SEC v. Apuzzo - 689 F.3d 204 (2d Cir. 2012)

Rule:

To satisfy the substantial assistance component of aiding and abetting, the Securities and Exchange Commission must show that a defendant in some sort associated himself with the venture, that he participated in it as in something that he wished to bring about, and that he sought by his action to make it succeed.

Facts:

The Securities and Exchange Commission (SEC) instituted a complaint alleging that defendant chief financial officer, Joseph Apuzzo, aided and abetted securities laws violations through his role in a fraudulent accounting scheme. The SEC alleged that Apuzzo agreed to participate in the fraudulent transactions. The district court granted Apuzzo’s motion to dismiss the complaint on the ground that the complaint did not meet the "substantial assistance" component of aiding and abetting liability because it failed to adequately allege that Apuzzo proximately caused the harm on which the primary violation was predicated.

Issue:

Did the complaint plausibly allege that the defendant aided and abetted the primary violation? 

Answer:

Yes.

Conclusion:

The judgment of the district court was reversed and the case was remanded for further proceedings. According to the court, in order to satisfy the substantial assistance component of aiding and abetting, the SEC was to show that the defendant in some sort associated himself with the venture, that he participated in it as in something that he wished to bring about, and that he sought by his action to make it succeed. Applying that test, the appellate court found that the complaint plausibly alleged that the CFO aided and abetted the primary violation. The CFO agreed to participate in the transactions; negotiated the details of those transactions, through which he extracted certain agreements from a second company in exchange for his company's participation; and approved and signed separate agreements with a third company and the second company.