Michael Gass and John Baraniak on the Controversial Tambone Decision
| May 26, 2009
| Michael T. Gass and John R. Baraniak, Jr.
Michael Gass, chair of securities litigation, and John Baraniak, partner in securities litigation, co-wrote the guest column “Will the First Circuit Reverse Its Tambone Decision?" published in Law360’s Securities Law section.
The article examines the past, present, and probable future of the highly controversial SEC v. Tambone decision, which held that a mutual fund’s underwriters could be primarily liable for disseminating prospectuses containing material statements that they knew, or were reckless in not knowing, were false. The SEC is using the Tambone decision to bring Rule10b-5 claims against a vastly expanded group of potential defendants, consisting not just of underwriters but of market participants like auditors who review materials incorporated into offering. A decision by the First Circuit following a rehearing en banc is expected in the coming months, and Mr. Gass and Mr. Baraniak predict the Court will most likely to curtail the reach of Tambone.