Central Bank of Denver v. First Interstate Bank of Denver

Private aiding-and-abetting liability under Section 10(b) of the Securities Exchange Act.

Bondholders sued participants in a public financing transaction after alleged misstatements about land values securing bonds. Central Bank served as indenture trustee and allegedly delayed independent review of the appraisal, leading plaintiffs to assert aiding-and-abetting liability under Section 10(b).

The Court held that private plaintiffs may not maintain aiding-and-abetting suits under Section 10(b).

Justice Kennedy's opinion emphasized statutory text. Section 10(b) prohibits manipulative or deceptive conduct by a primary violator, but it does not expressly create private aiding-and-abetting liability. The Court declined to expand private liability beyond the conduct Congress had identified.

1. How does the rule affect information production, investor reliance, and enforcement costs?
2. What are the likely error costs for lawful market activity and for undetected misconduct?