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Aiding and Abetting Securities Violations

On Behalf of | Jul 18, 2015 | Securities Laws, Uncategorized

Can I Be Liable for Somebody Else’s Wrongdoing?:  Aiding and Abetting Liability in Securities Law Violations

The Dodd-Frank Amendment

The financial crisis and the ensuing economic downturn of the past few years prompted a series of reforms aimed at improving regulation of the financial industry.  The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in particular, amended the Securities Exchange Act of 1934 to permit the SEC to bring an action for aiding and abetting a securities law violation.  Specifically, the amendment provides that “any person that knowingly or recklessly provides substantial assistance to another person in violation [of the Securities and Exchange Act of 1934] shall be deemed to be in violation . . . to the same extent as the person to whom such assistance is provided.”[1]

How does this play out in practice?  Under what circumstances can I be liable for someone else’s wrongdoing in securities law violations?

Because of the ability to interpret “providing substantial assistance” broadly, we believe that it is advisable for everyone that is connected to someone involved in a securities offering to proceed carefully and consider this potential liability.  State authorities have also been noted as being aggressive in enforcement on these types of issues as well as the SEC.

Counsel should be hired early in the securities offering process.

This will be a two-part series.  Our next post will look at the issues in more detail.


This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances.  This article should not be treated as legal advice to any person or entity.

Steps have been taken to verify the contents of this article prior to publication.  However, readers should not, and may not, rely on this article.  Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.

About the Author

Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or

[1] 15 U.S.C. § 78t(e).