Full opinion text
MEMORANDUM AND ORDER RE SECONDARY ACTORS’ MOTIONS TO DISMISS HARMON, District Judge. The above referenced putative class action, brought on behalf of purchasers of Enron Corporation’s publicly traded equity and debt securities during a proposed federal Class Period from October 19, 1998 through November 27, 2001, alleges securities violations (1) under Sections 11 and 15 of the Securities Act of 1938 (“1933 Act”), 15 U.S.C. §§ 77k and 77o; (2) under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 (“Exchange Act” or “the 1934 Act”), 15 U.S.C. §§ 783(b), 78t(a), and 78t-l, and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission (“SEC”), 17 C.F.R. § 240.10b-5; and (3) under the Texas Securities Act, Texas Rev. Civ. Stat. Ann. art. 581-33 (Vernon’s 1964 & 2002 Supp.). Pending before the Court inter alia are motions to dismiss pursuant to Rules 8(e)(1), 9(b), and 12(b)(6) of the Federal Rules of Civil Procedure, the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), codified at 15 U.S.C. § 78u-4(b)(3)(A), and Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), filed by the following accounting firms, law firms, and investment banks/integrated financial services institutions (“secondary actors in securities markets”): (1) Canadian Imperial Bank of Commerce (“CIBC”)(# 615); (2) CitiGroup Inc. (# 629); (3) J.P. Morgan Chase & Co.(# 632); (4) Vinson & Elkins L.L.P. (# 648); (5) Arthur Andersen LLP (#650); (6) Barclays PLC (#653); (7) Credit Suisse First Boston (# 658); (8) Kirkland & Ellis (#660); (9) Bank of America Corporation (# 664); (10) Merrill Lynch & Co. (# 667); (11) Lehman Brothers Holdings Inc. (# 679); and (12) Deutsche Bank AG (# 716). In essence Lead Plaintiffs consolidated complaint alleges that these and other named Defendants “are liable for (i) making false statements, or failing to disclose adverse facts while selling Enron securities and/or (ii) participating in a scheme to defraud and/or a course of business that operated as a fraud or deceit on purchasers of Enron’s public securities during the Class Period.... ” Consolidated complaint (# 441) at 254. APPLICABLE LAW The rapid collapse of Enron Corporation (“Enron”) and the resulting scope, variety, and severity of losses are unprecedented in American corporate history. It is not surprising that this consolidated action raises a number of novel and/or controversial issues that the law has thus far not addressed or about which the courts are in substantial disagreement. Lead Plaintiff Regents of the University of California’s claims are grounded in securities statutes, but judicial construction of those statutes spans the full spectrum of possibilities. After a careful review of frequently divergent case law and extensive deliberation, the Court applies the following law to the allegations in the consolidated complaint and, where appropriate, explains the bases for its selection. I. Texas Securities Act Plaintiff the Washington State Investment Board asserts a class action claim under the Texas Securities Act against Defendants Arthur Andersen LLP, JP Morgan, and Lehman Brothers and against individual Enron Defendants Bel-fer, Blake, Buy, Causey, Chan, John Duncan, Fastow, Foy, Gramm, Harrison, Jae-dicke, Lay, LeMaistre, Meyer, Jeffrey Skilling, Urquhart, Wakeham, Walker, Willison, Winokur in connection with the sale to the Washington Board and proposed subclass of $250 million of 6.95% Notes due July 15, 2028 and $250 million of 6.40% Notes due July 15, 2006. Article 581-33 of the Texas Securities Act, Tex.Rev.Civ. Stat. (Vernon’s Supp.2002), provides in relevant portion, Civil Liabilities A. Liability of Sellers. (2) Untruth or Omission. A person who offers or sells a security (whether or not the security or transaction is exempt under Section 5 or 6 of this Act) by means of an untrue statement of materi-. al fact or an omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading, is liable to the person buying the security from him, who may sue either at law or in equity for rescission, or for damages if the buyer no longer owns the security. However, a person is not liable if he sustains the burden of proof that either (a) the buyer knew of the untruth or omission or (b) he (the offeror or seller) did not know, and in the exercise of reasonable care could not have known of the untruth or omission. The issuer of the security (other than a government issuer identified in Section 5M) is not entitled to the defense in clause (b) with respect to an untruth or omission (i) in a prospectus required in connection with a registration statement under 7A, 7B, or 7C, or (ii) in a writing prepared and delivered by the issuer in the sale of a security.... F. Liability of Control Persons and Aiders (1) A person who directly or indirectly controls a seller, buyer, or issuer of a security is liable under Section 33A, 33B, or 33C jointly and severally with the seller, buyer, or issuer, and to the same extent as if he were the seller, buyer, or issuer, unless the controlling person sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. (2) A person who directly or indirectly with intent to deceive or defraud or with reckless disregard for the truth or the law materially aids a seller, buyer, or issuer of a security is liable under Section 33A, 33B, or 33C jointly and severally with the seller, buyer, or issuer, and to the same extent as if he were the seller, buyer, or issuer.... Tex.Rev.Civ. Stat. art. 581-33(A)(2), (F)(1) and (2)(Vernon Supp.2002). “Person” inter alia includes a corporation, partnership, limited partnership, company, and firm. Art. 581-4(B). “Sells” is defined as any act by which a sale is made, including a solicitation to sell, an offer to sell, or an attempt to sell, and encompasses “subscription, an option for sale, a solicitation of sale, a solicitation of an offer to buy, an attempt to sell, or an offer to sell, directly by an agent or salesman, by circular, letter, or advertisement or otherwise.” Texas Capital Securities Inc. v. Sandefer, 58 S.W.3d 760, 775 (Tex.App.-Houston [1st Dist.] 2001, review denied), citing art. 581-4(e). Moreover, liability may be imposed against a defendant as long as the defendant constituted any link in the chain of the selling process. Brown v. Cole, 155 Tex. 624, 291 S.W.2d 704, 708 (Tex.1956); Rio Grande Oil Co. v. State, 539 S.W.2d 917, 922 (Tex.Civ.App.-Houston [1st Dist.] 1976, writ ref'd n.r.e.); Texas Capital Securities, Inc. v. Sandefer, 58 S.W.3d at 775. The Texas Securities Act is to be construed “to protect investors” and “because article 581-33 is remedial in nature in the civil context, it ‘should be given the widest possible scope.’ ” Texas Capital Securities, 58 S.W.3d at 775, citing Tex. Rev.Civ. Stat. art. 581-10-1 (b)(Vernon 2001) and Flowers v. Dempsey-Tegeler & Co., 472 S.W.2d 112, 115 (Tex.1971). Article 581-33(A) has some significant differences from § 10(b) and from common law fraud in that it does not require reliance by the purchaser on the seller’s material misrepresentation or omission, i.e., the purchaser does not have to demonstrate that it would not have bought the security if it had known of the misrepresentation or omission. Granader v. McBee, 23 F.3d 120, 123 (5th Cir.1994); Weatherly v. Deloitte & Touche, 905 S.W.2d 642, 648-49 (Tex.App.-Houston [14th Dist.] 1995, writ dism’d w.o.j.)(“An omission or misrepresentation is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding to invest. An investor is not required to prove that he would have acted differently but for the omission or misrepresentation .... [T]he focus under the Texas Securities Act is on the conduct of the seller or issuer of the securities, i.e., whether they made a material misrepresentation, not on the conduct of the individual buyers.”); Anheuser-Busch Companies, Inc. v. Summit Coffee Co., 858 S.W.2d 928, 936 (Tex.App.-Dallas 1993, writ denied); Rio Grande Oil Co., 539 S.W.2d at 921; Summers v. WellTech, Inc., 935 S.W.2d 228, 234 (Tex.App.-Houston [1st Dist.] n.w.h.). Nor does the plaintiff have to demonstrate scienter under the Texas Act. Wood v. Combustion Engineering, Inc., 643 F.2d 339, 345 (5th Cir.1981). Where there are similarities, Texas courts turn to cases construing federal securities laws for guidance in interpreting the Texas Securities Act. In re Westcap Enterprises, 230 F.3d 717, 726 (5th Cir.2000); Beebe v. Compaq Computer Corp., 940 S.W.2d 304, 306-07 (Tex.App.-Houston [14th Dist.] 1997, no writ)(“While eases dealing with the federal securities laws are not dispositive concerning our interpretation of the Texas Securities Act, they may provide persuasive guidance.”); Searsy v. Commercial Trading Corp., 560 S.W.2d 637, 639 (Tex.1977); Star Supply Co. v. Jones, 665 S.W.2d 194, 196 (Tex.App.-San Antonio 1984, no writ); Campbell v. Payne, 894 S.W.2d 411, 417 (Tex.App.-Amarillo 1995, writ denied). Thus to prevail under art. 581-33(A)(2), a plaintiff must show that the defendant seller in offering or selling a security made an untrue statement of material fact or an omission of material fact that was essential to make the statement not misleading. Duperier v. Texas State Bank, 28 S.W.3d 740, 745 (Tex.App.-Corpus Christi, 2000), revieiu dismissed by agreement (Jan. 4, 2001). A misrepresentation or omission is “material if there is a substantial likelihood that proper disclosure would have been viewed by a reasonable investor as significantly altering the total mix of information made available .... In other words, the issue is whether a reasonable investor would consider the information important in deciding whether to invest.” Id. (and cases cited therein). The investor/buyer has no duty to perform due diligence nor to discover the truth by exercising ordinary care. Id.; In re Westcap Enterprises, 230 F.3d at 726. Although the Texas Securities Act does not define “control person,” comments to the statute note, “control is used in the same broad sense as in federal securities law” and that “[depending on the circumstances, a control person might include an employer, an officer or director, a large shareholder, a parent company, and a management company.” Art. 581-33F cmt. “The rationale for control person liability is that a control person is in the position to prevent the violation and may be able to compensate the injured investor when the primary violator (e.g., a corporate issuer which has gone bankrupt) is not.” Summers v. WellTech, Inc. 935 S.W.2d 228, 231 (Tex.App.-Houston [1st Dist.] 1996); Texas Capital Securities Management, Inc., 80 S.W.3d at 268. To make a prima facie case for control person liability under the Texas statute, the plaintiff must demonstrate that the defendant had actual power or influence over the controlled person and that the defendant induced or participated in the alleged violation. Texas Capital Securities, 80 S.W.3d at 261, citing Dennis v. Gen. Imaging, Inc., 918 F.2d 496, 509 (5th Cir.1990); G.A. Thompson & Co. v. Partridge, 636 F.2d 945, 958 (5th Cir.1981). Status alone is insufficient to establish that a defendant is a control person within the ambit of the statute. Id. at 268, citing Dennis, 918 F.2d at 509. A control person at a corporation can be sued directly without joining the corporation as a defendant. Summers v. WellTech, Inc. 935 S.W.2d at 231. If the buyer still owns the securities at issue, rescission is the sole remedy available; only if he has sold the securities, may he obtain money damages. Id.; Texas Capital Securities, Inc., 58 S.W.3d at 775. To establish aider and abettor liability under art. 581-33(F)(2), a plaintiff must demonstrate (1) the existence of a primary violation of the securities laws, (2) that the aider has a general awareness of its role in the violation, (3) that the aider gave substantial assistance in the violation, and (4) that the aider intended to deceive the plaintiff or acted with reckless disregard for the truth of the representations made by the primary violator. Frank v. Beat", Steams, & Co., 11 S.W.3d 380, 384 (Tex.App.-Houston [14th Dist.] 2000, writ denied). II. Federal Securities Law A. Section 10(b) of the 1934 Act and Rule 10b-5 Section 10(b) of the Exchange Act states in relevant part, It shall be unlawful for any person, directly or indirectly ... (b) To use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contri-vanee in contravention of such rules and regulations as the [SEC] may proscribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 788(b). Rule 10b-5, which implements § 10(b), in turn provides in relevant part, It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. The scope of Rule 10b-5 is coextensive with the coverage of § 10(b). United States v. O’Hagan, 521 U.S. 642, 651, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997); Ernst & Ernst, 425 U.S. at 214, 96 S.Ct. 1375; SEC v. Zandford, 535 U.S. 813, 122 S.Ct. 1899, 1901 n. 1, 153 L.Ed.2d 1 (2002). One objective underlying the enactment of § 10(b) following the 1929 stock market crash was “to insure honest securities markets and thereby promote investor confidence.” United States v. O’Hagan, 521 U.S. at 658, 117 S.Ct. 2199. Furthermore Congress tried “ ‘to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry.’ ” Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 150, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), quoting SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 186, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963). The Supreme Court has indicated that the statute should be “construed ‘not technically and restrictively, but flexibly to effectuate its remedial purposes.’ ” Affiliated Ute Citizens of Utah v. United States, 406 U.S. at 151, 92 S.Ct. 1456, quoting SEC v. Capital Gains Research Bureau, Inc., 375 U.S. at 195, 84 S.Ct. 275; Zandford, 122 S.Ct. at 1903. a. Misleading Statements or Omissions The PSLRA amends the Exchange Act and applies to private class actions brought pursuant to the Federal Rules of Civil Procedure. Pub.L. No. 104-67, 109 Stat, 737, codified at 15 U.S.C. §§ 77k, 77Z, 77z-l, 77z-2, 78a, 78j-l. 78t, 78u, 78u-4, 78u-5. Under the PSLRA, 15 U.S.C. § 78u — 4(b)(1) & (2), (b) Requirements for securities fraud actions (1) Misleading statements and omissions In any private action arising under this chapter in which the plaintiff alleges that the defendant— (A) made an untrue statement of a material fact; or (B) omitted to state a material fact necessary in order to make the statements made in the light of the circumstances in which they were made, not misleading; the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed. (2) Required state of mind In any private action under this chapter in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind. If the facts are not pled with the requisite particularity, the action is to be dismissed. 15 U.S.C. § 78u-4(b)(3)(A). The Fifth Circuit views the standard of the PSLRA to “at a minimum, incorporate the standard for pleading fraud under” Rule 9(b). ABC Arbitrage Plaintiffs Group v. Tchuruk, 291 F.3d 336, 349-50 (5th Cir.2002). Thus to plead a false or misleading statement or omission as the basis for a § 10(b) and Rule 10b-5(b) securities fraud claim and avoid dismissal, a plaintiff must (1) specify ... each statement alleged to have been misleading, i.e., contended to be fraudulent; (2) identify the speaker; (3) state when and where the statement was made; (4)plead with particularity the contents of the false representations; (5) plead with particularity what the person making the misrepresentation obtained thereby; (6) explain the reason or reasons why the statement is misleading, ie., why the statement is fraudulent .... the ‘who, what, when, where, and how’ required under Rule 9(b) ... [and] under 15 U.S.C. § 78u-M(b)(l), for allegations made on information and belief, ... and (7) state with particularity all facts on which that belief is formed, i.e., set forth a factual basis for such belief. Id. at 350. In most cases, at the pre-discovery stage, the allegations in the complaint are not based upon a plaintiffs personal knowledge and thus are based on “information and belief’ regardless of whether they are so characterized. The Fifth Circuit, relying on the Second Circuit’s reasoning in Novak v. Kasaks, 216 F.3d 300, 313-14 & n. (2d Cir.2000), cert. denied, 531 U.S. 1012, 121 S.Ct. 567, 148 L.Ed.2d 486 (2000), has held with respect to the last requirement, [O]ur reading of the PSLRA rejects any notion that confidential sources must be named as a general matter. In our view, notwithstanding the use of the word “all,” [§ 78u-4(b)(l) ] does not require that plaintiffs plead with particularity every single fact upon which their beliefs concerning false or misleading statements are based. Rather, plaintiffs need only plead with particularity sufficient facts to support those beliefs. Accordingly, where plaintiffs rely on confidential sources but also on other facts, they need not name their sources as long as the latter facts provide an adequate basis for believing that the defendants’ statements were false. Moreover, even if personal sources must be identified, there is no requirement that they be named, provided they are described in the complaint with sufficient particularity to support the probability that a person in the position occupied by the source would possess the information alleged. In both of these situations, the plaintiffs will have pleaded enough facts to support their belief, even though some arguably relevant facts have been left out. Accordingly, a complaint can meet the new pleading requirement imposed by paragraph (b)(1) by providing documentary evidence and/or a sufficient general description of the personal sources of the plaintiffs’ beliefs. Id. at 352. Nevertheless “if the other facts, ie., documentary evidence, do not provide an adequate basis for believing that the defendants’ statements or omissions were false and the descriptions of the personal sources are not sufficiently particular to support the probability that a person in the position occupied by the source would possess the information pleaded to support the allegations of false or misleading statements made on information and belief, the complaint must name the personal sources.” Id. at 353. Moreover, the Fifth Circuit also noted that where the complaint states that its allegations were made on “investigation of counsel,” the same pleading requirements as for “upon information and belief’ apply. Id. at 351 n. 70, citing In re Sec. Litig. BMC Software, Inc., 183 F.Supp.2d 860, 885 n. 33 (S.D.Tex.2001). To state a securities fraud claim under § 10(b) of the Exchange Act and Rule 10b-5(b), a plaintiff must allege, in connection with the purchase or sale of securities, (1) a misstatement or omission (2) of a material fact, (3) made with scienter, (4) on which the plaintiff relied and (5) which proximately caused his injury. Abrams v. Baker Hughes, Inc., 292 F.3d 424, 430 (5th Cir.2002), citing Shushany v. Allwaste, Inc., 992 F.2d 517, 520-21 (5th Cir.1993); Nathenson v. Zonagen, Inc., 267 F.3d 400, 406-07 (5th Cir.2001). Scienter for a private cause of action under § 10(b), means “intent to deceive, manipulate or defraud” (Abrams, 292 F.3d at 430, citing Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976)) or at least knowing misconduct (Herman & MacLean v. Huddleston, 459 U.S. 375, 382-83, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983)(mere negligence is insufficient)). Because the PSLRA does not define generally the required scienter for private securities fraud claims under § 10(b) and Rule 10b-5, but only mandates that the plaintiff plead facts with particularity to give rise to a strong inference of the requisite state of mind, the Fifth Circuit has held that severe recklessness, “limited to those highly unreasonable omissions or misrepresentations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standard of ordinary care, and that present a danger of misleading buyers or sellers which is either known to the defendant or is so obvious that the defendant must have been aware of it,” is sufficient to satisfy the scienter requirement. Nathenson, 267 F.3d at 408. To survive a motion to dismiss, the plaintiff must plead specific facts with particularity giving rise to a “strong inference” of scienter. Nathenson, 267 F.3d at 407. Circumstantial evidence may be used to give rise to a strong inference of scienter. Abrams, 292 F.3d at 430; Nathenson, 267 F.3d at 410. Rather than a piecemeal analysis, this court must view the totality of alleged facts and circumstances, together as a whole, to determine whether they raise the requisite strong inference of scienter. Abrams, 292 F.3d at 431. Allegations of motive and opportunity to commit fraud, by themselves, are generally insufficient to plead scienter in the Fifth Circuit, but may be employed along with other facts and circumstances to reach the level of severe recklessness. Abrams, 292 F.3d at 430; Nathenson, 267 F.3d at 410-411. Nor "does a conclusory assertion that a defendant should have known about internal corporate problems based merely on his position or status within the corporation suffice. Id. at 432. Moreover, “[a]n unsupported general claim about the existence of confidential corporate reports that reveal information contrary to reported accounts is insufficient to survive a motion to dismiss. Such allegations must have corroborating details regarding the contents of the allegedly contrary reports, their authors and recipients.” Id. at 432. Rejecting the need for pleading comprehensive, detailed evi-dentiary matter in securities litigation and embracing the more “sensible standard” of Novak, discussed supra, the Fifth Circuit requires “at least some specifics from these reports,” such as “who prepared internal company reports, how frequently the reports were prepared and who reviewed them.” ABC Arbitrage, 291 F.3d at 355. In addition, the Fifth Circuit has concluded that “the mere publication of inaccurate accounting figures or failure to follow GAAP, without more, does not establish scienter; a plaintiff must show that the accounting firm deliberately misrepresented material facts or acted with reckless disregard about the accuracy of its audits or reports. The party must know that it is publishing materially false information, or must be severely reckless in publishing such information.” Abrams, 292 F.3d at 430. See also Melder v. Morris, 27 F.3d 1097, 1103 (5th Cir.1994)(“boilerplate averments that the accountants violated particular standards are not, without more, sufficient to support inferences of fraud”). Allegations that a defendant was motivated to commit fraud to enhance his incentive compensation or to raise capital are also inadequate to establish scienter because “the executives of virtually every corporation in the United States would be subject to fraud allegations.” Abrams, 292 F.3d at 434 (“It does not follow that because executives have components of their compensation keyed to performance, one can infer fraudulent intent.”). A plaintiff must also demonstrate that the challenged misrepresentations in dispute were material, that he relied on them, and that as a proximate result, he was damaged. Misrepresentations or omissions are material if there is a substantial likelihood that a reasonable investor would have viewed the allegedly false, misleading or omitted statement as having significantly altered the total mix of information available to him in deciding whether to buy or sell his stock or, phrased another way, “if there was a substantial likelihood that a reasonable investor would consider the information important in making a decision to invest.” Basic Inc. v. Levinson, 485 U.S. 224, 230-31, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988); ABC Arbitrage, 291 F.3d at 359. Although materiality is a mixed question of fact and law and generally a decision for the jury, nevertheless, in reviewing a motion to dismiss, the court can determine that representations are immaterial as a matter of law. ABC Arbitrage, 291 F.3d at 359; Nathenson, 267 F.3d at 422. “Reliance ... generally requires that the plaintiff have known of the particular misrepresentation complained of, have believed it to be true and because of that knowledge and belief purchased or sold the security in question.” Nathenson, 267 F.3d at 413. To satisfy the reliance element in § 10(b) and Rule 10b-5 securities violation action, where a plaintiff investor who may not have read or heard the purported misrepresentations, a plaintiff may employ the “fraud-on-the-market” doctrine. The Supreme Court has stated that this theory “is based on the hypothesis that in an open and developed securities market, the price of a company’s stock is determined by the available material information regarding the company and its business.Misleading statements will therefore defraud purchasers of stock even if the purchasers do not directly rely on the misstatements. ....” Basic, 485 U.S. at 241-42, 108 S.Ct. 978, citing Peil v. Speiser, 806 F.2d 1154, 1160-61 (3d Cir.1986). Thus the presumption is that the plaintiff relied on the value of the stock, which is the market’s reflection of available material information about a company including the company’s fraudulent statements. Fine v. American Solar King Corp., 919 F.2d 290, 298 (5th Cir. 1990), cert. dism’d sub nom. Main Hurdman v. Fine, 502 U.S. 976, 112 S.Ct. 576, 116 L.Ed.2d 601 (1991). A defendant may rebut “the presumption of reliance by ‘any showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at a fair market price.’ ” Id., citing Basic, 485 U.S. at 248, 108 S.Ct. 978. Thus the defendant can rebut the presumption by demonstrating that the nondisclosure had no effect on the stock’s market price or that the plaintiff would have purchased the stock at the same price even if he had known the information that was not disclosed to the market or that the plaintiff actually knew about the information that was not disclosed to the market when he purchased the stock. Id.; Nathenson, 267 F.3d at 414. As a corollary to the fraud-on-the-market doctrine and a defense to rebut that doctrine’s presumption that the defendant’s misrepresentations affected the price of the company’s stock, the truth-on-the-market doctrine views a misrepresentation as immaterial if the information is already known to the market because that misrepresentation therefore cannot defraud the market. In re Sec. Litig. BMC Software, Inc., 183 F.Supp.2d 860, 905-06 n. 46 (S.D.Tex.2001). The fraud-on-the-market theory is particularly relevant where a § 10(b) and Rule 10b-5 case alleges market manipulation. Market manipulation schemes which are intended to distort the price of a security, if successful, necessarily defraud investors who purchase the security in reliance on the market’s integrity. Absent the ... theory, the parties injured by such manipulative schemes could not plead the necessary element of reliance. Scone Investments, L.P. v. American Third Market Corp., No. 97 CIV 3802(SAS), 1998 WL 205338, *5 (S.D.N.Y. Apr.28, 1998). When the cause of action under § 10(b) is based on an allegation of a material omission, the plaintiff must demonstrate that the defendant had a fiduciary duty to disclose to the plaintiff. Central Bank, 511 U.S. at 174, 114 S.Ct. 1439 (“When an allegation of fraud is based upon nondisclosure, there can be no fraud absent a duty to speak.”). Such a duty to disclose under the federal securities laws “arises from the relationship between parties.” Dirks v. SEC, 463 U.S. 646, 657-58, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983). The plaintiff must be “entitled to know because of a fiduciary or other similar relation of trust and confidence between them.” Chiarella v. United States, 445 U.S. 222, 226, 228, 230 n. 12, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980)(holding that when a person engages in insider trading, thus not disclosing inside information, to violate § 10(b) the trader must have an independent duty of disclosure; in dicta the court observed that corporate insiders violate a fiduciary duty to shareholders when they trade on nonpublic information). The PSLRA establishes a “safe harbor” shielding a “forward-looking” statement from Rule 10b-5 liability where such a statement is made by a natural person unless defendants prove that it was made with “actual knowledge ... that the statement was false and misleading.” 15 U.S.C. § 78u-5 and § 78u-5(e)(l)(B)(i). A statement is “forward-looking” if, inter alia, it is (A) a statement containing a projection of revenues, income (including income loss), earnings (including earnings loss) per share, capital expenditures, dividends, capital structure, or other financial items; (B) a statement of the plans and objectives of management for future operations, including plans or objectives relating to the products or services of the issuer; (C) a statement of future economic performance, including any such statement contained in a discussion and analysis of financial condition by the management or in the results of operations included pursuant to the rules and regulations of the Commission; (D) any statement of the assumptions underlying or relating to any statement described in subparagraph (A),(B), or (C); (E) any report issued by an outside reviewer retained by an issuer, to the extent that the report assesses a forward-looking statement made by the issuer .... 15 U.S.C. § 78u-5(i)(l)(A). The safe harbor protects individuals and corporations from liability for forward-looking statements that prove false if the statement is “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement” or where the forward-looking statement is immaterial. 15 U.S.C. § 78u-5(c)(l)(A)(i) and (ii). If a statement is “accompanied by meaningful cautionary statements,” the defendants’ state of mind is not relevant. Harris v. Ivax Corp., 182 F.3d 799, 803 (11th Cir.1999), citing H.R. Conf. Rep. 104-369, at 44 (1995), reprinted in 1995 U.S.C.A.A.N. 730, 743 (“The first prong of the safe harbor requires courts to examine only the cautionary statement accompanying the forward-looking statement. Courts should not examine the state of mind of the person- making the statement.”) See also Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1213 (1st Cir.1996)(“when statements of ‘soft’ information such as forecasts, estimates, opinions, or projections are accompanied by cautionary disclosures that adequately warn of the possibility that actual results or events may turn out differently, the ‘soft’ statements may not be materially misleading under the securities laws”). Where the forward-looking statement is not accompanied by cautionary language, plaintiffs must demonstrate that the defendant made the statement with “actual knowledge” that it was “false or misleading.” 15 U.S.C. § 78u-5(c)(l)(B). The safe harbor provision does not apply where the defendants knew at the time that they were issuing statements that the statements contained false and misleading information and thus lacked any reasonable basis for making them. Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1213 (1st Cir.1996); Gross v. Medaphis Corp., 977 F.Supp. 1463, 1473 (N.D.Ga.1997); In re MobileMedia Sec. Litig., 28 F.Supp.2d 901, 930 (D.N.J.1998). The PSLRA restricts review of forward-looking statements to those specified in the complaint. 15 U.S.C. § 78u-4(b)(l). Thus the Court must examine piecemeal the statements made by the company as expressed in the pleadings. There is a judicially created equivalent to the PSLRA’s “safe harbor” provision, the “bespeaks caution” doctrine, which the Eleventh Circuit in Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1276 n. 7 (11th Cir.1999) explains “operates similarly, protecting statements in the nature of projections that are accompanied by meaningful cautionary statements and specific warnings of the risks involved, so as to ‘bespeak caution’ to investors that actual results may differ, thereby shielding the statements from § 10(b) and Rule 10b-5 liability.” Id., citing Saltzberg v. TM Sterling/ Austin Assoc., 45 F.3d 399 (11th Cir.1995)(per curiam )(holding that explicit cautionary language in private placement memorandum rendered alleged misstatements immaterial and made them not actionable under the “bespeaks caution” doctrine). The Fifth Circuit has rejected the application of the “bespeaks caution” doctrine as a per se bar to liability. Rubinstein v. Collins, 20 F.3d 160, 162 (5th Cir.1994). Observing that the use of the doctrine by district courts “reflects a relatively recent, ongoing, and somewhat uncertain evolution in securities law,” the Fifth Circuit skeptically comments, In essence, predictive statements are just what the name implies: predictions. As such, any optimistic projections contained in such statements are necessarily contingent. Thus the “bespeaks caution” doctrine has developed to address situations in which optimistic projections are coupled with cautionary language— in particular, relevant specific facts or assumptions — affecting the reasonableness of the reliance on and the materiality of those projections. To put it another way, the “bespeaks caution” doctrine merely reflects the unremarkable proposition that statements must be analyzed in context. Id. at 167 [footnotes and citations omitted]. Under Fifth Circuit precedent, “[Cautionary language is not necessarily sufficient in and of itself, to render predictive statements immaterial as a matter of law. Rather, ... materiality is not judged in the abstract, but in light of the surrounding circumstances.” Id. at 167-68, citing Krim v. BancTexas Group, 989 F.2d 1435, 1448-49 (5th Cir.1993). The Fifth Circuit has defined the test: “The appropriate inquiry is whether, under all the circumstances, the omitted fact or the prediction without a reasonable basis ‘is one [that] a reasonable investor would consider significant in [making] the decision to invest, such that it alters the total mix of information available about the proposed investment.’ ” Id. at 168, citing Krim, 989 F.2d at 1445. Similarly, vague optimistic statements are not actionable because a reasonable investor would not rely on them in deciding to buy or sell securities. Grossman v. Novell, Inc., 120 F.3d 1112, 1119 (10th Cir.1997); San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 811 (2d Cir.1996)(statement that company was “ ‘optimistic’ about [its earnings] in 1993” and “should deliver income growth consistent with its historically superior performance” held to be “puffery” and to “lack the sort of definitive positive projections that might require later correction”); Raab v. General Physics Corp., 4 F.3d 286, 289 (4th Cir.1993)(statements in Annual Report that corporation predicted “10% to 30% growth rate over the next several years” and was “poised to carry the growth and success of 1991 well into the future” held to be mere puffery or immaterial statements); In re Sec. Litig. BMC Software, Inc., 183 F.Supp.2d 860, 888 (S.D.Tex.2001)(“Vague, loose optimistic allegations that amount to little more than corporate cheerleading are ‘puffery,’ ‘projections of future performance not worded as guarantees,’ and are not actionable under federal securities law because no reasonable investor would consider such vague statements material and because investors and analysts are too sophisticated to rely on vague expressions of optimism rather than specific facts”)(citing Krim v. BancTexas Group, Inc., 989 F.2d 1435, 1446 (5th Cir.1993)). b. Manipulative or Deceptive Contrivance or Scheme to Deceive or Course of Business Securities fraud actions under § 10(b) and Rule 10b-5 are not merely limited to the making of an untrue statement of material fact or omission to state a material fact. Section 10(b) prohibits “any manipulative or deceptive contrivance,” which, as indicated above, the Supreme Court, relying on Webster’s International Dictionary, includes “a scheme to deceive” or “scheme, plan or artifice.” Ernst & Ernst, 425 U.S. at 199 n. 20, 96 S.Ct. 1375. While subsection (b) of Rule 10b-5 provides a cause of action based on the “making of an untrue statement of a material fact and the omission to state a material fact,” subsections (a) and (c) “are not so restricted” and allow suit against defendants who, with scienter, participated in “a ‘course of business’ or a ‘device, scheme or artifice’ that operated as a fraud” on sellers or purchasers of stock even if these defendants did not make a materially false or misleading statement or omission. Affiliated Ute Citizens v. United States, 406 U.S. 128, 152-53, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). See also Superintendent of Ins. v. Bankers Life & Cas. Co. 404 U.S. 6, 11 n.7, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971)(“[I]t [is not] sound to dismiss a complaint merely because the alleged scheme does not involve the type of fraud that is ‘usually associated with the sale or purchase of securities.’ We believe that § 10(b) and Rule 10b-5 prohibit all fraudulent schemes in connection with the purchase or sale of securities, whether the artifices employed involve a garden type variety of fraud, or present a unique form of deception.”); Zandford, 122 S.Ct. at 1903-04 (broker’s “continuous series of unauthorized” sales of securities and personal retention of the proceeds without his client’s knowledge to further his fraudulent scheme “are properly viewed” as a “ ‘course of business’ that operated as a fraud or deceit on a stockbroker’s customer” in connection with the sale of securities). Novel or atypical methods should not provide immunity from the securities laws.; Santa Fe, 430 U.S. at 475-76 and n. 15, 97 S.Ct. 1292 (stating that § 10(b) covers deceptive “practices” and “conduct”); Central Bank, 511 U.S. at 177, 114 S.Ct. 1439 (“we again conclude that the statute prohibits only the making of a material misstatement or the commission of a manipulative act [emphasis added].”); In re Splash Technology Holdings, Inc. Sec. Litig., 2000 WL 1727377, *13 (N.D.Cal. Sept.29, 2000)(“Whereas 10b 5(b) focuses on fraudulent statements, 10b-5(a) and (c) are not by their terms restricted to statements. In this case, plaintiffs allege both fraudulent statements and acts as their requisite manipulative or deceptive practices”). In Zandford, a unanimous Supreme Court opinion, leaving aside the misrepresentation and omission language since it was not relevant to the case, the high court focused on § 10(b)’s alternative basis for liability, “unlawful for any person ... [t]o use or employ, in connection with the purchase or sale of any security ..., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe” and Rule 10b-5’s ban on the use, “in connection with the purchase or sale of any security,” of “any device scheme, or artifice to defraud” or any other “act, practice, or course of business ” that “operates ... as a fraud or deceit [emphasis added].” 122 S.Ct. at 1903. The Supreme Court held that allegations of a stock broker’s fraudulent scheme of “selling his customer’s securities and using the proceeds for his own benefit without the customer’s knowledge or consent” constituted “fraudulent conduct ‘in connection with the purchase or sale of any security’ ” within the meaning of § 10(b) and Rule 10b-5. 122 S.Ct. at 1900-01. The Court emphasized that “neither the SEC nor this Court has ever held that there must be a misrepresentation about the value of a particular security in order to run afoul of the Act.” 122 S.Ct. at 1903. Furthermore, employing a flexible approach to construing § 10(b), the Supreme Court clarified the statutory language, “in connection with the purchase or sale of any security.” Noting that the stock sales and the broker’s fraudulent practices were interdependent, the high court observed that the broker, who had discretion to manage his clients’ investment account and a general power of attorney to engage in securities transactions without their prior authorization or approval, wrote checks to himself from the clients’ mutual fund account that required the sale of securities to pay him. 122 S.Ct. at 1901. Thus the broker did not merely lawfully sell his clients’ stock and then decide to misappropriate the proceeds. 122 S.Ct. at 1904. Instead, the fraud coincided with the sales, each of which furthered his scheme, through a “course of business,” to defraud his clients and misappropriate their assets. An insider’s trading in securities of his company based on material nonpublic information “qualifies as a ‘deceptive device’ under § 10(b).” United States v. O’Hagan, 521 U.S. 642, 643, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997), quoting Chiarella v. United States, 445 U.S. 222, 228, 100 S.Ct. 1108, 63 L.Ed.2d 348 (1980). The simple allegation that a defendant was motivated to sell his company stock at a high price without an allegation that the defendant profited from such inflation also will not give rise to a strong inference of scienter. Abrams, 292 F.3d at 434. To be probative of scienter, a plaintiff must allege insider trading that occurred in suspicious amounts or at suspicious times, “out of line with trading practices or at times calculated to maximize personal profit. Further, even unusual sales by one insider do not give rise to a strong inference of scienter when other defendants do not sell some or all of their shares during the Class Period.” Id. at 435. Market manipulation, employment of a manipulative device, and engaging in manipulative schemes such as a scheme to artificially inflate or deflate stock prices, falsifying records to reflect non-existent profits, and creating and distributing false research reports favorably reviewing a company are other types of conduct prohibited by § 10(b) and Rule 10b-5 that do not fall within the category of misleading statements and omissions. See, e.g., United States v. Langford, 946 F.2d 798 (11th Cir.1991), cert. denied, 503 U.S. 960, 112 S.Ct. 1562, 118 L.Ed.2d 209 (1992); In re Blech Securities Litigation (Blech III), No. 94 CIV. 7696 RWS, 2002 WL 31356498, *3 (S.D.N.Y. Oct.17, 2002)(con-cluding that stock-purchaser plaintiffs’ allegations that Bear Stearns & Co. with scienter “directed” or “contrived” and agreed to fund specific fraudulent trades by Blech & Company, which Bear Stearns knew had a history of sham trading, and also processed the transactions, in an attempt to artificially inflate the price of Blech securities and reduce Blech’s debit balance, and thereby knowingly engaged in a scheme to defraud through sham transactions, stated a claim for primary liability under § 10(b)); Scone Investments, L.P. v. American Third Market Corp., No. 97 CIV. 3802, 1998 WL 205338, *5 (S.D.N.Y. Apr.28, 1998); In re Blech Sec. Litig. (Blech II), 961 F.Supp. 569, 580 (S.D.N.Y.1997)(“a plaintiff asserting a [§ 10(b) and Rule 10b-5] market manipulation claim must allege direct participation in a scheme to manipulate the market for securities”), citing Ernst & Ernst v. Hochfelder, 425 U.S. at 199, 96 S.Ct. 1375 (defining market manipulation as conduct “designed to deceive or defraud investors by controlling or artificially affecting the price of securities”). In Blech III, the court identified as practices constituting manipulation of the market “trades with controlled entities, fictitious trades, wash sales, prearranged matched trades, and ‘painting the tape,’” together with lending money or securities or borrowing money or securities from a customer, guaranteeing any account against loss, entering purchase or sale orders designed to raise or lower the price of a security or to give the appearance of trading for purposes of inducing others to trade (i.e., “marking the close” or “prearranged trading”) and “making arrangements to ‘park’ any security away from the true owner.” 2002 WL 31356498, *5. The Blech court also made clear that plaintiffs in that suit had to allege facts giving rise to a strong inference of scienter and assert that “Bear Stearns caused or directed trading by Blech & Co.’s customers or solicited or induced them to buy Blech Securities at inflated prices,” i.e., “in addition to alleging scienter of the Blech scheme, Plaintiffs must also allege that Bear Stearns itself engaged in the kind of manipulative conduct that Section 10(b) prohibits in this context.” Blech II, 961 F.Supp. at 582-83 (Section 10(b) requires allegation that Bear Stearns “directly and knowingly participated in deceptive or manipulative conduct that caused damage to the [plaintiff].”). Furthermore, conclusory “allegations that are consistent with the normal activity” of such a business entity, standing alone, e.g., in Blech the normal legitimate activity of a clearing broker, are insufficient to state a claim of primary liability under Central Bank. Blech II, 961 F.Supp. at 584 (“[T]he Complaint crosses the line dividing secondary liability from primary liability when it claims that Bear Stearns ‘directed’ or ‘contrived’ certain allegedly fraudulent trades. Under these circumstances, the Complaint adequately alleges that Bear Stearns engaged in conduct with scienter, in an attempt to affect the price of the Blech securities.”); McDaniel v. Bear Stearns & Co., Inc., 196 F.Supp.2d 343, 353, (S.D.N.Y.2002)(“[W]here a clearing firm moves beyond performing mere ministerial or routine clearing functions and [with actual knowledge] becomes actively involved in the introductory broker’s [fraudulent] action, it may expose itself to liability with respect to the introductory broker’s misdeeds.”). Thus to state a claim for market manipulation under § 10(b) and Rule 10b-5 against parties that employed manipulative and deceptive practices in a scheme to defraud, a plaintiff must allege (1) that it was injured (2) in connection with the purchase or sale of securities (3) by relying on a market for securities (4) controlled or artificially affected by defendants’ deceptive and manipulative conduct, and (5) the defendants engaged in the manipulative conduct with scienter. Blech II, 961 F.Supp. at 582, citing Ernst & Ernst v. Hochfelder, 425 U.S. at 199, 96 S.Ct. 1375. Furthermore because courts acknowledge the difficulty of satisfying Rule 9(b) in pleading a claim of market manipulation, “where the exact mechanism of the scheme is likely to be unknown to the plaintiffs, allegations of the nature, purpose, and effect of the fraudulent conduct and the roles of the defendants are sufficient for alleging participation.” Blech II, 961 F.Supp. at 580; see also Vandenberg v. Adler, No. 98 CIV. 3544 WHP, 2000 WL 342718, *5 (S.D.N.Y. Mar.31, 2000); In re Sterling Foster & Co., Inc. Sec. Litig., 222 F.Supp.2d 216, 278-79 (E.D.N.Y.2002)(“Courts have found allegations of fraud to have been pled with sufficient particularity when the complaint specifies (1) the manipulative acts performed; (2) which defendants performed them; and (3) the effect the scheme had on the market for the securities at issue.”). Moreover, to effectuate the Congressional purpose behind the 1934 Act of “ ‘in-surfing] honest securities markets and thereby promotfing] investor confidence,’ ” by requiring full disclosure “ ‘to achieve a high standard of business ethics in the securities industry,’ ” the Supreme Court has repeatedly “construed [the statute] ‘not technically and restrictively, but flexibly.” Zandford, 122 S.Ct. at 1903 (citations omitted). The SEC has also “consistently adopted a broad reading of the phrase, ‘in connection with the purchase or sale of any security’ ” and “maintained that a broker who accepts payments for securities that he never intends to deliver, or who sells customer securities with intent to misappropriate the proceeds” violates § 10(b) and Rule 10b-5, and the Supreme Court, in deference to the agency, followed suit in Zandford. Id. at 1903. In Zand-ford, concerned that “this statute must not be construed so broadly as to convert every common-law fraud that happens to involve securities into a violation of § 10(b)” and focusing on the broker’s scheme over a two-year period during which he made a number of transactions and converted the proceeds of the sales of his clients’ securities to his own use, the Supreme Court concluded, The securities sales and [the broker’s] fraudulent practices were not independent events. This is not a case in which, after a lawful transaction had been consummated, a broker decided to steal the proceeds and did so. Nor is it a case in which a thief simply invested the proceeds of a routine conversion in the stock market. Rather respondent’s fraud coincided with the sales themselves. Taking the allegations in the complaint as true, each sale was made to further respondent’s fraudulent scheme; each was deceptive because it was neither authorized by, nor disclosed to, the [clients].... In the aggregate, the sales are properly viewed as a “course of business” that operated as a fraud or deceit on a stockbroker’s customer. The fact that [the broker] misappropriated the proceeds of the sales provides persuasive evidence that he had violated § 10(b) when he made the sales, but misappropriation is not an essential element of the offense.... It is enough that the scheme to defraud and the sale of the securities coincide. Id. at 1903-04. The high court found that this type of fraud, based on silence, “represents an even greater threat to investor confidence in the securities industry” than merely an affirmative misrepresentation, in view of the fiduciary duty owed by a broker to a client with a discretionary account and the fact that this relationship of trust and confidence therefore gives rise to a duty to disclose. Id. at 1905. The Supreme Court concluded that because the broker “sold the [clients’] securities while secretly intending from the very beginning to keep the proceeds” and deprive the clients of that benefit, the “SEC complaint describes a fraudulent scheme in which the securities transactions and breaches of fiduciary duty coincide” and the breaches were thus “ ‘in connection with’ securities sales within the meaning of § 10(b).” Id. at 1905-06. c. Central Bank and Primary Violations Of substantial relevance to the motions this Court now reviews is the Supreme Court’s holding in a 5^4 decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), based on the language and legislative history of the statute, that a private plaintiff may not bring an aiding and abetting claim under § 10(b) and Rule 10b-5. The high court construed the general anti-fraud provision as prohibiting only the making of a material misstatement or a material omission or the commission of a manipulative act; therefore it does not prohibit giving aid to another, who then commits a primary § 10(b) violation. Id. at 177, 114 S.Ct. 1439. It further emphasized that none of the express private causes of action in both the Securities Act of 1933 and the 1934 Exchange Act imposes liability on one who aids or abets such primary violators. Id. at 179, 184, 114 S.Ct. 1439. Thus it reasoned, “[t]here is no reason to think that Congress would have attached aiding and abetting liability only to § 10(b) and not to any of the express private rights of action in the Act.” Id. at 180, 114 S.Ct. 1439, citing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 736, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975)(it would be “anomalous to impute to Congress an intention to expand the plaintiff class for a judicially implied cause of action beyond the bounds it delineated for comparable express causes of action.”). The court rejected as implausible the argument that silence in the statute constituted an “implicit congressional intent to impose § 10(b) aiding and abetting liability.” Id. Furthermore, the Supreme Court pointed out that the critical element for recovery under Rule 10b-5, reliance, would be eliminated if liability were imposed for aiding and abetting. Id. at 180, 114 S.Ct. 1439 (“Were we to allow the aiding and abetting action proposed in this case, the defendant could be liable without any showing that the plaintiff relied upon the aider and abettor’s statements or actions.”). Nor did it find that anything in the legislative history “even implies that aiding and abetting was covered by the statutory prohibition on manipulative and deceptive conduct.” Id. at 183, 114 S.Ct. 1439. Nevertheless, the Supreme Court did not conclude that secondary actors such as lawyers, accountants, banks, and underwriters were therefore always shielded from § 10(b) and Rule 10b-5 liability: Because the text of § 10(b) does not prohibit aiding and abetting, we hold that a private plaintiff may not maintain an aiding and abetting suit under § 10(b). The absence of § 10(b) aiding and abetting liability does not mean that secondary actors in securities markets are always free from liability under the securities Act. Any person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under 1 Ob-5, assuming all of the requirements for primary liability under Rule 10b-5 are met.In any complex securities fraud, moreover, there are likely to be multiple violators .... Id. at 191, 114 S.Ct. 1439. Furthermore, in Central Bank the defendant bank was the indenture trustee for $26 million in bonds issued by a public building authority, some in 1986 and more in 1988. The bonds were secured by landowner assessment liens and contained covenants requiring that the subject land had to be worth at least 160% of the bonds’ outstanding principal and interest and that the developer had to give the defendant bank an annual appraisal showing that the value of the land met this requirement. Even though the developer did so in 1998, the bank learned through the underwriter that the appraisal was questionable and that the value of the property securing the 1996 bonds may have declined, a fact confirmed by the bank’s own in-house appraiser. Nevertheless the bank continued working with the developer and delayed obtaining an independent review of the developer’s valuation of the land while the bank issued more bonds in 1988. Subsequently the building authority defaulted on the bonds and the bond purchasers did not only sue the authority, the bonds’ underwriters, and the land developer, but they also sued the bank, but only as “secondarily liable under § 10(b) for its conduct in aiding and abetting the [other defendants’] fraud.” 511 U.S. at 164, 114 S.Ct. 1439. The high court examined only the aiding and abetting claim pled against the bank and did not address the question whether the bank might be a primary violator, since the plaintiffs had not alleged such a claim. In sum, the Supreme Court left it to the lower courts to determine when the conduct of a secondary actor makes it a primary violator under the statute. In the aftermath of Central Bank, two divergent standards, the “bright line” test and the “substantial participation” test, have emerged. Under the “bright line” test, in order for the conduct of a secondary actor to rise to the level of a primary violation, the secondary actor must not only make a material misstatement or omission, but “the misrepresentation must be attributed to the specific actor at the time of public dissemination,” i.e., in advance of the investment decision, so as not to undermine the element of reliance required for § 10(b) liability. Wright v. Ernst & Young LLP, 152 F.3d 169, 175 (2d Cir.1998), cert. denied, 525 U.S. 1104, 119 S.Ct. 870, 142 L.Ed.2d 772 (1999); see also Shapiro v. Cantor, 123 F.3d 717, 720 (2d Cir.1997)(“ ‘If Central Bank is to have any real meaning, a defendant must actually make a false or misleading statement in order to be held liable under Section 10(b). Anything short of such conduct is merely aiding and abetting, and no matter how substantial that aid may be it is not enough to trigger liability under Section 10(b).’ ”){quoting In re MTC Electronic Technologies Shareholders Litigation, 898 F.Supp. 974, 987 (E.D.N.Y.1995)). For example, according to the investor-plaintiffs’ complaint in Wright, 152 F.3d 169, Ernst & Young LLP, an outside auditor for BT Office Products, Inc. (“BT”), violated § 10(b) by privately and orally approving false and misleading financial statements that the auditor knew would be passed on to investors. BT subsequently made these statements public during a press release, but represented that the information was unaudited and did not mention Ernst & Young. The district court granted the accounting firm’s motion to dismiss based on Central Bank’s rejection of aiding and abetting liability. On appeal, the Second Circuit affirmed, finding that a contrary result would in effect “revive aiding and abetting liability under a different name, and would therefore run afoul of the Supreme Court’s holding in Central Bank.” Id. at 175. It also required that the defendant, to be liable, must have known or should have known that his representation would be disseminated to investors, although the defendant need not communicate the misrepresentation directly to them. Wright, 152 F.3d at 175, citing Anixter v. Home-Stake Production Co., 77 F.3d 1215, 1226 (10th Cir.1996). The Second Circuit noted that because in BT’s press release BT did not mention Ernst & Young, nor Ernst & Young’s private prior approval of the statements made in the press release by BT, the auditor neither directly nor indirectly communicated misrepresentations to investors. Therefore, the amended complaint failed to allege that Ernst & Young made “a material misstatement (or omission) on which a purchaser or 'seller of securities relie[d].” Moreover .