TAILIEUCHUNG - What Janus Meant: The First Wave of Court Decisions Interpreting the Supreme Court’s “Ultimate Authority” Test in Securities Cases

Investments are deemed to be held for trading. Investments are recorded at their fair value with the change between this amount and average cost being recorded as unrealized appreciation (depreciation) in value of investments in the Statement of Operations. Securities listed on a recognized public securities exchange in North America are valued for financial statement purposes at their bid prices for long positions and ask prices for short positions. The Manager uses fair value pricing when the price of a security held in the Fund is unavailable, unreliable or not considered to reflect the current value, and may determine another value which it considers to be fair and reasonable using the services of. | PAUL HASTINGS December 2011 STAY CURRENT A Client Alert from Paul Hastings What Janus Meant The First Wave of Court Decisions Interpreting the Supreme Court s Ultimate Authority Test in Securities Cases BY THE SECURITIES LITIGATION AND ENFORCEMENT GROUP CONTRIBUTING AUTHORS GRACE A. CARTER THOMAS A. ZACCARO JOSHUA G. HAMILTON AND TIMOTHY D. REYNOLDS The Supreme Court s decision in Janus Capital Group Inc. v. First Derivative Traders 131 S. Ct. 2296 June 13 2011 sent a powerful signal when it held that the investment advisor to a mutual fund could not be held primarily liable under Section 10 b of the Securities Exchange Act for statements in the fund s prospectus because the investment advisor did not have ultimate authority over the statements. The Janus decision already has impacted the securities fraud landscape. The Court s ruling appears straightforward - no primary liability except for those who have ultimate authority or control over the content and dissemination of a statement. In the six months since Janus was decided courts have applied the ruling in cases involving related corporate entities corporate officers and major shareholders. The Ninth Circuit has noted that Janus sets the pleading bar even higher in private securities fraud actions seeking to hold defendants primarily liable for the misstatements of others. 1 Yet just how high the pleading and proof bar has been set outside the mutual fund and investment advisor context remains an open question. Different federal courts - even within the same district -have come to different conclusions. Until higher courts rule on the scope of Janus the uncertainty created by these differing lower court decisions could blur the Janus bright line rule. And plaintiffs have begun to cast their nets wider looking for alternative theories to avoid dismissal under Janus. The Ultimate Authority Standard Set by Janus The Janus saga began when investors in Janus Capital Group common stock brought a putative securities .

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