ernst ernst hochfelder argued december decided march petitioner accounting firm retained audit periodically brokerage firm books records respondents customers brokerage firm invested securities scheme ultimately revealed fraudulent perpetrated firm president principal stockholder fraud came light respondents filed action damages petitioner securities exchange act act makes unlawful use employ manipulative deceptive device contrivance contravention securities exchange commission sec rules alleged brokerage firm president scheme violated sec rule petitioner aided abetted violations failure conduct proper audits firm thereby failing discover internal practices prevented effective audit district granted petitioner motion summary judgment dismissed action holding whether cause action based merely allegations negligence genuine issue material fact whether petitioner conducted audits accordance generally accepted standards appeals reversed remanded holding one breaches duty inquiry disclosure owed another liable damages aiding abetting third party violation rule fraud discovered prevented breach genuine issues fact whether petitioner committed breach whether inquiry disclosure led discovery prevention president fraud held private cause action damages lie rule absence allegation scienter intent deceive manipulate defraud defendant part pp use words manipulative device contrivance clearly shows intended proscribe type conduct quite different negligence particularly use word manipulative virtually term art used connection securities markets connotes intentional willful conduct designed deceive defraud investors controlling artificially affecting price securities pp act legislative history also indicates addressed practices involving element scienter read impose liability negligent conduct alone pp structure act interrelated securities act act support contention since contrast certain sections acts terms explicitly restricted willful knowing purposeful conduct construed require negligent action inaction precondition civil liability instance congress acts created express civil liability favor purchasers sellers securities clearly specified whether recovery premised knowing intentional conduct negligence entirely innocent mistake express recognition cause action premised negligent behavior example stands sharp contrast language moreover express civil remedies act allowing recovery negligent conduct subject significant procedural restrictions indicating judicially created private damages remedy comparable restrictions extended consistently congress intent actions premised negligence since allow causes action express act remedies brought instead thereby nullifying effectiveness restrictions remedies pp language rule arguably read proscribing type material misstatement omission course conduct effect defrauding investors whether wrongdoing intentional reading comport rule administrative history makes clear intended apply activities involving scienter importantly scope rule exceed power granted sec whose language history compel interpreting rule apply intentional wrongdoing pp case remanded proceedings require proof negligent misfeasance petitioner since throughout history case respondents proceeded theory liability premised negligence fact specifically disclaiming petitioner engaged fraud intentional misconduct powell delivered opinion burger stewart white marshall rehnquist joined blackmun filed dissenting opinion brennan joined post stevens took part consideration decision case robert berner argued cause petitioner briefs francis morrissey michael madda kenneth lang willard king argued cause filed brief respondents hochfelder et al willard lassers argued cause respondents allison et al brief donald vetter leon despres alex elson paul gonson argued cause securities exchange commission amicus curiae urging affirmance brief solicitor general bork deputy solicitor general friedman lawrence nerheim charles luedde kenneth bialkin louis craco filed brief american institute certified public accountants amicus curiae urging reversal justice powell delivered opinion issue case whether action civil damages may lie securities exchange act act stat securities exchange commission rule cfr absence allegation intent deceive manipulate defraud part defendant petitioner ernst ernst accounting firm retained first securities company chicago first securities small brokerage firm member midwest stock exchange national association securities dealers perform periodic audits firm books records connection audits ernst ernst prepared filing securities exchange commission commission annual reports required first securities act also prepared first securities responses financial questionnaires midwest stock exchange exchange respondents customers first securities invested fraudulent securities scheme perpetrated leston nay president firm owner stock nay induced respondents invest funds escrow accounts represented yield high rate return respondents majority transactions occurring fact escrow accounts nay converted respondents funds use immediately upon receipt transactions customary form dealings first securities customers respondents drew personal checks payable nay designated bank account escrow accounts reflected books records first securities none shown periodic accounting respondents connection investments included first securities filings commission exchange fraud came light nay committed suicide leaving note described first securities bankrupt escrow accounts spurious respondents subsequently filed action damages ernst ernst district northern district illinois act complaint charged nay escrow scheme violated commission rule ernst ernst aided abetted nay violations failure conduct proper audits first securities revealed discovery respondents cause action rested theory negligent nonfeasance premise ernst ernst failed utilize appropriate auditing procedures audits first securities thereby failing discover internal practices firm said prevent effective audit practice principally relied nay rule open mail addressed first securities addressed first securities attention even arrived absence respondents contended ernst ernst conducted proper audit discovered mail rule existence rule disclosed reports exchange commission ernst ernst irregular procedure prevented effective audit led investigation nay revealed fraudulent scheme respondents specifically disclaimed existence fraud intentional misconduct part ernst ernst extensive discovery district granted ernst ernst motion summary judgment dismissed action rejected ernst ernst contention cause action aiding abetting securities fraud maintained rule merely allegations negligence concluded however genuine issue material fact respect whether ernst ernst conducted audits accordance generally accepted auditing standards appeals seventh circuit reversed remanded holding one breaches duty inquiry disclosure owed another liable damages aiding abetting third party violation rule fraud discovered prevented breach reasoned ernst ernst statutory duty inquiry adequacy first securities internal control system contracted audit first securities prepare filing commission annual report first securities financial condition required act rule reasoned respondents beneficiaries statutory duty inquire related duty disclose material irregularities discovered concluded genuine issues fact whether ernst ernst failure discover comment upon nay mail rule constituted breach duties inquiry disclosure whether inquiry disclosure led discovery prevention nay fraud granted certiorari resolve question whether private cause action damages lie rule absence allegation scienter intent deceive manipulate defraud conclude therefore reverse ii federal regulation transactions securities emerged part aftermath market crash securities act act stat amended et designed provide investors full disclosure material information concerning public offerings securities commerce protect investors fraud imposition specified civil liabilities promote ethical standards honesty fair dealing see act intended principally protect investors manipulation stock prices regulation transactions upon securities exchanges markets impose regular reporting requirements companies whose stock listed national securities exchanges see although acts contain numerous carefully drawn express civil remedies criminal penalties congress recognized efficient regulation securities trading accomplished rigid statutory program part act congress created commission provided arsenal flexible enforcement powers see act act section act makes unlawful person use employ connection purchase sale security manipulative deceptive device contrivance contravention rules regulations commission may prescribe necessary appropriate public interest protection investors acting pursuant power conferred commission promulgated rule provides employment manipulative deceptive devices shall unlawful person directly indirectly use means instrumentality interstate commerce mails facility national securities exchange employ device scheme artifice defraud make untrue statement material fact omit state material fact necessary order make statements made light circumstances made misleading engage act practice course business operates operate fraud deceit upon person connection purchase sale security section makes unlawful use employment manipulative deceptive device contrivance contravention commission rules words manipulative deceptive used conjunction device contrivance strongly suggest intended proscribe knowing intentional misconduct see sec texas gulf sulphur friendly concurring cert denied sub nom coates sec loss summary remarks bus law special issue see also kohn american metal climax adams concurring dissenting amicus curiae brief however commission contends nothing language manipulative deceptive device contrivance limits operation knowing intentional practices support view commission cites overall congressional purpose acts protect investors false deceptive practices might injure see affiliated ute citizens supra superintendent insurance bankers life cas supra case borak see also sec capital gains res commission reasons since effect upon investors given conduct regardless whether conduct negligent intentional congress must intended bar practices done knowingly intentionally logic approach impose liability wholly faultless conduct conduct results harm investors result commission unlikely support apart logic might lead commission add gloss operative language statute quite different commonly accepted meaning see addison holly hill fruit products argument simply ignores use words manipulative device contrivance terms make unmistakable congressional intent proscribe type conduct quite different negligence use word manipulative especially significant virtually term art used connection securities markets connotes intentional willful conduct designed deceive defraud investors controlling artificially affecting price securities addition relying upon commission argument respect operative language statute respondents contend since dealing remedial legislation tcherepnin knight must construed technically restrictively flexibly effectuate remedial purposes affiliated ute citizens quoting sec capital gains research bureau supra argue remedial purposes acts demand construction embraces negligence standard liability seeking accomplish broad remedial goals congress adopt uniformly negligence standard even express civil remedies circumstances respect certain classes defendants congress create express liability predicated upon failure exercise reasonable care act stat amended liability experts accountants misleading statements portions registration statements responsible situations good faith absolute defense act stat amended misleading statements document filed pursuant act still circumstances congress created express liability regardless defendant fault act issuer liability misleading statements registration statement thus evident congress fashioned standards fault express civil remedies acts particularized basis ascertainment congressional intent respect standard liability created particular section acts must therefore rest primarily language section deal judicially implied liability statutory language certainly less important view language clearly connotes intentional misconduct mindful language statute controls sufficiently clear context oregon packard motor car nlrb inquiry may unnecessary turn nevertheless legislative history act ascertain whether support meaning attributed commission respondents although extensive legislative history act bereft explicit explanation congress intent think relevant portions history support conclusion addressed practices involve element scienter read impose liability negligent conduct alone original version develop act contained identical bills introduced senator fletcher representative rayburn sess sess section bills present evolved proscribed unlawful use device contrivance device contrivance way manner commission may rules regulations find detrimental public interest proper protection investors subsections proposed listed specific practices congress empowered commission regulate rulemaking power see short sale order soon hearings house bill held substitute bill introduced houses abbreviated modified operative language read manipulative device contrivance see still third bill retaining commission power regulate specific practices enumerated prior bills omitting reference commission authority prescribe rules concerning manipulative deceptive devices general introduced passed house final language modified version senate amendment last house bill see conf neither intended scope reasons changes operative language revealed explicitly legislative history act deals primarily aspects legislation indication however intended proscribe conduct involving scienter extensive hearings preceded passage act touched briefly discussion devoted enumerated devices commission empowered proscribe relevant exposition provision become thomas corcoran spokesman drafters corcoran indicated subsection later says thou shalt devise cunning devices course subsection clause prevent manipulative devices think objection kind clause commission authority deal new manipulative devices hearings house committee interstate foreign commerce legislative reports address scope catchall function directly considering specific manipulative practices left commission regulation however reports indicate liability attach absent scienter supporting conclusion congress intended lesser standard senate report discusses generally various abuses precipitated need legislation inadequacy stock exchanges report analyzes component provisions statute parse specific reference following addition discretionary elastic powers conferred administrative authority effective regulation must include several clear statutory provisions reinforced penal civil sanctions aimed manipulative deceptive practices demonstrated fulfill useful function sanctions found sections investor suffered loss reason illicit practices equitable allowed recover damages guilty party bill provides person unlawfully manipulates price security induces transactions security means false misleading statements makes false misleading statement report corporation shall liable damages bought sold security prices affected violation statement case burden plaintiff show violation fact statement false misleading relied thereon damage defendant may escape liability showing statement made good faith supra emphasis supplied acts constitute interrelated components federal regulatory scheme governing transactions securities see blue chip stamps indicated sec national securities interdependence various sections securities laws certainly relevant factor interpretation language congress chosen recognizing respondents commission contrast sections acts support contention civil liability may imposed upon proof negligent conduct think misconceive significance provisions acts commission argues congress explicit requiring willful conduct standard fault intended citing act stat generally proscribes manipulation securities prices sections example respectively prohibit manipulation security prices purpose creating false misleading appearance active trading security respect market security purpose inducing purchase sale security others see also section imposes upon ny person willfully participates act transaction violation provisions civil liability anyone purchased sold security price affected manipulative activities commission concludes since terms explicitly restricted willful knowing purposeful conduct construed cases require negligent action inaction precondition civil liability structure acts support commission argument instance congress created express civil liability favor purchasers sellers securities clearly specified whether recovery premised knowing intentional conduct negligence entirely innocent mistake see act stat amended act stat amended example act unambiguously creates private action damages registration statement includes untrue statements material facts fails state material facts necessary make statements therein misleading within limits specified issuer securities held absolutely liable damages resulting misstatement omission experts accountants prepared portions registration statement accorded due diligence defense effect negligence standard expert may avoid civil liability respect portions registration statement responsible showing reasonable investigation reasonable ground believe statements responsible true omission material fact see escott barchris constr supp sdny express recognition cause action premised negligent behavior stands sharp contrast language significantly undercuts commission argument also consider significant express civil remedies act allowing recovery negligent conduct see subject significant procedural restrictions applicable section act example authorizes require plaintiff bringing suit thereof post bond costs including attorney fees specified circumstances assess costs conclusion litigation section specifies statute limitations one year time violation discovered event exceed three years time offer sale applicable actions brought restrictions significantly imposed amendments act adopted part act prior amendment contained provision payment costs act may stat see act june stat amendments also substantially shortened statute limitations provided compare stat see act stat think procedural limitations indicate judicially created private damages remedy comparable restrictions extended consistently intent congress actions premised negligent wrongdoing extension allow causes action covered brought instead thereby nullify effectiveness carefully drawn procedural restrictions express actions see fischman raytheon mfg sec texas gulf sulphur friendly concurring rosenberg globe aircraft supp ed loss supra jennings marsh securities regulation ed unwilling bring result absent substantial support legislative history none addressed point primarily language history commission contends however subsections rule cast language standing alone encompass intentional negligent behavior subsections respectively provide unlawful make untrue statement material fact omit state material fact necessary order make statements made light circumstances made misleading engage act practice course business operates operate fraud deceit upon person viewed isolation language subsection arguably subsection read proscribing respectively type material misstatement omission course conduct effect defrauding investors whether wrongdoing intentional note first reading harmonized administrative history rule history making clear commission adopted rule intended apply activities involved scienter importantly rule adopted pursuant authority granted commission rulemaking power granted administrative agency charged administration federal statute power make law rather power adopt regulations carry effect congress expressed statute dixon quoting manhattan general equipment commissioner thus despite broad view rule advanced commission case scope exceed power granted commission congress reasons stated think commission original interpretation rule compelled language history related sections acts see gerstle lanza drexel sec texas gulf sulphur friendly concurring loss supra statute speaks specifically terms manipulation deception implementing devices contrivances commonly understood terminology intentional wrongdoing history reflects expansive intent quite unwilling extend scope statute negligent conduct iii recognizing rule might held require proof negligent nonfeasance ernst ernst precondition imposition civil liability respondents contend case remanded trial whatever standard adopted throughout lengthy history case respondents proceeded theory liability premised negligence specifically disclaiming ernst ernst engaged fraud intentional misconduct circumstances think inappropriate remand action proceedings judgment appeals reversed footnotes two separate substantially identical complaints initially filed different members present group respondents subsequently respondents jointly filed first amended complaint two cases treated district consolidated consolidated formally appeal first count complaint directed exchange charging acts omissions aided abetted nay fraud summary judgment favor exchange affirmed appeal hochfelder midwest stock exchange cert denied immediately nay suicide commission commenced receivership proceedings first securities proceedings respondents except two asserted claims based fraudulent escrow accounts claims ultimately allowed sec first securities cert denied held nay conduct violated rule first securities liable nay fraud aider abettor question ernst ernst liability considered case response interrogatories district respondents conceded accuse ernst ernst deliberate intentional fraud merely inexcusable negligence app district also held respondents action barred doctrine equitable estoppel applicable illinois statute limitations three years see infra customers first securities respondents sent confirmation forms required rule requesting verify accuracy statements notify ernst ernst exceptions although confirmation forms contained reference escrow accounts ernst ernst notified fact last audit first securities ernst ernst completed december first complaint action filed february support holding appeals cited decision hochfelder midwest stock exchange supra detailed elements necessary establish claim rule based defendant aiding abetting securities fraud solely inaction see supra case plaintiff must show party charged aiding abetting knowledge breach duty inquiry knowledge fraud possessing knowledge party failed act due improper motive breach duty disclosure explained instant case elements comprise flexible standard liability amplified according peculiarities case view holding intent deceive manipulate defraud required civil liability rule need consider whether civil liability aiding abetting appropriate section rule elements necessary establish cause action see brennan midwestern life ins supp supp nd ind aff cert denied defendant held liable giving active knowing assistance third party engaged violations securities laws see generally ruder multiple defendants securities law fraud cases aiding abetting conspiracy pari delicto indemnification contribution rev see supra concluded duty inquiry imposed ernst ernst grounded concern protection investors respondents without reaching question whether statute imposed direct duty respondents held ernst ernst owed duty inquiry respondents arising contract first securities since ernst ernst specifically foresee respondents limited class might suffer negligent audit compare glanzer shepard ultramares touche see rhode island hospital trust nat bank swartz moreover respondents conceded rely financial statements reports prepared ernst ernst certificate opinion briefs respondents allude several alleged failings ernst ernst audit first securities principally failure inquire collectibility certain loans first securities nay failure follow memorandum characterized first securities overall system internal control weak centralization functions cashier appeals mentioned none alleged deficiencies opinion case although discuss loans nay certain related matters opinion hochfelder midwest stock exchange holding existence facts insufficient put exchange notice inquiry first securities financial affairs required appeals also reversed district holding respect equitable estoppel statute limitations see supra view disposition case need address issues although verbal formulations standard applied varied several courts appeals held substance negligence alone sufficient civil liability rule see white abrams flexible duty standard myzel fields cert denied negligence sufficient kohler kohler knowledge required courts appeals held type scienter intent defraud reckless disregard truth knowing use practice defraud necessary action see clegg conk cert denied element scienter conscious fault lanza drexel willful reckless disregard truth decisions announcing form negligence suffices civil liability rule actually involved negligent conduct smallwood pearl brewing cert denied kohn american metal climax adams concurring dissenting bucklo scienter rule nw rev opinion term scienter refers mental state embracing intent deceive manipulate defraud certain areas law recklessness considered form intentional conduct purposes imposing liability act need address question whether circumstances reckless behavior sufficient civil liability rule since case concerns action damages also need consider question whether scienter necessary element action injunctive relief rule cf sec capital gains research bureau respondents contend ernst ernst owed direct duty act rule conduct proper audit first securities may base private cause action ernst ernst violation duty respondents cause action however premised solely alleged violation rule lengthy history litigation amended original complaint aver cause action rule therefore consider claim liability properly us even assuming respondents assert claim independently see note implied liability securities exchange act harv rev sec release may birnbaum newport steel cert denied kardon national gypsum supp ed see cases cited supra compare comment scienter rule rev note negligent misrepresentations rule chi rev note securities acts harv rev note civil liability section rule suggestion replacing doctrine privity yale loss securities regulation ed commission permit recovery upon proof negligence cases order harmonize civil liability express civil remedies contained acts commission limit circumstances civil liability imposed negligent violation rule situations defendant knew reasonably foresee plaintiff rely conduct ii plaintiff fact rely iii amount plaintiff damages caused defendant conduct definite ascertainable brief sec amicus curiae commission concludes present record establish conditions since ernst ernst reasonably foreseen financial statements first securities induce respondents invest escrow accounts respondents fact rely ernst ernst audits amount respondents damages unascertainable respondents accept commission basic analysis operative language statute rule reject additional requirements recovery negligent violations let general words draw nourishment purpose one thing draw unexpressed spirit outside bounds normal meaning words quite another legislation expressed technical terms addressed common run men therefore understood according sense thing ordinary man right rely ordinary words addressed addison holly hill fruit products see frankfurter reflections reading statutes rev webster international dictionary ed defines device hat devised formed design contrivance invention project scheme often scheme deceive stratagem artifice contrivance pertinent part thing contrived used contriving scheme plan artifice turn contrive pertinent part defined devise plan plot fabricate design invent scheme commission also ignores use terms use employ language supportive view congress intend embrace negligent conduct webster international dictionary supra defines manipulate manage treat artfully fraudulently manipulate accounts exchanges force prices matched orders wash sales fictitious reports rig see infra see supra support position commission cites statements corcoran senate hearings modern society many things make crimes sheer matters negligence intent necessary every crime hearings subcommittee stock exchange practices senate committee banking currency comments taken context shed light meaning corcoran remarks made discussion whether criminal violations arise material part incorporated act absence specific intent influence security prices personal gain remarks moreover addressed scope general observations concerning activity society might proscribe criminal law ferdinand pecora counsel committee draftsman provident securities described language xcluding scope act done ulterior motives purposes set forth act hearings subcommittee stock exchange practices supra prior passage act proposed amended require willful behavior prerequisite civil liability violations compare act see commission also relies objections draft version see supra raised representatives securities industry house senate hearings warned language vague commission might outlaw anything hearings subcommittee stock exchange practices supra hearings house committee interstate foreign commerce remarks kind made course legislative debate hearings persons responsible preparation drafting bill entitled little weight see mine workers wrightwood dairy especially regard statements legislative opponents zeal defeat bill understandably tend overstate reach nlrb fruit packers see schwegmann calvert distillers wash sales transactions involving change beneficial ownership matched orders orders security entered knowledge orders substantially size substantially time price entered different persons security section act proscribes wash sales matched orders effectuated purpose creating false misleading appearance active trading security registered national securities exchange respect market security see latimer thornton individuals sign registration statement directors issuer underwriter securities similarly accorded complete defense civil liability based exercise reasonable investigation reasonable belief registration statement misleading see feit leasco data processing equipment supp edny underwriters established defense see generally jennings marsh securities regulation ed sources cited therein folk civil liabilities federal securities acts barchris case rev section creates potential civil liability seller securities favor purchaser misleading statements omissions connection transaction seller exculpated proves know exercise reasonable care known untruth omission section act amended title ii act makes persons control person liable liable jointly severally extent controlled person unless knowledge reasonable ground believe existence facts reason liability controlled person alleged exist see act june stat provisions act expressly create civil liability except directed specific classes individuals directors officers beneficial holders securities see provident securities kern county land occidental petroleum contains condition requiring something negligence section creates potential civil liability person willfully participates manipulation securities national exchange section creates potential civil liability misleading statements filed commission provides defendant defense acted good faith knowledge statement false misleading imposes liability upon controlling person violations act control exculpates defendant acted good faith induce act constituting violation emphasizing important difference operative language purpose act contrasted however courts concluded proof scienter unnecessary action damages shareholder recipients materially misleading proxy statement issuer corporation gerstle see also kohn american metal climax adams concurring dissenting since statute limitations provided civil actions law limitations forum state followed cases judicially implied remedies see holmberg armbrecht cases cited therein although always certain state statute limitations followed statutes limitations usually longer period provided loss supra costs see infra congress regarded restrictions private damages actions significant introducing title ii act senator fletcher indicated amendment act providing potential payment costs including attorneys fees important amendment cong rec one purposes deter actions brought solely potential settlement value see ibid conf blue chip stamps manor drug stores deterrent lacking context district power award attorneys fees sharply circumscribed see alyeska pipeline service wilderness society bad faith requirement rich ex rel industrial lumber section act creates private cause action persons accountants make cause made materially misleading statements reports documents filed commission need consider question whether cause action may maintained basis actions constitute violation liability extends persons reliance statements purchased sold security whose price affected statements liability limited however important respect defendant accorded defense acted good faith knowledge statement false misleading consistent language legislative history section suggests something negligence part defendant required recovery original version see supra provided defendant liable acted good faith exercise reasonable care ground believe statement false misleading accounting profession objected provision ground liability created honest errors judgment see senate hearings stock exchange practices supra house hearings supra subsequent drafts current formulation adopted also significant actions limited relatively short statute limitations similar provided act moreover act district authorized require plaintiff post bond costs including attorneys fees assess costs conclusion litigation apparently rule hastily drafted response situation clearly involving intentional misconduct commission regional administrator boston reported director trading exchange division president corporation telling shareholders corporation poorly purchasing shares resultant depressed prices fact business exceptionally well rule drafted approved day report received see conference codification federal securities laws bus law remarks milton freeman one rule codrafters blue chip stamps supra blackmun dissenting although adopted pursuant language rule appears derived significant part act blue chip stamps supra blackmun dissenting sec texas gulf sulphur friendly concurring cert denied sub nom coates sec indication administrative history rule subsections intended proscribe conduct involving scienter indeed commission release issued contemporaneously rule explained securities exchange commission today announced adoption rule prohibiting fraud person connection purchase securities previously existing rules fraud purchase securities applied brokers dealers new rule closes loophole protections fraud administered commission prohibiting individuals companies buying securities engage fraud purchase sec release may fiscal year commission adopted rule additional protection investors new rule prohibits fraud person connection purchase securities previously existing rules fraud purchase securities applied brokers dealers annual report securities exchange commission find language history dispositive appropriate standard liability occasion examine additional considerations policy set forth parties may influenced lawmakers formulation statute note standard urged respondents significantly broaden class plaintiffs may seek impose liability upon accountants experts perform services express opinions respect matters acts last term blue chip stamps pertinently observed much development law deceit elimination artificial barriers recovery claims first express concern inexorable broadening class plaintiff may sue area law ultimately result harm good ultramares touche chief judge cardozo observed respect liability indeterminate amount indeterminate time indeterminate class hazards business conducted terms extreme enkindle doubt whether flaw may exist implication duty exposes consequences see supra justice blackmun justice brennan joins dissenting see blue chip stamps manor drug stores interprets securities exchange act securities exchange commission rule cfr restrictively narrowly thereby stultifies recovery victim time confining statute rule situations defendant scienter intent deceive manipulate defraud sheer negligence says within reach statute rule contemplated great reforms effectuated congress commission perhaps right doubt government commission doubt evidenced thrust brief filed solicitor general behalf commission amicus curiae opinion sure certain technical consistency seems however investor victimized much negligent conduct positive deception logical drive wedge two saying congress clearly intended one certainly one questions fact respondents victims intentional securities fraud practiced leston nay issue course petitioner accountant firm involvement firm responsibility rule language rule making unlawful person connection purchase sale security make untrue statement material fact omit state material fact necessary order make statements made light circumstances made misleading engage act practice course business operates operate fraud deceit upon person motion summary judgment therefore respondents allegations view sufficient district dismissal action improper extent dismissal rested proposition suit maintained rule mere negligence opposite appears true least second circuit respect suits sec enjoin violation rule sec management dynamics sec spectrum sec texas gulf sulphur cert denied sub nom coates sec see real distinction situation one surely question whether negligent conduct violates rule depend upon plaintiff identity negligence violation factor sec sues must violation factor private party sues present posture case concerned issue violation secondary issue private party judicially created entitlement damages specific relief see rondeau mosinee paper critical importance auditing accountant role insuring full disclosure overestimated sec emphasized certifying statements accountant duty safeguard public interest client touche niven bailey smart complex society accountant certificate lawyer opinion instruments inflicting pecuniary loss potent chisel crowbar benjamin cert denied sub nom howard light initial inquiry whether ernst ernst preparation certification financial statements first securities company chicago negligent failure perceive nay extraordinary mail rule alleged respects thus whether rule violated thwarted today decides thwarted rests congress rephrase investor victims ever relief federal securities laws thought enacted broad needed deserving benefit understandably resolve number issues suggested briefs see ante view result reached purpose served considering issues dissent