Aiding or Encouraging Securities Fraud after Sell v Gama

Abstract

In Sell v. Gama, a 2013 decision, the Arizona Supreme Court held that Arizona’s securities act does not include a separate claim for aiding and abetting. The Court left open whether A.R.S. § 44-2003(A) — which extends liability to persons who participate in or induce a fraudulent sale — is broad enough to include aiding and abetting. The article addresses that issue and concludes that aiding and abetting survives through § 44-2003(A). In 1951, when § 44-2003(A) was enacted, aiding and abetting did not exist as a distinct theory of securities-law liability. Instead, it was through the standard of participation, and sometimes inducement, that courts imposed liability for what today (but not in 1951) would be pleaded and discussed as aiding and abetting. As a result, the 1951 lawmakers who enacted § 44-2003(A) would have seen no reason to list liability for participating and inducing and then separately mention aiding and abetting. In practice, moreover, the courts in decisions since 1951 have invariably found defendants liable as participants or inducers when the elements of aiding and abetting are present.