Full opinion text
OPINION AND ORDER LYNCH, District Judge. Various defendants in this large securities class action arising from the collapse of Refco Inc. and its affiliated companies (“Refco”) move for dismissal or partial dismissal of the First Amended Complaint as to them. This opinion addresses ten motions to dismiss by twenty-eight defendants, many of whom raise overlapping arguments. Accordingly, to avoid an unduly duplicative and lengthy opinion, the movants’ legal arguments will be grouped together. Detailed discussions of relevant factual allegations will be reserved for the legal analyses that require them, and the initial discussion of background facts will accordingly be brief. BACKGROUND I. The Allegations A. The Alleged Fraudulent Scheme Refco was a provider of brokerage and clearing services in the international derivatives, currency and futures markets. Part of Refco’s business model involved giving loans to its trading clients, which the clients then used to leverage larger trades. (Compl. ¶¶ 2, 87, 382.) At a certain point, Refco began making loans without adequately assessing the customers’ credit-worthiness or their trading activities. These risky loans began to backfire in 1997 and 1998, when several global financial crises caused Refco and a number of its largest customers to suffer massive trading losses. (Compl. ¶¶31, 383-97.) The loans were now “uncollectible receivables” that would never be paid. (P. Mem. 8.) Rather than disclose these uncollectible receivables to the public and Refco’s investors, Refco’s management allegedly devised a scheme to hide them. First, they transferred the loans onto the books of Refco Group Holdings, Inc. (“RGHI”), an entity owned and controlled by defendant Phillip R. Bennett, Refco’s president, CEO, and Chairman (Compl. ¶ 32) and Tone Grant, Bennett’s predecessor as CEO (id. ¶ 41). As a result, RGHI owed hundreds of millions of dollars to Refco. In order to hide RGHI’s obligation to Ref-co, the complaint alleges, a series of fraudulent transactions were arranged by which the RGHI receivable was made to disappear from Refco’s books. The transactions all worked in essentially the same way. First, Refco Capital (a Refco subsidiary) would make loans to a third party. This money was transferred into accounts in the third party’s name at Refco. (Compl. ¶¶ 417-18). The third party would then loan an equivalent amount to RGHI; the loan agreements between the third party and Refco Capital required that the money be used only for that purpose. (Id. ¶ 411.) These loans to RGHI were guaranteed by Refco itself; Bennett — on behalf of Refco as guarantor — signed the loan agreement between the third party and RGHI. (Compl. ¶¶ 415-18.) RGHI then used the loan from the third party to pay down the money it owed to Refco for the uncollectible receivables. (Compl. ¶ 416.) Thus, Refco Capital was loaning money to RGHI for use in temporarily paying off its debt to Refco. This series of transactions would take place a few days before the end of the relevant financial period, and would be undone within two weeks. (Compl. ¶ 409). The loans in question were substantially greater than Refco’s reported net income. A February 2005 loan, for example, was for $595 million, 337% of Refco’s reported net income for the relevant fiscal year. (Compl. ¶ 560.) A February 2004 loan was for $970 million, 518% of Refco’s reported net income for the relevant fiscal year. (Id.) If compared to quarterly income, of course, the size of the loans is even more dramatic: a November 2004 loan for $545 million was the equivalent of 3,045% of Refco’s reported net income for that quarter. (M) Thus, Refco Capital was loaning enormous sums of money to the third party while Refco guaranteed an equivalent loan from the third party to RGHI. Meanwhile, Refco Capital — not RGHI — paid to the third party the interest purportedly owed by RGHI. (Id. ¶ 563.) The transactions took place in substantially the same form over the course of six years. None of these transactions was disclosed to the public in the filings discussed below. Thus, in effect, Refco was loaning money to itself, through third parties, to hide its dismal financial situation from the public and its investors. B. The Relevant Transactions The various transactions at issue in this case took place while the fraudulent scheme above was ongoing. 1.The Rule 144A Bonds and the Exxon Capital Exchange In June 2004, Refco issued $600 million of 9% Senior Subordinated Notes due in 2012. These bonds were sold to the defendants referred to by plaintiffs as the “Bond Underwriter Defendants,” who call themselves the “144A Defendants.” These defendants then immediately resold the bonds to institutional buyers, including some of the plaintiffs. (See Compl. ¶¶ 94-95, 100-08.) The bonds were unregistered pursuant to Securities and Exchange Commission (“SEC”) Rule 144A, 17 C.F.R. § 230.144A, which exempts private placements to qualified institutional buyers from the registration requirements of the Securities Act, and were thus issued pursuant to an offering memorandum rather than a registration statement. (Compl. ¶¶ 105-108.) Plaintiffs allege that this offering memorandum contained various false statements concerning Refco’s financial performance and viability. (Id. ¶¶ 109-143.) The unregistered bond offering was marketed to institutional investors at a nationwide road show in July 2004 (the “Road Show”). Plaintiffs argue that this unregistered bond offering was the first step in a single plan of financing. The second step in this putative plan came when Refco issued registered bonds, which holders of the Rule 144A Bonds acquired by exchanging their Rule 144A bonds for registered bonds in a transaction known as an “Exxon Capital exchange.” The registered bond offering was made pursuant to a Form S-4 Registration Statement (Wilson Decl. Ex. C) (the “Bond Registration Statement”), which was filed with the SEC on October 12, 2004, and became effective on the day the registered bonds were issued, April 13, 2005. The registration statement was not yet effective at the time of the Rule 144A offering. (Compl. ¶¶ 149-50.) Plaintiffs allege that this statement, too, contained various false statements of material fact. (Id. ¶¶ 153-65.) 2.The August 2005 IPO In August 2005, Refco conducted a successful initial public offering (“IPO”), underwritten by fifteen banks including the three banks that served as underwriters for the Rule 144A offering. (See P. Mem. 14 n. 8). In the IPO, Refco sold approximately 20% of its shares to plaintiff RH Capital and other members of the putative class. (Compl. ¶ 166.) The IPO was conducted pursuant to a Form S-l registration statement dated April 8, 2005, Form S-l/A registration statements dated May 27, July 1, July 20, July 25, August 8, and August 10, 2005, and a Form 424B1 prospectus dated August 10, 2005. (Id. ¶ 168.) Again, plaintiffs allege that these filings contained false statements of material fact. (Id. ¶¶ 172-98.) 3.The October 2005 Press Release and Refco’s Collapse On October 10, 2005, Refco issued a press release announcing that it had discovered an “undisclosed affiliate transaction.” (Id. ¶ 199.) The press release disclosed the existence of a $340 million receivable owed to the company by “an entity controlled by Phillip R. Bennett” (that is, RGHI), and indicated that Bennett had repaid the receivable in cash as of October 10. It suggested that the receivable represented RGHI’s assumption of a debt owed by a third party to Ref-co, which “may have been uncollectible.” (Id.) Because this receivable had not been disclosed in the previously-filed financial statements, the press release concluded that these statements “should no longer be relied upon.” (Id. ¶ 200.) Refco’s stock price dropped 45% in a single day. (Id. ¶ 202.) Plaintiffs allege, however, that this press release did not disclose the full extent of Refco’s troubles, because it downplayed the impact that the disclosure would have on Refco’s business. (Id. ¶¶ 202-03.) An investigation by the SEC was immediately commenced, and on October 12, 2005, Bennett was arrested as a flight risk. (Id. ¶¶ 205-06.) Refco’s stock price continued to decline sharply until the New York Stock Exchange (“NYSE”) halted trading of Refco shares on October 13, 2005. (Id. ¶ 208.) On October 17, 2005, Refco announced that it was filing for bankruptcy. (Id. ¶209.) This litigation was initiated on October 11, 2005. In an order dated February 8, 2006 (Doc. # 63), the Court appointed RH Capital Associates LLC (“RH Capital”) and Pacific Investment Management Company LLC (“PIMCO”) as lead plaintiffs pursuant to 15 U.S.C. § 78u-4(a)(3)(B) and 15 U.S.C. § 77z-l(a)(3). A consolidated class action complaint was filed on April 3, 2006, and the First Amended Consolidated Class Action Complaint (Doc. # 86) (the “complaint”) was filed on May 5, 2006. Papers relating to the ten motions to dismiss now pending were submitted between July and November of 2006, and the motions are now fully briefed. Before discussing the substance of these motions, a brief introduction to the various movants is appropriate. C. The Movants There are ten separate motions to dismiss pending, several of which are filed on behalf of more than one defendant. This section briefly identifies the movant or group of movants behind each of the ten motions. 1.Phillip R. Bennett, RGHI, and the Bennett Trust Defendant Phillip R. Bennett was the President, Chief Executive Officer and Chairman of Refco until he was forced to resign in October 2005. (Compl. ¶ 32.) Bennett held his interests in Refco both directly and through RGHI and the Phillip R. Bennett Three Year Annuity Trust (the “Bennett Trust”), both of which he controlled. (Id. ¶¶ 26-28.) 2.Tone Grant Tone Grant was the President of Refco Group before Bennett was promoted to that position in September 1998, at which time Grant ended his employment with Refco. Grant continued to own 50% of RGHI, which in turn owned approximately 43% of Refco Group, until the August 2004 bond offering. (Id. ¶ 23.) To avoid confusion with defendant Grant Thornton, this opinion will refer to Tone Grant by his full name. 3.William Sexton William Sexton was Executive Vice President and Chief Operating Officer (“COO”) of Refco Group beginning in August 2004. He briefly served as CEO of Refco after Bennett’s resignation. (Id. ¶ 34.) 4.Joseph J. Murphy and Gerald M. Sherer Joseph Murphy was an Executive Vice President for global marketing at Refco beginning in 1999. Plaintiffs also allege that he served as an officer of certain Refco subsidiaries, but these do not include Refco Capital or RGHI, the subsidiaries most directly involved in the allegedly fraudulent transactions. (Id. ¶ 36.) Gerald Sherer was Chief Financial Officer (“CFO”) and an Executive Vice President of Refco Group beginning in January 2005. (Id. ¶ 33.) 5.Robert Trosten Robert Trosten was Sherer’s predecessor as CFO of Refco Group. He served in that capacity from 2001 to October 2004. (Id. ¶ 40.) 6.Philip Silverman Philip Silverman was secretary of several Refco entities, including RGHI, and was Controller of Refco Group during 2004 and 2005. (/¿¶37.) 7.Dennis Klejna Dennis Klejna was an Executive Vice President and General Counsel of Refco Group from 1999 until the company’s collapse. (Id. ¶ 38.) 8.The THL and Audit Committee Defendants The “THL Partners Defendants” and the “THL Individual Defendants” (together, the “THL Defendants”) are entities and individuals affiliated with Thomas H. Lee Partners, L.P., a private equity firm that invested $507 million in Refco prior to its collapse. In June 2004, the THL Defendants helped Refco with a leveraged buyout, in which the THL Defendants acquired a 57% equity stake in Refco. The remaining 43% was held by RGHI, which, in turn, was owned by Bennett. This gave the THL Defendants a dominant position on Refeo’s board of directors and a controlling interest in Ref-co’s stock. The Audit Committee Defendants are three former Refco outside directors who were members of Refco’s audit committee. 9.Grant Thornton LLP Grant Thornton LLP was Refco’s outside auditor. It is the subject of two claims under the Securities Act involving the October 2004 Bond Registration Statement, and one claim under Section 10(b) of the Exchange Act. Each of the three claims arises from the audit reports Grant Thornton prepared on Refco’s year-end financial statements beginning in the year 2003. 10.The Bond Underwriter Defendants Defendants Credit Suisse Securities (USA) LLC (“Credit Suisse”), Banc of America Securities LLC (“BAS”), and Deutsche Bank Securities Inc. (“Deutsche Bank”) refer to themselves as the “144A Defendants,” while plaintiffs refer to them as the “Bond Underwriter Defendants.” (P. Mem. 53-54.) These banks were the underwriters for the Rule 144A private placement of Refco bonds. This opinion will refer to them as the “Bond Underwriter Defendants.” DISCUSSION The complaint makes claims under both the Securities Act of 1933 and the Securities Exchange Act of 1934. While few defendants move to dismiss all the claims against them, many defendants move to dismiss some, and many of their arguments overlap. There are several overarching issues raised: (1) whether there can be liability under Securities Act §§ 11 and 12 for involvement in the Rule 144A private placement of unregistered bonds; (2) the sufficiency of allegations of control-person liability under Securities Act § 15 based on the Bond Registration Statement; (3) whether the Exchange Act § 10(b) and Rule 10b-5 claims are adequately pled with respect to scienter and specific allegations of misrepresentation; (4) whether plaintiffs have adequately alleged their Exchange Act claims against Grant Thornton, Refco’s auditor; (5) whether plaintiffs have adequately stated a claim for control-person liability under the Exchange Act; and (6) whether the insider-trading allegations against a few of the defendants are adequate. I. Standards for Motions to Dismiss On a motion to dismiss, the allegations in the Complaint are accepted as true, and all reasonable inferences drawn in favor of the plaintiffs. Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir.1998). The Court’s task is “not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.1985). Therefore, motions to dismiss should only be granted if it appears that the plaintiffs can prove no set of facts in support of their claim that would entitle them to relief. Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir.1984). In deciding motions to dismiss, the Court may consider documents that are referenced in the Complaint, documents that the plaintiffs relied on in bringing suit and that either are in the plaintiffs’ possession or that the plaintiffs knew of when bringing suit, or matters of which judicial notice may be taken. Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002). “[W]hen a plaintiff chooses not to attach to the complaint or incorporate by reference a document upon which it relies and which is integral to the complaint, the court may nonetheless take the document into consideration in deciding the ... motion to dismiss, without converting the proceeding to one for summary judgment.” Int’l Audiotext Network, Inc. v. AT & T Co., 62 F.3d 69, 72 (2d Cir.1995) (internal citation and quotation marks omitted). Thus, for purposes of a motion to dismiss, a court may consider: any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference, as well as public disclosure documents required by law to be, and that have been, filed with the SEC, and documents that the plaintiffs either possessed or knew about and upon which they relied in bringing the suit. Rothman v. Gregor, 220 F.3d 81, 88-89 (2d Cir.2000) (internal citations omitted). II. Claims Under Sections 11 and 12 of the Securities Act Several defendants move to dismiss Counts One and Three of the Amended Complaint, which involve §§12 and 11 of the Securities Act, respectively. Essentially, § 11 creates liability for misstatements in registration statements for public offerings, 15 U.S.C. § 77k, while § 12 creates liability for misstatements in prospectuses. 15 U.S.C. § 77k. The first set of transactions on which the relevant claims are based was the private placement offering of $600 million in Senior Subordinated Notes. (See Confidential Offering Circular,. July 22, 2004, Wilson Decl. Ex. B. (the “Offering Memorandum”).) As discussed above, the notes were unregistered pursuant to SEC Rule 144A, 17 C.F.R. § 230.144A, which exempts private placements to qualified institutional buyers from the registration requirements of the Securities Act. See 15 U.S.C. § 77d(2) (exempting from registration requirements “transactions by an issuer not involving any public offering”); see also In re Livent, Inc. Noteholders Secs. Litig., 151 F.Supp.2d 371, 431 (S.D.N.Y.2001). Among the purchasers of unregistered bonds in this offering were plaintiffs PIMCO and PIMCO High Yield Fund. The Bond Underwriter Defendants acted as lead initial purchasers — that is, underwriters — for this issue. The second set of transactions was the public offering of registered bonds pursuant to a Form S-4 Registration Statement (Wilson Decl. Ex. C) (the “Bond Registration Statement”). In this offering, Refco allowed holders of unregistered bonds to exchange their bonds for registered bonds in a transaction known as an “Exxon Capital exchange.” (Compl. ¶ 149.) See Exxon Capital Holding Corp., SEC No-Action Letter (May 13, 1988). The Bond Underwriter Defendants are not identified as underwriters in the Bond Registration Statement, and claim not to have been involved in this transaction in any fashion whatsoever. A. Claims Arising From the Rule 144A Offering and the Subsequent Public Offering Count One of the Complaint makes claims under § 12(a)(2) of the Securities Act based on alleged misstatements in the Rule 144A Offering Memorandum. This count is challenged by a group of defendants that includes the Bond Underwriter Defendants and several defendants whom plaintiffs claim “solicited the [plaintiffs’] purchases of the 144A Bonds.” (Compl. ¶ 275.) This group of defendants argues that § 12(a)(2) does not apply to private offering memoranda. The Bond Underwriter Defendants also move to dismiss Count Three of the complaint, which makes claims under § 11 of the Securities Act based on the Bond Registration Statement, on the grounds that their involvement in Refco’s collapse was limited to underwriting the June 2004 private placement of bonds pursuant to Rule 144A, and that this private placement is not a “public offering” subject to the terms of the Act. Plaintiffs make three arguments in defense of their claims arising from the Rule 144A offering: first, that the Rule 144A offering itself is covered by § 12(a)(2); second, alternatively, that the Rule 144A offering should be treated as part of a two-step transaction which, viewed as a whole, falls within the coverage of § 12(a)(2) or § 11; and third, that the Bond Underwriter Defendants were directly involved with the creation of the Bond Registration Statement and are therefore subject to liability under § 11 even if the Rule 144A offering is not covered. 1. The Rule 144A Offering Cannot Give Rise to Liability Under § 12(a)(2) Section 12(a)(2) of the Securities Act extends liability to any person who offers or sells a security ... by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements ... not misleading. 15 U.S.C.A. § 111 (a)(2). Thus, if the Offering Memorandum or some other relevant document does not qualify as a “prospectus or oral communication” within the meaning of the statute, then plaintiffs’ § 12(a)(2) claims based on the Rule 144A offering must be dismissed. The Supreme Court held in Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995), that the work “prospectus” refers to “documents related to public offerings by an issuer or its controlling shareholders,” that is, documents that “must include the information contained in registration statement.’’ Id. at 569, 115 S.Ct. 1061 (emphasis added; internal quotation marks omitted). The phrase “oral communication,” the Court explained, refers only to oral communications relating to a prospectus, and therefore does not change the analysis. Id. at 567-68, 115 S.Ct. 1061. Thus, § 12(a)(2) liability “cannot attach unless there is an obligation to distribute the prospectus in the first place.” Id. at 571, 115 S.Ct. 1061. The Second Circuit further clarified this rule in Yung v. Lee, 432 F.3d 142 (2d Cir.2005), holding that § 12(a)(2) does not apply to the distribution of a prospectus prepared in connection with a public offering to a purchaser in a private transaction. Id. at 149. Even where the defendants’ marketing efforts in connection with the private transaction relied heavily upon the same prospectus used in a public offering, there was no liability because defendants were not obligated to distribute the prospectus in connection with that transaction. Id. Under Yung, therefore, the issue is whether the defendants in this case were obligated to distribute a prospectus in connection with the Rule 144A transaction at issue. Rule 144A specifically provides that securities sold in compliance with its provisions “shall be deemed not to have been offered to the public.” 17 C.F.R. § 230.144A(c). Plaintiffs rely heavily on the fact that the Rule 144A Offering Memorandum included the same information that would later be included in the Bond Registration Statement, but the test is whether there was any requirement that that information be included in the Offering Memorandum. See Gustafson, 513 U.S. at 569, 115 S.Ct. 1061. Plaintiffs point to no such requirement. The complaint explicitly acknowledges that “the Bonds were exempt-from-registration pursuant to Rule 144A.” (Compl. ¶273.) To concede that an issuance is properly exempted from registration under Rule 144A is to concede that the issuance complies with the conditions of the rule, and securities issued in compliance with the conditions of the rule “shall be deemed not to have been offered to the public.” 17 C.F.R. § 230.144A(c). In other words, exemption from registration and non-public status are necessary consequences of compliance with the conditions of Rule 144A. If the Rule 144A bonds were exempt from registration because they complied with Rule 144A, they were nonpublic by definition. District courts in the Second Circuit have consistently dismissed § 12(a)(2) claims based on Rule 144A offerings on the grounds that “offerings under Rule 144A are by definition non-public, and offering memoranda distributed in connection with such offerings cannot give rise to Section 12(a)(2) liability.” Am. High-Income Trust v. Alliedsignal, 329 F.Supp.2d 534, 543 (S.D.N.Y. 2004); see also AIG Global Secs. Lending Corp. v. Banc of Am. Secs. LLC, 254 F.Supp.2d 373, 388-389 (S.D.N.Y.2003). Plaintiffs assert that the SEC “has made clear that its promulgation of Rule 144A was not intended to limit the reach of § 12(a)(2), and that it believes § 12(a)(2) should apply to Rule 144A/Exxon Capital exchange transactions” (P. Mem. 47 (emphasis in original)), conveying the impression that the SEC agrees with their legal analysis. However, although the SEC would be “in sympathy on policy grounds” with a finding of § 12(a)(2) liability, it believes that “the more likely reading of Gustafson ... is that ... the Supreme Court would not have deemed the offering memorandum in the Rule 144A offering to be a prospectus.” (Letter of Aug. 9, 2001, from David M. Becker, General Counsel of the SEC, to the U.S. Dist. Ct. for the Dist. of S.C., In re Safety-Kleen Bondholders Litig., No. 3:00-1145-17, Coffey Dec. Ex. 1, at 3.) This Court agrees with the SEC and with prior courts in this district that under current law a Rule 144A offering does not give rise to liability under § 12(a)(2). Plaintiffs rely on the pre-Gustafson case of Hill York Corp. v. Am. Int’l Franchises, Inc., 448 F.2d 680 (5th Cir.1971), for the proposition that “the question of public offering is one of fact and must depend upon the circumstances of each ease.” Id. at 687. It is true that a few post-Gustaf-son cases in other districts have applied this reasoning to find that a § 12(a)(2) claim based on a Rule 144A offering could survive a motion to dismiss. See, e.g., In re Enron Corp. Secs., Derivative & ERISA Litig., 310 F.Supp.2d 819, 859-866 (S.D.Tex.2004). As noted above, however, courts in the Southern District of New York have repeatedly declined to follow this reasoning. Even if it were followed, nothing in the alleged facts of this case suggests that the Rule 144A offering was public. Plaintiffs assert that “the Rule 144A Bonds were offered to a subset of the investing public” (P. Mem. 44), but this is disingenuous. In a broad sense, any private transaction involves “a subset of the investing public” — every investor is a “subset” of the investing public just as every citizen is a subset of the general public. The Offering Memorandum by its terms, however, required the terms of the offer not to be made public, and made clear that the offering was “personal to the offeree ... and [did] not constitute an offer to any other person or to the public generally.” (Offering Memorandum, Wilson Decl. Ex. B., at ii.) The Offering Memorandum also provided that the notes were not registered with the SEC (id. at ii-iii), which, for the reasons discussed above, clearly implies that they are non-public under Rule 144A. See In re WorldCom, Inc. Secs. Li- tig., 294 F.Supp.2d 431, 454 (S.D.N.Y.2003) (‘WorldCom I”) (relying on similar language to hold that “[t]he fact that the [offering in question] was a private placement is clear from its face”). Nothing in the complaint suggests that the Rule 144A offering was directed at the general investing public. “[N]o matter how the plaintiff might word the claim, the document involved cannot be ‘silkenized’ into a § 12[ (a) ](2) ‘prospectus’.” Glamorgan Coal Corp. v. Ratner’s Group PLC, No. 93 Civ. 7581,1995 WL 406167, at *3 (S.D.N.Y. July 10, 1995). In short, plaintiffs have offered no persuasive reason why the Rule 144A offering should be treated-as public within the meaning of § 12(a)(2). 2. The Rule 144A Offering and the Exxon Capital Exchange Do Not Constitute a Single Transaction Covered By § 12(a)(2) or § 11 Plaintiffs argue that even if the Rule 144A offering itself is not covered by § 12(a)(2), it should be treated as part of a single, two-step transaction that is covered by that provision. They argue that an initial purchaser or underwriter that prepares an offering memorandum for a private placement of notes is liable under § 12 when the issuer of the notes later exchanges, them for registered bonds in an Exxon Capital exchange. In other words, plaintiffs contend that the entire two-step process (the initial offering of unregistered bonds, followed by the Exxon Capital exchange) was a single “public offering.” They make the same argument with respect to § 11 of the Securities Act, 15 U.S.C. § 77k. District courts have rejected similar efforts to subject Rule 144A transactions to § 12(a)(2) liability by treating them as part of larger transactions. See Am. High-Income Trust, 329 F.Supp.2d at 543; In re Interbank Funding Corp. Secs. Litig., 329 F.Supp.2d 84, 94-95 (D.D.C.2004). “The process by which an issuer offers bonds through a private placement under Rule 144A of the Securities Act, and subsequently offers to exchange the Rule 144A notes for registered securities — an “ ‘Exxon Capital exchange offer’ — is typical of high-yield debt issuance.” Am. High-Income Trust, 329 F.Supp.2d at 541. Therefore, to treat the two transactions as part of a single plan “would render Rule 144A ineffective for a very substantial number of securities transactions, and defeat the capital market financing objectives the Rule 144A exemption was designed to achieve.” Livent, 151 F.Supp.2d at 431-32 (addressing a similar integration argument in a § 11 context). If an Exxon Capital exchange brought unregistered bonds within the scope of § 11 or § 12, qualified institutional buyers who participated in the exchange would be considered underwriters under the Securities Act and would be required to file their own registration statement, which would significantly undermine Rule 144A’s goal of promoting liquidity in secondary securities markets. Id. at 431. The SEC, like courts in this district, has taken the position that no liability under § 12(a)(2) arises in a two-step transaction of this kind. Letter from Jacob H. Still-man, Solicitor, Office of the General Counsel of the SEC, to the U.S. Dist. Ct. for the N. Dist. of Ala., dated Nov. 28, 2006, In re HealthSouth Secs. Litig., No. CV-03-BE-1500-S (Letter from Robert B. McCaw to the Court, dated Dec. 1, 2006, Ex. A), at 8-11. As the SEC noted, the concept of “integration” on which the plaintiffs’ theory is premised is a specific doctrine in securities law by which courts determine whether multiple securities transactions should be considered part of the same offering for purposes of determining whether exemptions from the registration requirements apply. To apply it to the facts of this case would be “to apply ‘integration’ in an entirely novel manner which stands the concept on its head,” because “[t]he Commission, and securities market participants, recognize the two steps to be separate transactions.” Id. at 11. Indeed, as the SEC noted, the qualified institutional buyers certainly relied on that understanding when they decided to become involved in the Rule 144A transaction. Id. Plaintiffs allege that the Offering Memorandum was used as the foundation for preparing the Bond Registration Statement, that the two documents were substantially similar in content, and that the parties preparing the Offering Memorandum knew and understood that they were preparing statements that would also be included in the Bond Registration Statement. (Compl. ¶ 153.) Two transactions do not become one, however, simply because they involve the same statements. Plaintiffs have failed to show that the two transactions were one for purposes of § 12(a)(2). Thus, Count One of the complaint, which makes claims under § 12(a)(2) based on the Rule 144A offering, must be dismissed. Count Three of the complaint makes claims against various defendants — including the Bond Underwriter Defendants— pursuant to Section of 11 of the Securities Act, 15 U.S.C. § 77k. Count Three is based on alleged misstatements in the Bond Registration Statement, not the Rule 144A Offering Memorandum. Section 11 imposes liability for material misrepresentations in a registration statement, and by its terms applies only to registered offerings. Plaintiffs argue, however, that the Bond Underwriter Defendants may be liable under § 11 for misstatements in the Rule 144A Offering Memorandum because the unregistered and registered offerings should be treated as one transaction for purposes of § 11. The arguments against plaintiffs’ integration theory discussed above apply with equal force to plaintiffs’ § 11 claims, and so the Rule 144A offering and the subsequent public offering will not be treated as one integrated transaction for purposes of § 11. See Livent, 151 F.Supp.2d at 431-32. 3. The Bond Underwriter Defendants Are Not Liable Under § 11 For Their Involvement in the Preparation of the Bond Registration Statement The only remaining question with respect to liability under §§11 and 12 is whether the Bond Underwriter Defendants are subject to § 11 liability for direct involvement in the creation of the Bond Registration Statement. The Bond Underwriter Defendants move to dismiss Count Three as against them on the grounds that their involvement was limited to the Rule 144A offering. In order to be liable under § 11 for misstatements in the Bond Registration Statement, the defendants must qualify as “underwriters” within the meaning of § 11(a)(5). The term “underwriter” is defined by the Securities Act as: any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors’ or sellers’ commission. 15 U.S.C.A. § 77b(a)(ll). In this case, plaintiffs allege “upon information and belief’ that the Bond Underwriter Defendants “participated in the preparation of the Bond Registration Statement.” (Compl. ¶¶ 153, 307.) This conclusory allegation of participation in the preparation of the statement includes no detail whatsoever; plaintiffs make no specific allegations as to the extent of this participation or what actual actions the defendants took. The term “underwriter” in the Securities Act has been broadly interpreted. Thus, the Seventh Circuit has held that it includes “a party retained solely to make minimum interest rate recommendations and participate in the preparation of a registration statement but which does not purchase or sell securities, solicit orders, take part in the actual distribution, assume any risk of sale of the securities or do other things commonly associated with an underwriter’s role.” Harden v. Raffensperger, Hughes & Co., Inc., 65 F.3d 1392, 1396 (7th Cir.1995). “Underwriter” is not, however, a term of unlimited applicability that includes anyone associated with a given transaction. “It is crucial to the definition of ‘underwriter’ that any underwriter must participate in the distribution of a security.” McFarland v. Memorex Corp., 493 F.Supp. 631, 644 (D.C.Cal.1980). Thus, parties have been found not to meet the definition where there was “no allegation ... that the [the parties] purchased any [of the relevant] securities with a view to distribution or that they offered or sold any security on behalf of [the issuer].” Id. “[Underwriters are subjected to liability because they hold themselves out as professionals who are able to evaluate the financial condition of the issuer.” Id. at 646. This is precisely what the Underwriting Defendants did not do with respect to the public offering in this case. Plaintiffs have alleged no facts suggesting the Bond Underwriter Defendants held themselves out in any respect as to the public offering; on the contrary, any role they may have played in that offering was never publicly acknowledged. Nor do any of the allegations in the Amended Complaint suggest that the Bond Underwriter Defendants bore any risk with respect to that transaction. “An underwriter buys securities directly or indirectly from the issuer and resells them to the public, or he performs some act (or acts) that facilitates the issuer’s distribution. He participates in the transmission process between the issuer and the public.” Ingenito v. Bermec Corp., 441 F.Supp. 525, 536 (S.D.N.Y. 1977). Because the plaintiffs have failed to make any specific allegations of “participation” of the kind that would qualify the Bond Underwriter Defendants as underwriters of the public offering, the plaintiffs’ conclusory allegation that they “participated” in the creation of a registration statement, read in isolation, would likely be insufficient to survive a motion to dismiss. “Conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to [defeat] a motion to dismiss.” Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 240 (2d Cir.2002) (internal citation omitted). Even if this bare allegation could suffice in some circumstances, it does not here, because in the context of the entire complaint it is clear that the word “participated” refers entirely to defendants’ participation in the Rule 144A offering — not to actual participation in the creation of the Bond Registration Statement. Plaintiffs state that the Bond Underwriter Defendants were “paid as underwriters and ... performed the functions of underwriters in connection with the Bond Offering — including contacting potential investors, organizing road shows, preparing the offering documents, and conducting a ‘due diligence’ investigation.” (P. Mem. 54.) Despite plaintiffs’ artful use of the phrase “Bond Offering” to describe both the Rule 144A offering and the subsequent public offering, it is clear from the Amended Complaint that all of these actions took place in the context of the Bond Underwriter Defendants’ work on the Rule 144A offering, not the subsequent public offering. (Compl. ¶¶ 107, 144, 147-48, 153.) Plaintiffs’ memorandum of law clarifies that the “indirect participation” alleged (P. Mem. 55) includes the Bond Underwriter Defendants’ participation in the Road Show in July 2004 during which the Rule 144A bonds were marketed to investors. Plaintiffs’ theory is that because the Rule 144A bonds by their terms anticipated the possibility of an exchange for registered bonds, the Bond Underwriter Defendants by soliciting purchasers for the Rule 144A bonds in fact “solicited [investors] to participate in both steps of the Bond Offering.” (P. Mem. 54.) Once plaintiffs’ theory that the “two-step process” was in fact a single transaction is rejected, therefore, plaintiffs’ claim of “indirect participation” (P. Mem. 55) in this context becomes irrelevant. The alleged “indirect participation” also includes the actual underwriting of the Rule 144A offering, with the knowledge that the bonds would later be exchanged for registered bonds (P. Mem. 54-55), an argument that also necessarily fails once the plaintiffs’ single-transaction theory is rejected. Of course, a court reviewing a motion to dismiss is required to draw all inferences in favor of the non-moving party. Here, however, the single sentence alleging that the Bond Underwriter Defendants participated in the public offering presents a legal conclusion, not a factual allegation, and must be read in the context of the factual allegations to which it refers. “Conclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts will not prevent dismissal of Section 11 claims.” In re Merrill Lynch & Co., Inc. Research Reports Secs. Litig., 272 F.Supp.2d 243, 253 (S.D.N.Y. 2003) (internal citations, alterations and quotation marks omitted). Plaintiffs have in fact failed to allege any specific role whatsoever in the underwriting of the public offering; their only relevant allegation is simply a reproduction of the statutory requirement of “direct or indirect participation,” 15 U.S.C. § 77b(a)(ll), and in context even that allegation pertains to matters that do not give rise to § 11 liability. Accordingly, the Bond Underwriter Defendants’ motion to dismiss Count Three as to them will be granted. B. Motions to Dismiss the § 11 Claims For Failure to Allege Fraud With Sufficient Particularity Defendants Silverman, Klejna, Bennett, and Grant Thornton argue that the claims relating to § 11 of the Securities Act (Compl. ¶¶ 299-132, 313-328) sound in fraud, and are therefore subject to a higher pleading standard. (Silverman Mem. 22-24; Klejna Mem. 30-33; Bennett Mem. 19-21; Grant Thornton Mem. 15-18.) This argument is without merit. Rule 9(b) of the Federal Rules of Civil Procedure provides that “[i]n all aver-ments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” To meet the requirements of Rule 9(b), a complaint must “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent.” Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993). The Second Circuit has acknowledged that “fraud is not an element or a requisite to a claim under Section 11,” and that “a plaintiff need allege no more than negligence to proceed under Section 11.” Rombach v. Chang, 355 F.3d 164, 171 (2d Cir.2004). Accordingly, Rule 9(b)’s standards apply to Section 11 claims only “insofar as the claims are premised on allegations of fraud.” Id. Applying this analysis, however, the court found implications of fraud in language that closely tracked the language of Section 11 itself: Plaintiffs assert that their Section 11 claims “do[ ] not sound in fraud” but the wording and imputations of the complaint are classically associated with fraud: that the Registration statement was “inaccurate and misleading;” that it contained “untrue statements of material facts;” and that “materially false and misleading written statements” were issued. Rombach, 355 F.3d at 171 (emphasis in original). This passage presents something of a conundrum, because applied literally, it would seem to require applying a 9(b) standard to all claims under § 11. Section 11 applies when “any part of the registration statement ... contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.” 15 U.S.C.A. § 77k(a) (emphasis added). See Johnson v. NYFIX, Inc., 399 F.Supp.2d 105, 122 (D.Conn.2005). Fraud, of course, implies more than falsity, and the mere fact that a statement is misleading (as are all false statements, whether intentionally, negligently or innocently made) does not make it fraudulent. It is clear that the Second Circuit did not intend Rombach as an instruction that all § 11 pleadings should be subjected to the Rule 9(b) standard. See Rombach, 355 F.3d at 178 (finding that § 11 claims against certain defendants sounded in negligence, not fraud). Nor can the Second Circuit have intended that all allegations directly reproducing the language of § 11 be subject to Rule 9(b); as Rombach acknowledges, violations of § 11 claims do not necessarily involve fraud. 355 F.3d at 171. Therefore, the court’s conclusion that the particular language in Rombach was indicative of fraud should be read in the context of the pleadings at issue in that case, in which the plaintiffs “[did] not assert any claim of negligence on the part of the Individual Defendants, nor [did] they specify any basis for such a claim.” Rombach v. Chang, No. 00 Civ. 0958, 2002 WL 1396986, at *4 (E.D.N.Y. June 7, 2002). Rombach necessarily requires a case-by-case analysis of particular pleadings to determine whether “the gravamen of the complaint is plainly fraud.” 355 F.3d at 172, quoting In re Stac Elecs. Secs. Litig., 89 F.3d 1399, 1405 n. 2 (9th Cir.1996). In this case, the gravamen of the § 11 claims is plainly not fraud. The complaint in this case is carefully structured so as to draw a clear distinction between negligence and fraud claims. The Securities Act claims are found in the first half of the complaint (¶¶ 86-379); the Exchange Act allegations, which include allegations of fraud by some — but not all — of the defendants named in the Securities Act claims, are found in the second half of the complaint (¶¶ 381-720). This careful division makes it easy to distinguish between the two, and the substance of the allegations keeps the distinction as clear as does the complaint’s structure. The relevant factual allegations are contained in a section called “Defendants’ Negligence” (Compl. ¶¶ 249-258), which alleges exactly that. The Securities Act section of the complaint alleges various untrue or misleading statements in the Offering Memorandum, the Bond Registration Statement, and the IPO Registration Statement. As to the defendants’ intent, however, these claims are carefully couched in the language of negligence. For example, plaintiffs allege that Refeo’s corporate officers and auditors “did not conduct a reasonable investigation of the statements contained in the Offering Memorandum and the Bond Registration Statement, and did not possess reasonable grounds for believing that the statements in those documents were true and not misleading.” (Compl. ¶ 252.) Defendants have pointed to no allegations in the Securities Act section of the complaint that contain even a hint of fraud. As Silverman notes (Silverman Mem. ¶ 24), the complaint certainly accuses Ref-co itself of concealing uncollectible receivables. (Compl. ¶ 199.) Indeed, it is clear that plaintiffs believe that Refco and various persons associated with it, including most, if not all, of the defendants, were engaged in a massive fraud. This fact, however, does not take away plaintiffs’ right to plead in the alternative that defendants violated provisions requiring only negligence. See Rombach, 355 F.3d at 171 (“The same course of conduct that would support a Rule 10b-5 claim may as well support a Section 11 claim or a claim under Section 12(a)(2).”). Of course, “[pjlaintiffs cannot evade the Rule 9(b) strictures by summarily disclaiming any reliance on a theory of fraud or recklessness.” In re JP Morgan Chase Secs. Litig., 363 F.Supp.2d 595, 635 (S.D.N.Y.2005). Thus, the language at the beginning of each Securities Act claim disclaiming any intent to allege fraud is by itself insufficient to protect those claims from Rule 9(b)’s stringent requirements. In this case, however, plaintiffs have done more than disclaim fraud; they have specifically pled alternate theories of fraud and negligence. As the Third Circuit held in a similar case, plaintiffs ... do not merely disavow already-pled allegations of fraud in connection with their Section 11 and Section 12(a)(2) claims, leaving the court to sift through those allegations in search of some lesser included claim of strict liability. Rather, both plaintiffs have expressly pled negligence in connection with their Section 11 and 12(a)(2) claims. We regard this difference in pleading as dispositive. In re Suprema Specialties, Inc. Secs. Litig., 438 F.3d 256, 272 (3d Cir.2006) (internal citations, alterations, and quotation marks omitted). Defendants do not argue that the complaint is insufficiently specific if Rule 9(b)’s standards are not applied. Accordingly, the motions by defendants Silverman, Klejna, Bennett, and Grant Thornton to dismiss the § 11 claims (Count Three) and the control-person claims based on underlying § 11 violations (Count Four) for failure to satisfy Rule 9(b)’s standards will be denied. C. Whether Unregistered Bondholders Have Standing to Make § 11 Claims Based on the Bond Registration Statement Several defendants move to dismiss the § 11 claims as to those plaintiffs who acquired the Registered Bonds by exchanging unregistered Rule 144A bonds for them. (See Sexton Mem. 23-26, Klejna Mem. 33-35, THL/Audit Comm. Mem. 22, and Grant Thornton Mem. 20-23; response at P. Mem. 58-62.) This argument applies to the § 11 claims made on behalf of plaintiffs who purchased unregistered bonds and then traded them for registered bonds in the Exxon Capital exchange, but does not reach the claims of those plaintiffs who acquired registered bonds on the open market. The defendants frame the argument in several different ways, all of which are based on the idea that the Bond Registration Statement had nothing to do with the unregistered bondholders’ decision to exchange their unregistered bonds for registered bonds. Thus, Grant Thornton frames the question as one of what statements are material under § 11, arguing that “any positive or negative news contained in the registration statement would have impacted the bondholder’s holdings regardless of whether he exchanged his stock.” (Grant Thornton Memo 21.) Sexton argues these plaintiffs have no standing (Sexton Mem. 23-23) and that they “lack the required causation nexus with the Registration Statement” (Sexton Reply 14). Klejna, who is not being sued for any role in the unregistered bond offering, argues that it would be unfair to hold him responsible for an investment decision by plaintiffs in which he had no involvement. (Klejna Reply 14.) The questions of standing, reliance, materiality, and causation are related, because “materiality is intimately bound up with the concept of reliance,” and “Reliance, in turn, is linked to causation.” In re McKesson HBOC, Inc. Secs. Litig., 126 F.Supp.2d 1248, 1260 (N.D.Cal.2000). Put another way, a misstatement is material if an investor acted in reliance upon it and was thereby caused to suffer damages. The parties argue at some length about whether it is appropriate to impose a reliance requirement on § 11 claims. Although the caselaw is not entirely clear as to the circumstances in which reliance can be relevant to a § 11 claim, the better reading of § 11 seems to be that it “creates a presumption that ‘any person acquiring such security’ was legally harmed by the defective registration statement.” APA Excelsior III L.P. v. Premiere Techs., Inc., 476 F.3d 1261, 1271 (11th Cir.2007). “To say that reliance is ‘presumed’ is simply not the same thing as saying that reliance is ‘irrelevant.’ ” Id. at 1272. But see Westinghouse Elec. Corp. v. ’21’ Int’l Holdings, Inc., 821 F.Supp. 212, 218 (S.D.N.Y.1993) (“Reliance is not a factor in a § 11 action, and thus impossibility of reliance can be no bar to a § 11 claim. As long as a plaintiff can show that the particular securities he purchased were registered by means of a materially false registration statement, he has a claim under § 11.” (internal citations omitted).) Whether framed as a question of materiality or reliance, it seems clear as a matter of law and logic that plaintiffs should be entitled to no recovery when it can be established with certainty that they were not harmed in any way by the relevant misrepresentations. Defendants offer at least two different reasons to think that reliance was impossible in the present case, that is, that any misstatements in the Bond Registration Statement were immaterial as to plaintiff unregistered bondholders. The first contention is that the unregistered bondholders’ relevant investment decision was already made at the time they purchased the unregistered bonds. As Sexton puts it, “[plaintiffs’ investment decision could not have possibly been affected or ‘impelled’ by the registration statements because their investment commitment to Refco was made when they purchased the Rule 144A Bonds prior to the issuance of the registration statement.” (Letter from Stuart I. Friedman to the Court, dated Mar. 1, 2007; see Sexton Mem. 24-25.) In other words, “Rompletion of the mandated exchange was the performance of a ministerial act.” (Klejna Mem. 34.) In a case to which defendants seek to analogize this one, the Eleventh Circuit concluded that where plaintiffs had made a binding and irrevocable commitment to purchase the relevant investments prior to the issuance of the registration statement, there could be no liability under § 11. APA Excelsior, 476 F.3d 1261, 1275-76. Section ll’s presumption of reliance is rebutted, in other words, where the plaintiffs were irrevocably committed to purchase the securities before the registration statement issued, because “[t]o hold otherwise would mean that an impossible fact will be presumed in Plaintiffs’ favor.” Id. at 1273. Defendants argue that plaintiffs’ claims similarly should be dismissed on the grounds that the unregistered bondholders, like the parties in APA Excelsior, were irrevocably committed to the Exxon Capital exchange when they purchased the unregistered bonds. At this stage of the litigation, however, it cannot be said with certainty that “the plaintiffs lacked the power or authority to back out” of the Exxon Capital exchange. Pell v. Weinstein, 759 F.Supp. 1107, 1114 (M.D.Pa.1991). It is true that, according to the complaint, the unregistered bondholders would not have bought the unregistered bonds without the understanding that they would be exchanged for Registered Bonds. (Compl. ¶ 104.) Furthermore, the complaint alleges that the Exxon Capital exchange was “mandated by the Offering Memorandum and the underwriting contracts.” (Compl. ¶ 100 (emphasis added).) In context, however, it is clear that it was the issuers of the bonds, not the purchasers, who were obligated under this arrangement. Plaintiffs allege that the “co-issuers” of the bonds “undertook to use their best efforts to offer the Registered Bonds in exchange for the 144A Bonds.” (Compl. ¶ 103.) An undertaking on the offeror’s side does not oblige the offerree to accept. Nothing in the plaintiffs’ allegations suggests that plaintiffs were irrevocably committed to the Exxon Capital exchange. Indeed, plaintiffs contend that “unless and until they affirmatively exchanged the bonds ... the Rule 144A bondholders retained the option of rejecting the exchange offer and keeping their registered bonds.” (Letter from Stuart M. Grant to the Court, dated Mar. 12, 2007.) Defendants have pointed to no language in the relevant documents suggesting otherwise. Defendants point out that the unregistered bondholders allegedly decided to buy the unregistered bonds specifically because they understood that the bonds would be exchanged for registered bonds. Alleging that plaintiffs had made a decision, however, is not the same as alleging that they had entered into a commitment. Although plaintiffs certainly intended ■ to exchange their 144A bonds for registered bonds, there is at least a question of fact as to whether the Bond Registration Statement could have had any impact on their decision to participate in the Exxon Capital exchange. As a question of irrevocable commitment, therefore, defendants’ arguments are unpersuasive. There are other ways to frame the issue, however. Plaintiffs argue that “a jury could find ... that there is a substantial likelihood that a reasonable investor would consider that information [in the Registration Statement] important when deciding whether to purchase the [llkA Bonds] and exchange them for Registered Bonds.” (P. Mem. 61 (emphasis added).) Plaintiffs’ phrasing assumes that the unregistered and registered bond offerings may be treated as a single transaction, a theory that has already been rejected for the reasons discussed above. It is therefore necessary to ask what the unregistered bondholders— already owners of non-tradeable Refco bonds — could have done differently had the Bond Registration Statement been fully candid about Refco’s alleged foul deeds and dreadful prospects. Under this line of inquiry, it is not an irrevocable commitment that rebuts the presumption of reliance, but rather the fact that plaintiffs had no other options. “[W]hen presented with a Rule 12(b)(6) motion, a complaint may not properly be dismissed ... on the ground that the alleged misstatements or omissions are not material unless they are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The Second Circuit has held that where “the omitted information would not have made a reasonable shareholder any less likely to favor the objected-to transaction, ... such an omission, material or not, could not have caused the injury for which damages are sought.” Minzer v. Keegan, 218 F.3d 144 (2d Cir.2000). Applying this materiality analysis to a case where plaintiffs’ only options were to trade their preferred stock for common stock, or to redeem it at a price substantially below the market price, the Fifth Circuit held that there could be no liability for misrepresentations because “respondents d[id] not indicate how they might have acted differently had they had prior notice” of the true facts behind the misrepresentations. Dwoskin v. Rollins, Inc., 634 F.2d 285, 291 n. 4 (5th Cir.1981). See also Elfenbein v. Am. Fin. Corp., 487 F.Supp. 619, 627 (S.D.N.Y.1980). The same principle applies here, because plaintiffs have not alleged that unregistered bondholders would have been any less likely to go through with the Exxon Capital exchange had the Bond Registration Statement been accurate. Plaintiffs have not alleged that the unregistered bonds differed in any respect from the registered bonds for which they were exchanged, except that the registered bonds were freely tradeable. Had the plaintiffs known the true state of Refco’s affairs, they would have had no reason to avoid making make their holdings tradeable; on the contrary, they would have had every reason to rid themselves of the bonds as soon as possible. Plaintiffs have failed to allege that the omitted information would have made a reasonable shareholder any less likely to favor the Exxon Capital exchange. They have therefore failed to show that any omissions or misrepresentations were material. Accordingly, Counts Three and Four will be dismissed as to any plaintiffs who obtained registered bonds in the Exxon Capital exchange. III. Control-Person Liability Under Securities Act § 15 A. Standards for Control-Person Liability To make out a claim for control-person liability under section 15 of the Securities Act, plaintiffs must allege “(a) a primary violation by a controlled person, and (b) control by the defendant of the primary violator.” In re Global Crossing, Ltd. Secs. Litig., No. 02 Civ. 910, 2005 WL 2990646, at *7 (S.D.N.Y. Nov. 7, 2005) (“Global Crossing III”). Control entails “ ‘the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.’ ” SEC v. First Jersey Secs., Inc., 101 F.3d 1450, 1472-73 (2d Cir.1996), quoting 17 C.F.R. § 240.12b-2. To prevail on a § 15 claim, “[a] plaintiff is required to prove actual control, not merely control person status.” In re IPO Secs. Litig., 241 F.Supp.2d 281, 352 (S.D.N.Y.2003) (emphasis omitted). B. Control Person Liability for the Rule 144A Offering Memorandum As an initial matter, the dismissal of Count One, the count pertaining to the Rule 144A Offering Memorandum, necessarily requires the dismissal of Count Two, which pertains to control-person liability for the statements made in the Rule 144A Offering Memorandum. As noted above, control-person liability exists only where there is a primary violation, and so the conclusion that misstatements in the Offering Memorandum cannot give rise to liability requires the further conclusion that those misstatements cannot give rise to control-person liability. Accordingly, Count Two will be dismissed in its entirety. C.Control Person Liability for the Bond Registration Statement and the IPO Registration Statement Count Four of the complaint alleges control-person liability for misstatements in the Bond Registration Statement. Counts Six and Eight allege control-person liability for misstatements in the August 2005 IPO Registration Statement and prospectus. There is no dispute that misstatements in these documents would constitute a primary violation of the Securities Act; therefore, the sole issue with respect to Counts Four, Six and Eight is whether the plaintiffs have adequately alleged that the defendants named in these counts exercised control over Refco at the time the statements became effective. As this Court found in an earlier case, allegations of control under Section 15 are subject only to notice-pleading requirements, and accordingly survive motions to dismiss “as long as it is at least plausible that plaintiff could develop some set of facts that would pass muster.” In re Global Crossi