language liable jointly and severally with and to the same extent [as the primary violator] in section 502.503(1) would mean nothing as far as aiders and abettors are concerned.