Document: 442 U.S. 560 99 S.Ct. 2479 61 L.Ed.2d 82 TOUCHE ROSS & CO., Petitioner,v.Edward S. REDINGTON, etc., et al. No. 78-309. Argued March 26, 1979. Decided June 18, Opinion after remand, 2 Cir., 612 F.2d 68. Syllabus ccounting firm was retained by a securities brokerage (Weis) registered with the Securities and Exchange Commission (SEC) member of New York Stock (Exchange), in this capacity audited Weis' books records prepared for filing SEC annual reports financial condition required § 17(a) Act 1934 (1934 Act) implementing regulations. Subsequently, because precarious condition, respondent Redington appointed as trustee liquidation business pursuant to Investor Protection (SIPA). During liquidation, cash on hand, well sum money advanced Corporation (SIPC) under SIPA, proved be insufficient make whole those customers who had left assets or deposits Weis. The SIPC then filed an action damages against petitioner District Court, seeking impose liability upon reason its allegedly improper audit statements alleging that such conduct breached duties owed SIPC, trustee, others common law, 17(a), regulations, misconduct prevented true from becoming known until it too late forestall lessen adverse consequences customers. Court dismissed complaint, holding no claim relief stated private cause could implied 17(a). Appeals reversed, imposes duty accountants, breach gives rise right favor broker-dealer's customers, assert behalf Held: There is Pp. 568-579. (a) In terms, simply requires broker-dealers keep file may prescribe, does not purport create anyone. section's intent, evident face, provide SEC, Exchange, other authorities sufficiently early warning enable them take appropriate protect investors before collapse, any stretch language section confer rights remedy event regulatory are unsuccessful achieving their objectives broker-dealer becomes insolvent corrective steps can taken. 568-571. (b) conclusion implicit reinforced fact Act's legislative history entirely silent whether should available. This also supported statutory scheme which sections explicitly grant causes action. More particularly, significantly broader than one granted 18(a), provides principal express civil misstatements but limits purchasers sellers securities. 571-574. (c) inquiry case ends when determined basis Congress did intend create, either expressly implication, Further inquiries "necessity" implying proper forum enforcement asserted have little relevance decision case. Pp.575-576 (d) Section 27 remedial purposes do furnish sufficient ground federal courts petitioner's alleged merely grants jurisdiction district over violations suits enforce thereunder venue service process. It creates own force effect liabilities. And generalized references "remedial purposes" justify reading provision "more broadly reasonably permit." v. Sloan, 436 103, 116, 98 1702, 1711, 56 148. 576-578. 592 617, reversed remanded. Arnold I. Roth, City, petitioner. Philip R. Forlenza, respondent, Corp. James B. Kobak, Jr., Redington. Mr. Justice REHNQUIST delivered opinion Court. 1 Once again, we called decide statute providing one. Term alone, been asked undertake task fewer five times cases certiorari.1 Here firms certain Act), 48 Stat. 897, amended, 15 U.S.C. 78q(a), accountants reports, based contained reports.2 * Petitioner Touche Ross Co. certified public accountants. Weis Inc. (Weis), (Commission) serve independent accountant 1969 1973. capacity, conducted audits Act, rules regulations adopted thereunder. 17 CFR 240.17a-5 (1972).3 responses questionnaires firms. 3 arises out insolvency 1973, learned possible officers. May sought injunction barring officers conducting violation Act.4 At same time, (SIPC), authority, applied United States Southern decree adjudging were need protection afforded 1970 (SIPA), 84 1636, 78aaa seq.5 requested (Trustee) act SIPA. 4 hand appeared Accordingly, Trustee $14 million satisfy, up specified limits, claims approximately 34,000 creditors Despite advance there apparently remain several dollars unsatisfied customer claims.6 5 1976, York. "common allegations" at stage must accept true, aver conspired conceal substantial operating losses during 1972 fiscal year falsifying Act. App. 8. seek certification preparation answers questionnaire. Id., 15-19. complaint alleges conduct, Trustee, thereunder, Ross' dereliction 8-9. seeks recover $51 whose property unable return. million, subrogee has paid SIPA right. Act; state common-law accountants' negligence, contract, warranty.7 6 428 F.Supp. 483 (SDNY 1977).8 A divided panel Second Circuit reversed. 617 (1978). court first found F.2d, 621. next concluded, factors set forth Cort Ash, 422 66, 78, 95 2080, 2088, 45 26 (1975), accountant's his even though acknowledged "legislative mute issue." 622. held Weiss customers.9 We certiorari, 439 979, 563, 58 649 (1978), now reverse. II 7 question existence is, course, construction. Cannon University Chicago, 441 677, 688, 1946, 1953, 60 (1979); see National Railroad Passenger Association Passengers, 414 453, 458, 94 690, 693, 38 646 (1974) (hereinafter Amtrak ). SIPC's argument implication tort principles, therefore, misplaced. Brief Respondent 22-23. As recently emphasized, "the violated some person harmed automatically give person." supra, U.S., S.Ct., 1953. Instead, our limited solely determining intended Trustee. involving interpretation statute, analysis begin itself. 689, 1953; Teamsters Daniel, 551, 558, 790, 795-796, 808 Santa Fe Industries, Green, 430 462, 472, 97 1292, 1300, 51 480 (1977); Piper Chris-Craft Inc., 1, 24, 926, 940, 124 Ernst Hochfelder, 425 185, 197, 96 1375, 1382, 47 668 (1976). 8 time pertinent us, read, relevant part, follows: 9 "Every national exchange, every thereof, . broker dealer title, shall make, keep, preserve periods, accounts, correspondence, records, prescribe necessary interest investors." 78q(a) (1970 ed.). 10 prescribe. not, past circumstances But finding remedies, least prohibited created parties. E. g., supra (20 1681); Johnson Railway Express Agency, 421 454, 1716, 44 295 (1975) (42 1981); Superintendent Insurance Bankers Life Cas. Co., 404 6, 92 165, 30 128 (1971) (15 78j(b)); Sullivan Little Hunting Park, 396 229, 90 400, 24 386 (1969) 1982); Allen State Board Elections, 393 544, 89 817, 22 ( 42 1973c); Jones Alfred H. Mayer 392 409, 88 2186, 20 1189 (1968) J. Case Borak, 377 426, 1555, 12 423 (1964) 78n(a)). By contrast, neither confers parties nor proscribes unlawful. 11 intent face. like provisions countless statutes require regulated businesses periodic governmental perform functions. information oversee compliance various they concerned. case, along inspections information, ensure "net capital rule," tool monitor health risks involved leaving broker-dealers.10 Commission, collapse particular involved. or, indeed, forward-looking, retrospective; insolvency, recompense occurred. short, inferring lay 79, 2088. recognized, available nevertheless argue deny infer congressional silence hazardous enterprise, best. See Clara Pueblo Martinez, 49, 64, 1670, 1680, 106 where, here, plain weighs remedy, suggestion whatsoever reinforces find within section. 82-84, 2089-2091; cf. Barbour, 412, 1733, 263 (1975); Amtrak, (1974); T. M. States, 359 464, 79 904, 952 (1959).11 13 justification imply establish part. First, flanked 16(b), 78p(b); 78r(a). 9(e) 78i(e). 20, 78t. Obviously, then, wished damage knew how so expressly. Blue Chip Stamps Manor Drug Stores, 723, 734, 1917, 1919, 539 693; 471, 908. 14 Second, 18(a) persons, "make made" materially misleading documents although persons who, reliance statements, purchased sold security price affected statements.12 78r(a); 211 n. 31, 1389 31; 736, 1925. Since allege issue, cannot sue 18(a).13 get would received if accurate.14 exclusive made sellers. They deprive whom represent, reports. evidence support view including 17(a).15 Certainly, pointed except 18(a)'s purview. Cf. Corp., 419-420, 1738; 693. For where contemporaneously passage terms securities, extremely reluctant chose provide. 735-736, 1925-1926; 210, 1389; 421-423, 1738-1740; 908.16 urge, agreed, stop here. Relying consider "effectuate purpose section" traditionally relegated law. contend essential goals properly matter federal, state, concern. 30-35; 42-52. reach merits arguments concerning believe four considered "relevant" each these entitled equal weight. central remains Indeed, three discussed —the focus history, purpose, 2088—are ones relied intent. Here, identifiable class agree speak issue remedies this, there: Congress, action, definitely answered negative. 16 Finally, (1964), 14(a) 78n(a), shareholders resulting deceptive proxy solicitations 14(a). emphasize Borak discusses which, inter alia, thereunder.17 breach.18 effect; source plaintiffs' found, all, substantive enforce, jurisdictional provision. 424, 1740. 690-693, 13, 1954-1955 13; 25, 941; 557, 827. actual decline read virtually Acts supra.19 invocation similarly unavailing. Only last Term, emphasized will 148 (1978); 200, 1384. mere designed brokers' behalf. 9, 9; 421, 1739. To extent today's differs suffices say series since adhered stricter standard follow today. 688-709, 1953-1964. ultimate thinks improve enacted into III 18 result sanctions injustice. wrong forum, liberty legislate. If circumstances, it. "[I]t us fill hiatus area." Wheeldin Wheeler, 373 647, 652, 83 1441, 1446, 605 (1963). nothing said prevents creating arising intends aware effectuate 19 judgment remanded further proceedings consistent opinion. ordered. 21 POWELL took part consideration BRENNAN, concurring. 23 I join Court's 1934, respondents, represent bankrupt firm, account injured improperly preparing certifying promulgated Under tests established prior cases, respondents Although analyses outlined often overlap, when, clearly "create plaintiff," id., i. e., plaintiff " 'one especial benefit enacted,' ibid., quoting Texas Pacific Rigsby, 241 33, 39, 36 482, 484, L.Ed 874 (1916), "indication explicit implicit, remedy," remaining two themselves MARSHALL, dissenting. 25 authorize factors: "First, enacted,'—that plaintiff? indication one? Third, underlying finally, area basically concern inappropriate law?" (citations omitted). Applying factors, bring imposed 78q(a). 28 beneficiaries scheme. brokers "as [SEC], rule, prescribes 78q(a)(1) (emphasis added). 432, 1559, (1964). Pursuant battery directs verify ante, 563-564, 3. requirements, consistently regulators "monitor broker-dealers." Ante, 570.1 addition, events giving suit, mandated disclose revealed "material inadequacies" procedures. 37 Fed.Reg. 14608 (1972). Thus, clear "favored wards" 17, 623 (CA2 1978), initial test Ash satisfied here.2 29 With respect second factor, address availability 17. majority, however, discerns aspects Because unrelated suggests so. noted 711, 1965, (1979), "that complex accepted refusing otherwise separate section." finds interaction between §§ 78r(a), affords misstatement. light limitation, majority reasons, embraces plaintiffs. However, pertains course transactions, while concerned exclusively broker's insolvency. Given divergence focus, reflect restrict false regarding affect all. am unwilling assume "Congress simultaneously deprived [it] means protection." 623. here lacks resources all file, rely 1559; 556, 826, (1969); 12. Implying both facilitate SEC's efforts incentive functions properly. 31 reporting plainly traditional concern, rather relates effectiveness requirements. And, held, problems caused insolvencies scope, standards governing disclosure. 32 sum, straightforward application compels affirmance below. misapplies precedent disregards respectfully dissent. See, addition instant Chrysler Brown, 281, 1705, 208 Southeastern Community College Davis, 397, 2361, 980; Transamerica Mortgage Advisers, Lewis, 77-1645, cert. granted, 952, 348, 343 1972, date ed.), "(a) Every transacts through medium member, association, 78o memoranda, papers, books, investors. Such subject reasonable periodic, special, examinations examiners representatives deem substantially amended Amendments 1975. 14, 137. present 17(a)(1) contains essentially sentence version Compare ed.) (1976 194 1381 (1976), reserved performed auditing services Weis, Rule 17a-5 report certificate stating "clearly statement covered accounting principles practices reflected therein." 240.17a-5(a), (h) Release 3338 (Nov. 28, 1942), X-17A-5. contain "reasonably comprehensive scope made, reviewed procedures followed safeguarding accordance generally applicable circumstances; omitted procedure deemed case." 240.17a-5(g)(2) Nothing interpreted authority omit ordinarily employ expressing opinions Rule. 240.17a-5(g)(3). attach oath affirmation correct. 240.17a-5(b)(2). 1972. 240-17a-5 Some months later, indicted, conspiracy violate number recordkeeping Levine, 73 Crim. 693 (SDNY); Solomon, 509 863, 865 1975). Four defendants pleaded guilty count; count. Ibid. nonprofit organization dealers 78ccc. maintains fund, assessments members, used compensate, incur insolvencies. 78ddd, 78fff(f). determines failed danger failing meet obligations conditions indicating instability, apply competent adjudicating 78eee(a)(2). required. 78fff. 415-418, 1736-1738, (1975). liquidated, permitted return 67% received. 620 1978). Subsequent marshaling recoveries litigation reduced amount deficit fund property. 5. accounts protected maximum $50,000 customer, $20,000. Approximately institution court, commenced nearly identical suit court. Index 13996/76 (N.Y.S.Ct., N.Y. County). parties, factual allegations, claims, requests state-court begun discovery remained inactive complaint. 7. view, bookkeeping anybody." F.Supp., 489, 491. statements. 12, infra. bought stock certified. declined very concluded matter, titles, juxtaposition "strongly suggest only 18." 489. dismissed, exercising pendent subject-matter claims. 492-493. None latter rulings us. rejected Because, court's [by virtue 18's limiting language] "bailee" he return, "subrogee" paid. 624-625. maintain right, "SIPC ever customers." 624, 13. exercise actions Appeals' ruling stay pending determination 619 3, 625. hold wrongly unnecessary Appeals. e. Study Unsafe Unsound Practices Brokers Dealers, Report Recommendations H.R.Doc. 92-231, pp. 7-8, 15, 22, (1971); 11497 Assn. S.E.C. 322, 329 (1942). net rule minimum ratio aggregate indebtedness always liquid him current obligations. (c)(3); 240.15c3-1 needed requirements 15(b)(4), (b)(4) (authorizes administrative imposition for, applications Commission); 21, 78u (allows investigate enjoin refer Attorney General prosecution); 32, 78ff criminal rules); 4, supra. What confirms belief integral system preventative monitoring, liquidation. S.Rep. 792, 73d Cong., 2d Sess., (1934); H.R.Rep. 1383, Hearing H.R. 7852 House Committee Interstate Foreign Commerce, 225-226 (1934). 94-75, p. 119 U.S.Code Cong. Admin.News 1975, 179 (legislative 1975 amendments 17). provides: "Liability Any application, report, document chapter regulation undertaking registration provided subsection material fact, liable (not knowing misleading) statement, reliance, unless sued prove acted good faith knowledge misleading. law equity jurisdiction. may, discretion, payment costs assess costs, attorneys' fees, party litigant." another sustained bank Bank 75 Civ. 916 631 (Mulligan, J., dissenting). related brought claiming, 17a-5, plaintiffs purchaser-seller requirement thus Rich 415 95, 102-104 (S.D.N.Y.1976). correctness rulings. example, alleges: "Weis' 1973 forced [SIPA] become necessary, most going preserved [infusion merger firm] Moreover, truthful reporting, occurred end year, greater liabilities lower later." Senator Fletcher introducing bill formed "Section [18] act." 78 Cong.Rec. 2271 (1934) Richard Whitney, President testified length proposals. testimony Senate Banking Currency, indicated understanding extended "persons transacting securities." Hearings S.Res. 1st pt. 6638 insists specifically afford broker-dealers, might failure broker-dealer. plan insurance 5, recently, increased amounts insured $40,000 $100,000 1978, 265, 78fff-3 ed., Supp.III). asserts thought 62 37; Reply 11-12. believed 'filling void' passed 12; 91-1218, (1970). discern doubt inquiry. 91st still situation fraud committed broker, probably proof. influenced 27, 78aa, "The Territory place proceeding wherein transaction constituting defendant inhabitant business, process served wherever found. Judgments decrees rendered review 1254, 1291, 1292 Title 28. No assessed Supreme courts." appear itself cannot. 27-31; 25-35; say, control. 214, 1391; Industries (1977). 10(b) damages. 169 (1971). acquiesced 25-year-old acceptance 10(b). 1954-1955, 196, 1382; 730, 1922, similar longstanding lower-court 45-year Hawkins Merrill, Lynch, Pierce, Fenner Beane, 85 104, (W.D.Ark.1949). Hawkins, defalcating correspondent's advising correspondent controlled describe way avoid Citing Kardon Gypsum 69 512 (E.D.Pa.1946), injured, contrary. 121. H.R.Doc.No. 8024 (1967); 11,497 621-622 "neither unlawful." 569. parties; sense, generates expectations, appropriately rely, performed, prohibits inconsistent created.

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