Broker liability: the three faces of Zandford

The Supreme Court’s June 3 decision in SEC v. Zandford, 122 S. Ct. 1899, seems at first blush to be bad news for brokers – an unblemished affirmation of the SEC’s expansive view of broker liability. However, the opinion does set some bounds on the reach of Section 10(b) and Rule 10b‐5. And an unusual, if somewhat subtle aspect of the case is that Zandford may actually help brokerage firms move certain types of private securities class actions from state courts to the federal system, where they may be dismissed.