Full opinion text
AMENDED MEMORANDUM OPINION AND ORDER JAMES O. BROWNING, District Judge. THIS MATTER comes before the Court on the Motion to Dismiss Consolidated Amended Complaint by Defendants Thornburg Mortgage, Inc., Garrett Thorn-burg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Ann-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman, filed September 22, 2008 (Doc. 126). The Court held a hearing on April 22, 2009. The primary issues are: (i) whether the Plaintiffs sufficiently allege facts giving rise to the strong inference of scienter necessary to support liability under the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78a-78oo; (ii) whether the Plaintiffs adequately allege any false or misleading statements of fact to support liability under the Exchange Act; (iii) whether any of the Defendants are subject to control-person liability under Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a); (iv) whether, under the facts alleged, Paul G. Decoff, Defendant Thornburg Mortgage, Inc.’s (“TMI’s”) Senior Executive Vice President and Chief Lending Officer, and/or Defendant Clarence D. Simmons, TMI’s Senior Executive Vice President and Chief Financial Officer, are proper parties defendant to the Plaintiffs’ claim under Section 11 of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77k; (v) whether, under the facts alleged, any of the Defendants are proper parties defendant to the Plaintiffs’ claim under Section 12(a)(2) of the Securities Act, 15 U.S.C. § 771 (a)(2); and (vi) whether the Plaintiffs properly allege control-person liability against any Defendant under Section 15 of the Securities Act, 15 U.S.C. § 77o. Because TMI is in the midst of a pending bankruptcy proceeding, the Court will reserve judgment as to the claims against TMI and the claims that are dependent upon TMI’s liability. Otherwise, the motion is granted in part and denied in part. The Court dismisses the Plaintiffs’ claims based on the Securities Act of 1933 against all of the Defendants. The Court also dismisses the Plaintiffs’ Section 10(b) claims against Defendants Garrett Thornburg, Joseph H. Badal, Decoff, Simmons, Ann-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman. The Court dismisses the Plaintiffs’ Section 20(a) claims against Thornburg, Badal, Anderson, Ater, Cutler, Kalangis, Lopez, Mullin, and Sherman. The Court reserves ruling on this motion as to the Plaintiffs’ Section 10(b) claim against TMI and the Plaintiffs’ Section 20(a) claims against Goldstone, Simmons, and Decoff. FACTUAL BACKGROUND This case arises from what the Plaintiffs refer to as “a campaign of selective disclosure characterized by half-truths, outright falsehoods and strategic omissions.” Plaintiffs’ Opposition to Defendants’ Motion to Dismiss Consolidated Amended Complaint Filed by Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Gold-stone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Anne-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangus, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman at 3, filed December 22, 2008 (Docs. 154, 155, 156, 157)(“1934 Act Response”). The Plaintiffs’ Consolidated Class Action Complaint, filed May 27, 2008 (Doc. 68)(“CCAC”), describes a series of public statements and filings dating back to early 2006 that the Plaintiffs assert were fraudulent material misrepresentations. The Court draws the following statement of facts from the well-pleaded, non-conclusory allegations of the CCAC, as the Court must when analyzing the propriety of a motion to dismiss under rule 12(b)(6) of the Federal Rules of Civil Procedure. 1. The Parties. This consolidated action is brought by Lead Plaintiffs (i) W. Allen Gage, individually and on behalf of J. David Wrather; (ii) Harry Rhodes; (iii) FFF Investments, LLC; (iv) Robert Ippolito, individually and as Trustee for the Family Limited Partnership Trust; (v) Nicholas F. Aldrich, Sr., individually and on behalf of the Aldrich Family, as well as by the Plaintiffs (vi) Betty L. Manning; and (vii) John Learch (collectively “the Plaintiffs”). The Plaintiffs all purchased shares of TMI stock during the Class Period at prices that they allege were artificially inflated. They assert that they were damaged as a result of these inflated-price purchases, now that the truth has been revealed. See' CCAC ¶ 53, at 15-16. Manning acquired 550 shares of TMI common stock during the May 2007 Offering. See id. ¶ 54, at 16. She bought them on May 4, 2007 and paid $27.05 per share. See id. Learch, as trustee for the Learch trust, acquired 400 shares of 7.5% Series E Cumulative Convertible Redeemable Preferred Stock in the June 2007 Offering. See id. ¶ 55, at 16. He bought his shares on June 19, 2007 and paid $25.00 per share. See id. The sole institutional defendant involved in this motion is TMI. Founded-in 1993, TMI is a publicly traded residential-mortgage lender that focuses primarily on “jumbo” and “super-jumbo” segment, ie., loans totaling over $417,000.00, of the adjustable-rate mortgage (“ARM”) market. See CCAC ¶ 5, at 2. In essence, TMI generates business by loaning and borrowing money, and charging a higher interest rate on the money that it loans to others than its sources charge it on the money that it borrows. See id. ¶ 5, at 2-3. As the Plaintiffs put it, “[TMI] generates income from the small, net spread between the interest income it earns on its assets and the cost of its borrowings.” Id. TMI was formed under the laws of the State of Maryland, and has its principal place of business in Santa Fe, New Mexico. See id. ¶ 57, at 16. At all relevant times, TMI’s securities have been traded on the New York Stock Exchange (“NYSE”) under the symbol “TMA.” Id. For federal income tax purposes, TMI is classified as a Real Estate Investment Trust, which means that, so long as TMI meets certain requirements', it is exempt from federal and state income tax at the corporate level. The requirements to maintain this tax exemption are that TMI must: (i) distribute at least eighty-five percent of its taxable income by the end of each calendar year; (ii) declare dividends of at least ninety percent of its income by the time it files its tax returns for such year; and (iii) pay such dividends no later than the date of the first regular dividend payment after such declaration. See id. ¶ 71, at 20-21. There are also twelve individuals named as Defendants in this action. Thornburg was TMF’s founder. See id. ¶ 58, at 17. At all relevant times, he served as Chairman of the Board of Directors and, until December 18, 2007, acted as Chief Executive Officer. See id. Goldstone has served as President, Chief Operating Officer, and a director since June 1993. See id. ¶ 59, at 17. Goldstone became CEO on December 18, 2007. See id. Badal served as a director, the Chief Lending Officer, and Executive Vice President until his retirement on December 31, 2007. See id. ¶ 60. at 17. Decoff has served as Senior Executive Vice President and Chief Lending Officer since January 1, 2008. See id. ¶ 61. at 17. Simmons has served as Senior Executive Vice President since March 2005, and Chief Financial Officer since April 2005. See id. ¶ 62, at 17-18. These Defendants — TMI, Thornburg, Goldstone, Simmons, Badal, and Decoff — will be referred to as “the Thornburg Defendants.” The CCAC describes the remaining individual Defendants, Anderson, Ater, Cutler, Kalangis, Lopez, Mullin and Sherman (“the Director Defendants”) only as directors during the Class Period. See id. ¶¶ 522-28, at 162-63. When discussing the arguments made in the Defendants’ briefs, the Court will refer to them collectively as “the Defendants.” 2. The Claims. This case is a federal securities class action that sets forth claims under the Securities Act and under the Exchange Act. The Plaintiffs allege that “certain defendants acted knowingly or with recklessness in issuing materially false or misleading statements and/or failing to disclose facts concerning [TMIJ’s business and financial condition between April 19, 2007 and March 19, 2008, inclusive.” CCAC ¶ 2, at 1-2. Thus, the Plaintiffs assert, the Defendants are liable for violations of Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), respectively, and Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 771 (a)(2), and 77(o), respectively. 3. The Condition of the Housing Market in 2006-2007. In 2006 and 2007, real-estate values began to falter, resulting in an increased rate of mortgage defaults. See CCAC ¶ 92-93, 96, at 27-29. As a result, by early 2007, the market for A1L-A mortgages, mortgage-backed securities (“MBSs”), and asset-backed commercial paper (“ABCP”) shrunk. See id. ¶¶ 100-03, at 30-31. The result, according to the Plaintiffs, was three fold: (i) reduced demand for Alb-A MBSs; (ii) increased cost of obtaining capital; and (iii) decreased revenues from ARM mortgages. See 1934 Act Response at 7 (citing CCAC ¶¶ 13, 129-33, at 5, 38-39). Large mortgage lenders began to announce staggering losses coupled with a bleak outlook for the future. See CCAC ¶¶ 13, 96-103, at 5, 29-31. TMI, however, continued to deny that the deteriorating mortgage market was affecting it, appearing to report that its superior underwriting standards insulated it from such effects. See id. ¶¶ 79, 213-14, at 24, 63. 4. Problems for Thornburg Mortgage, Inc. — the Exchange Act Claims. According to the Plaintiffs, to show profitability, TMI must continuously increase the totals on its balance sheet by buying and originating mortgage-backed assets. See id. ¶ 5, at 3. This business model requires TMI to have continuous access to capital. See id. TMI has, historically, acquired capital through public offerings of its securities, short-term borrowings — including reverse repurchase agreements (“RPAs”) — the issuance of asset-backed commercial paper (“ABCP”), and the issuance of collateralized-debt obligations (“CDOs”). See id. ¶ 6, at 3. TMI was “heavily leveraged” — meaning that it borrowed a large amount of money compared to the money that it had. For example, depository banks are subject to Federal Reserve rules, which mandate ten percent cash reserves — for every $10.00 of money that the bank borrows from outside sources, it must retain $1.00 of actual cash available at all times. See CCAC ¶ 7, at 3. TMI’s internal policy allows it to borrow $12.50 for every $1.00 it holds in equity— an eight-percent equity-reserve position. See CCAC ¶ 7, at 3. Throughout the Class Period, beginning in December 2006, analysts asked TMI whether its limited equity provided sufficient insurance against a real-estate market downturn. See id. ¶ 82, at 24. In the face of this inquiry, TMI recognized the potential risk of the real-estate market going south, but repeatedly reassured analysts and its investors that its liquidity position — its ability to satisfy debt obligations as they arise — was not at risk. See id. ¶¶ 7, 82, at 3, 24-25. As late as July 20, 2007, TMI reported that its unencumbered assets securing its highly leveraged financing were at their highest level “in the history of the organization.” Id. ¶ 7. at 3. From a leverage perspective, our adjusted equity to asset ratio was 8.19%, up from 8.01% in the first quarter, so we did deleverage a little bit during the quarter, and my suspicion is that we will deleverage a little bit further as we move — as we go through the second quarter. We are a little bit nervous about the liquidity issues and the skittishness in the mortgage market, and this might just be an environment to be a little bit more cautious and a little more prudent. However, our unencumbered, asset portfolio continues to be very, very strong. That number is, I think we have closed the quarter with the highest level of unencumbered assets in the history of the organization, $1.6 billion of unencumbered assets, so we have plenty of liquidity as our hedge strategy, our duration management and interest rate risk strategy, and the high credit quality of our portfolio performs as we would have expected it to perform. Id. ¶ 83, at 25 (emphasis in CCAC). TMI repeatedly stated in its filings with the Securities and Exchange Commission (“SEC”) that its focus was to acquire and originate high quality, highly liquid mortgage assets such that sufficient assets could be readily converted to cash, if necessary, to meet its financial obligations. See id. ¶ 9, at 4. The Defendants — or, at least Goldstone — stated throughout the Class Period that TMI was “exclusively” focused on the “prime” loan mortgage market, which is characterized by loans made to borrowers with a credit score above 620, a debt-to-income ratio no greater than seventy-five percent, and a combined loan-to-value ratio of ninety percent. Id. ¶ 10, at 4. TMI’s highest-ranking executives repeatedly denied that TMI originated lower-quality “subprime” or Alt-A loans and, as a result, represented that TMI’s asset base and earnings potential were not financially exposed to the decline in the subprime and Alt-A mortgage markets. Id. ¶ 11. at 4., “Alt-A loans are ‘alternatives’ to the gold standard of conforming, GSE-backed mortgages. Often an Alt-A borrower is unable to provide the proof of income or the verification of assets necessary to obtain a prime mortgage, but has a satisfactory credit score, or vice versa. In other words, Alt-A or ‘alternative’ loans are associated with and defined by a higher level of risk than prime loans due to a borrower’s inability to provide these fundamental guarantees.” Id. ¶ 98, at 29. See id. ¶ 11, at 4. TMI’s multi-billion dollar asset portfolio during the Class Period was comprised of various mortgage-related assets. See id. ¶ 12, at 4. TMI’s mortgage-based holdings include both loans it originates, and loans it acquires or purchases. See id. ¶ 12 at 4-5. TMI also purchased MBSs-, which it frequently posted as the collateral under its many short-term borrowing agreements. See id. TMI would originate loans, securitize them, and sell off interests in the securitized assets to obtain additional financing. See id. In 2006 and 2007, as the markets for subprime and Alt-A mortgages began to decline, and subprime and Alt-A borrowers began to default with increased ■ frequency, many mortgage lenders, such as Countrywide, announced that they were experiencing serious financial and operational problems. See CCAC ¶ 13, at 5. The Defendants, however, insisted that TMI’s stringent underwriting standards and “high quality” assets insulated it from the market downturn and, in fact, positioned TMI to benefit from the economic environment. Id. As early as April 2007, however, TMI acknowledged burgeoning concerns with the Alt-A mortgage market, but assured its investors that TMI was different than the typical mortgage company and, thus, shareholders’ investments in TMI were safe. See id. As the prices for MBSs backed by AINA loans as collateral declined throughout 2007, the Defendants never disclosed that TMI was holding billions of dollars worth of MBSs backed by AINA collateral on its balance sheets. See id. ¶ 14, at 5. Notwithstanding the Defendants’ repeated representations that TMI’s focus is on originating prime- — rather than subprime or Alt-A — loans, several confidential witnesses with direct knowledge of TMI’s internal practices state that TMI originated Alt-A loans during the Class Period. See CCAC ¶ 14, at 5-6. During the Class Period, the inclusion of AINA assets in TMI’s investment portfolio was adversely affecting its balance sheet by (i) being illiquid/non-salable; and (ii) declining in value, which triggered margin calls from RPA counter-parties on RPAs in which the AINA assets were being held as collateral. See id. ¶ 15, at 6. Nevertheless, on June 6, 2007, Goldstone stated during a North America REIT’s Investor Forum, that TMI occupied a niche in the mortgage-finance market, focusing “exclusively on prime mortgage loan originations, as opposed to subprime.” Id. ¶ 76, at 22-23. He further stated: [Underwriting a $100,000 loan and underwriting a $1 million loan is essentially the same process. So if you can spread your underwriting costs over a $1 million loan as opposed to over a $100,000 loan, you’ve got a more profitable transaction .... [TMI] actually spend[s] more money than most people in the industry on underwriting loans [to] get the credit quality and the portfolio correct, [and] to do [its] due diligence [it] can justify that incremental or additional expense from an underwriting perspective because [it is] amortizing or capitalizing that expense against a much larger average loan size. So consequently, it actually end[s] up with a competitive advantage as it relates to everybody else in the industry. Id. (alterations in original). Also, throughout the Class Period, TMI’s SEC filings asserted that its assets are concentrated in “prime” and “high quality” ARM securities that meet TMI’s “High Quality” criteria. CCAC ¶ 77, at 23. The SEC filings also insisted that TMI’s “primary focus is to acquire and originate high quality, highly liquid mortgage assets such that sufficient assets could be readily converted to cash, if necessary, in order to meet our financial obligations.” Id. ¶ 79, at 24. Notwithstanding these statements, the Defendants — or, at least Goldstone — knew by no later than June of 2007, but did not disclose, that the ABCP market was shrinking rapidly and, by July 2007, had more or less dried up. See id. ¶ 15, at 6; id. ¶¶ 131-32, 134, 250, 263, 288, at 38-40, 74-75, 88. Goldstone allegedly admitted this shrinking market to certain confidential sources during a private meeting on August 8, 2007. See id. ¶ 15, at 6. Gold-stone also reassured the confidential sources that, notwithstanding the problems in the ABCP market, TMI’s relationships with its lender banks “were fine.” Id. ¶ 131, at 38-39. Also by July of 2007, the RPA market became an increasingly more costly source of financing as a result, in part, of a combination of declining asset values and the illiquidity of the ABCP market. See id. ¶ 16, at 6. After early July, TMI was unable to complete any securitization transaction “based on a lack of buyers in the marketplace.” Id. Notwithstanding these apparent problems, Goldstone made some comments during the July 20, 2007 earnings conference call to the effect that the forces affecting the mortgage market were not a threat to TMI. See id. ¶ 114, 115, at 34. Goldstone stated that “[TMI is] behaving substantially different that subprime originators because [it is] not that. [It is] not an Alt>-A originator. [It is] not — [It is] a prime adjustable rate mortgage originator ____” Id. ¶ 114, at 34. Goldstone further stated that “[t]he current credit crisis in the market environment today, the liquidity issues in the marketplace today, are creating a very, very nice opportunity for [TMI].” Id. ¶ 115, at 34. On August 14, 2007, TMI advised the market, without any warning, that because of liquidity concerns, it was exploring the potential sale of assets. See id. ¶¶ 18, 135, 273-74, at 7, 40, 82. TMI had, however, already began a sale of assets by August 10, 2007. See id. ¶¶ 18, 132, 134-35, 137-38, at 7, 39^0. On August 20, 2007, TMI admitted that it had sold approximately thirty-five percent of its portfolio — $20.5 billion of its highest-rated mortgage-backed assets — to meet margin calls on its RPA agreements and to satisfy maturing ABCP obligations. See id. Furthermore, TMI had sold those assets at a discount— approximately ninety-five percent of their face value. See id.; id. ¶ 265(c), at 79. The company did not disclose that its balance sheets contained billions of dollars worth of MBSs that were backed by Alt-A collateral. See id. ¶ 19, at 7. On August 14, 2007, the price of TMI common stock fell forty-three percent, from $13.81 per share to $7.89 per share. See id. ¶ 20, at 7. Also on that day, a substantial volume of shares — 27,293,100— were traded. See id. Allegedly based on the series of false and misleading statements, TMI was able to obtain hundreds of millions of dollars in its securities offerings. See id. ¶ 22, at 8. Specifically, TMI made one stock offering in early September of 2007, in which it raised $500 million in sales. See id. Further, it made two offerings in January of 2008, which gathered an additional $212 million in total proceeds. See id. On February 28, 2008, TMI announced in its 2007 Form 10-K Annual Report that it was forced to meet over $300 million in margin calls under its RPAs. See id. ¶ 23. at 8. This disclosure was the first time that TMI announced that it owned $2.9 billion in MBSs that were backed by Alb-A collateral, and that the declining value of its Alt-A-backed MBSs was to blame for the margin calls. Also on February 28, 2008, upon the release of the above information, TMI’s common stock dropped in value again — this time fifteen percent, from $11.54 per share to $9.86 per share. See id. ¶24, at 8. TMI stock traded heavily that day, with 21,012,500 shares changing hands. See id. TMI had not, however, met all of its margin-call obligations. On February 28, 2008 — the same day as the release of TMI’s 2007 Form 10-K — JP Morgan Chase notified TMI that TMI had defaulted on a $320 million loan by failing to meet an earlier margin call of $28,000,000.00. See id. ¶ 25, at 8-9. On March 3, 2008, TMI disclosed via a press release that it had “been subject to additional margin calls of approximately $270 million as of February 29, 2008,” and that it was “currently in default with one RPA counterparty.” Id. ¶ 26, at 9; id. ¶ 171, at 48. TMI also stated that “the lender had not yet exercised its right to liquidate pledged collateral,” which the Plaintiffs assert was false, and TMI also stated that, “to the extent any other RPA contains a cross-default provision, the related lender could declare an event of default at any time,” which the Plaintiffs assert was misleading. CCAC ¶ 26, at 9; id. ¶ 372, at 113 (quoting TMI’s March 3, 2008 Form 8-K). JP Morgan had already told TMI (i) that the TMI was in default; and (ii) that JP Morgan planned to exercise its rights under the RPA. See CCAC ¶27, at 9. Also, TMI did not disclose that all of its RPA agreements included cross-default provisions, meaning that any company with which TMI had an RPA could declare a default event and demand buy-back of the TMI RPAs. See id. Nevertheless, after the disclosure that occurred, TMI’s stock price fell yet again. Between February 29, 2009 and March 3, 2009, the price of TMI common stock decreased from $8.90 per share to $4.32 per share — a drop of fifty-one percent. See id. ¶ 28, at 9. Over the course of those three days, investors traded 76,858,800 shares of TMI stock. See id. On March 4, 2008, TMI’s auditor, KPMG, LLP send TMI a letter informing TMI that it was withdrawing its unqualified audit opinion contained in TMI’s Form 10-K for 2007. See CCAC ¶29, at 9-10. KPMG stated that, “due to conditions and events that were known or should have been known to the company,” the 2006 and 2007 year-end financial statements “contain material misstatements associated with available for sale securities,” and that “substantial doubt exists relative to [TMIJ’s ability to continue as a going concern.” CCAC ¶ 29, at 9-10 (alterations omitted). KPMG demanded that TMI “make appropriate disclosure of the newly discovered facts” and that its previous opinion letter “could no longer be relied upon.” CCAC ¶ 29, at 9-10. Only one week earlier, KPMG had issued an unqualified audit opinion for TMI. See CCAC ¶ 30, at 10. On March 5, 2008, TMI disclosed to its investors that the February 28, 2009 JP Morgan default had triggered cross-defaults in all of TMF’s RPAs. See id. ¶ 32, at 10. On the same day, the price of TMI’s common stock fell again, from $3.40 per share to $1.26 per share — a 54.4% drop. See id. ¶ 33, at 10. On March 6, 2008, TMI received a letter from the NYSE informing TMI that the NYSE had commenced an investigation into transactions in TMI’s common stock in January of 2008. See CCAC ¶ 34, at 10-11. The investigation was ostensibly regarding the impact of recent market events in the mortgage industry on TMI’s book value. See id. ¶ 178, at 51. TMI did not disclose the existence of the letter or the investigation that day. See id. ¶ 34. at 11. On March 7, 2008, TMI disclosed to the public that it received the letter from KPMG and further announced that it would restate its financial statements for 2007 — but not for 2006. See CCAC ¶ 35, at 11. TMI stated that the restatement was necessary because of “a significant deterioration of prices of MBS[s], combined with a liquidity position under unprecedented pressure from increased margin calls[,] a portion of which [TMI] has been unable to meet.” See CCAC ¶ 35, at 11 (alterations omitted). TMI also stated that its restatement would result in a $427.8 million impairment charge on its balance sheet to reflect the fact that it may not have the ability to hold certain ARM assets to maturity. See id. Between March 7, 2008 and March 10, 2008, TMI’s stock price fell another thirty-six percent, from $1.08 to $0.69. See id. ¶37. at 11-12, Between March 7, 2008 and March 10, 2008, 34,591,800 shares were traded. See id. ¶ 394, at 120. On March 11, 2008, TMI filed the restatement of its financials. See CCAC ¶ 35, at 11. The impairment charge listed on the restated financial statement was actually $676.6 million. See CCAC ¶ 35, at 11. The restatement resulted in a $300,000.00 reduction in management fees and a $5.4 million reduction in fourth-quarter performance fees. See id. The Plaintiffs allege that the restatement reflected an impairment to TMI’s asset portfolio as of December 31, 2007 and not as of March, 2008. Problems continued to pile on TMI. On March 12, 2008, TMI announced that it had defaulted on a $49,000,000.00 RPA with Morgan Stanley because it could not meet a $9,000,000.00 margin call. See id. ¶ 38, at 12. This default allegedly led to a further decrease in TMI’s stock price. See id. On March 19, 2008, TMI announced that it had entered into a bailout agreement with five of its remaining lenders to obtain approximately $5.8 billion in financing. See CCAC ¶ 39, at 12. Goldstone admitted that the deal would significantly dilute the value of TMI common stock, and that the deal was the only way to “give the company the liquidity and staying power to remain afloat.” Id. On the same day, the price of TMI stock fell again. See id. The price per share of TMI common stock dropped fifty percent, from $3.00 per share to $1.50 per share. See id. On April 28, 2008 — seven weeks after TMI received the NYSE letter — TMI informed the investing public that the NYSE had commenced an investigation of some of its January 2008 trading. See CCAC ¶ 178, at 51. Likely because April 28, 2008 is outside the Class Period, the Plaintiffs do not attempt to causally tie any particular adverse effect to this disclosure. They emphasize, however, how long it took— seven weeks — for TMI to disclose that the NYSE had commenced this investigation. See id. During those seven weeks, the Plaintiffs point out, TMI issued nine SEC filings and press releases, none of which mentioned the investigation. See 1934 Act Response at 10. 5. TMI’s Public Offerings and SEC Filings. The Plaintiffs allege that the Defendants relevant to this motion are strictly liable for violations of Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 771 (a)(2), and 77(o), respectively. See CCAC ¶ 40, at 12. The allegations arise out of four events: (i) the May 4, 2007 public offering of 4,500,000 shares of common stock at $27.05 per share, which resulted in gross proceeds of $121.7 million; (ii) the June 19, 2007 public offering of 2,750,000 shares of 7.5% Series E Cumulative Convertible Redeemable Preferred Stock (“Series E Stock”) at $25.00 per share, which resulted in gross proceeds of $68,800,000.00; (iii) the September 7, 2007 public offering of 20,000,000 shares of 10% Series F Cumulative Convertible Redeemable Preferred Stock (“Series F Stock”) at $25.00 per share, which resulted in gross proceeds of $500 million; and (iv) the January 15, 2008 concurrent public offering of eight million shares of Series F Stock at $19.50 per share, which resulted in gross proceeds of $156 million, and seven million shares of common stock at $8.00 per share, which resulted in gross proceeds of $56,000,000.00. See id. All of these public offerings were made pursuant to a Shelf Registration Statement (“SRS”), filed with the SEC on Form S-3 on May 20, 2005, and a Prospectus that became effective on June 16,2005. See CCAC ¶ 42, at 13. The SRS prospectively incorporates by reference: any documents [the Company] file[s] pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and prior to the termination of the offering of the securities to which this prospectus relates will automatically be deemed to be incorporated by reference in this prospectus and to be part hereof from the date of filing those documents. CCAC ¶ 42, at 13 (presumably quoting the SRS). Thus, the SRS incorporates by reference certain of the quarterly, annual, and current reports. See CCAC ¶ 42, at 13. The May 2007 Offering was made pursuant to: (i) the SRS; (ii) a Preliminary Prospectus Supplement filed with the SEC on form 424B5 on May 3, 2007; and (iii) a Prospectus Supplement filed with the SEC on Form 424B2 on May 7, 2007. See CCAC ¶ 43, at 13. The June 2007 Offering was made pursuant to: (i) the SRS; (ii) a Preliminary Prospectus Supplement, filed on Form 424B5 on June 11, 2007; (iii) a Final Term Sheet, filed with the SEC as a Free Writing Prospectus on June 15, 2007; and (iv) a Definitive Prospectus Supplement, filed with the SEC on Form 424B2 on June 18, 2007. See CCAC ¶ 44, at 13-14. The September 2007 Offering was made pursuant to: (i) the SRS; (ii) a Free Writing Prospectus filed with the SEC on August 30, 2007; (iii) a Preliminary Prospectus Supplement dated and filed with the SEC on Form 424B5 on August 30, 2007; (iii) a Final Term Sheet dated August 30, 2007; and (iv) a Prospectus Statement dated August 30, 2007, and filed with the SEC on Form 424B2 on September 4, 2007. See CCAC ¶ 45, at 14. The January 2008 Offerings were made pursuant to: (i) the SRS; (ii) two Preliminary Prospectus Supplements filed on Forms 424B5 on January 9, 2008; and (iii) two Prospectus Supplements filed on Forms 424B2 on January 15, 2008. See CCAC ¶46, at 14. 6. How TMI Makes Money. TMI is not a bank or savings-and-loan institution, but its business purpose, strategy, and methods of operation are very similar to those of banks and savings-and-loans. The primary distinction is that, unlike a bank, TMI finances the purchase and origination of its ARM assets with equity capital, unsecured debt, CDOs, and short-term borrowing, instead of deposits or federal advances. Goldstone, during a November 27, 2007 earnings conference, explained: We are a portfolio lender. I would contrast that with a mortgage banking strategy. By mortgage banker, I mean that’s a company who is in the business of originating mortgages and they then turn around and sell them to third parties and they book gain on sale, present value future cash flows as part of that gain on sale. That’s not the business that we are in. We’re a portfolio lender. We originate loans and acquire assets principally to hold on our balance sheet and our income and profitability is generated by the spread or the net difference between the income that we earn, or the interest that we earn on our assets, and our cost of funds. CCAC ¶ 72, at 21-22. The Plaintiffs insist that this business model results in a need to continuously acquire capital and increase the magnitude of its balance sheet. See CCAC ¶ 73, at 22. They further insist that the model requires TMI to have ready access to cash to achieve growth and to maintain stability during market downturns. See id. The composition of TMI’s asset portfolio was a significant aspect of its business plan throughout the Class Period. See id. ¶ 78, at 23. TMI acquires cash needed to fund its operation in three primary ways: (i) equity offerings, including selling of preferred and common stock; (ii) short-term borrowing, such as RPAs and ABCP; and (3) CDOs. See id. ¶ 73, at 22. Sale of CDOs were a significant source of funding, but became more difficult to consummate as the mortgage financing market declined during the Class Period, particularly for those securities rated less than AAA. See id. ¶ 75, at 22. TMI even encountered difficulties selling its AAA-rated CDOs during the Class Period. See id. 7. The Plaintiffs’ Motive-Based Facts. Another business entity, Thornburg Mortgage Advisory Corporation (“TMAC”), is TMI’s manager and runs TMI. See id. ¶ 193, at 57-58. Thornburg is the CEO of TMAC. See id. Of the other individuals that run TMAC, many are also TMI executives, including Goldstone and Senior Vice Presidents Nathan Fellers and Ann Beckett. See id. TMAC executives were paid from management fees that TMAC earned under its Management Agreement with TMI. TMAC’s management fee was based on TMI’s “Average Historical Equity,” i.e., the difference between total assets and total liabilities calculated each month. Id. ¶ 194, at 58. The Plaintiffs insist that this fee structure provided an incentive to grow the size of TMI’s asset base to get more income for TMAC and, therefore, more executive compensation. See id. At least one analyst has concluded that “this management structure could produce a potential conflict of interest between the external manager and shareholders, particularly about the appropriate size of assets during different phases of a business cycle.” Id. ¶ 195, at 58. PROCEDURAL BACKGROUND This case is four cases that have all been consolidated before this Court. Kenneth Slater, manager of KT Investments, LLC, filed an initial Complaint on August 21, 2007. See Class Action Complaint, filed August 21, 2007 (Doc. 1). In that Complaint, Slater sought to assert class claims against TMI for violations of the Exchange Act, but did not assert any claims under the Securities Act. See Doc. 1. On February 8, 2008, pursuant to a stipulation, the Court consolidated the action that Slater brought with three other actions — namely, Snydman v. Thornburg Mortgage. Inc., No. CIV 07-1025 JEC/RHS, Gonsalves v. Thornburg, No. CIV 07-1069 MV/WDS, and Smith v. Thornburg Mortgage, Inc., No. CIV 07-1115 MCA/RLP. See Order Consolidating Related Actions. Appointing Lead Plaintiff, and Approving Lead Plaintiffs Selection of Lead Counsel and Liaison Counsel at 2-3, filed February 8, 2008 (Doc. 49). At that same time, the Court selected Lead Plaintiffs, named the firms of Schiffrin Barroway Topaz & Kessler, LLP and Wolf Haldenstein Adler Freeman & Hertz, LLP, as Co-Lead Counsel, and named the Branch Law Firm as Liaison Counsel. See id. at 3. On May 27,2008, the Plaintiffs filed the CCAC, alleging violations of the Securities Act and the Exchange Act. Specifically, the Plaintiffs assert that the Defendants are liable for violations of Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), respectively, and Sections 11, 12(a)(2), and 15 of the Securities Act, 15 U.S.C. §§ 77k, 77l (a)(2), and 77o, respectively. See CCAC ¶¶ 2-3, at 1-2. The CCAC makes, class-action allegations on behalf of a class defined as “all persons and entities who purchased or otherwise acquired TMI common stock and/or securities in the open market and/or in or traceable to the Offerings during the Class Period and who were damaged thereby,” but excluding “the Defendants, the directors and officers of TMI, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which any of the defendants have or had a controlling interest.” Id. ¶ 486-87, at 151. In support of their Securities Act claims, the Plaintiffs allege that the offering documents for all four of TMI’s public offerings were materially false and/or misleading because: (i) they incorporated TMI’s 2006 financial results which, as KPMG determined, were materially false and required restatement; and (ii) they failed to disclose that TMI originated Alb-A mortgage loans and possessed a multi-billion-dollar MBS portfolio backed by Alt-A loans that, the Plaintiffs assert, exposed TMI to financial peril in the declining mortgage-financing market. See CCAC ¶ 48, at 15. The Defendants move the Court for an order dismissing the CCAC in its entirety. The Defendants base their motion on rules 8(a), 9(b), and 12(b)(6) of the Federal Rules of Civil Procedures, and the provisions of the Exchange Act, the Securities Act, and the Private Securities Litigation Reform Act of 1995. The Plaintiffs filed two responses on December 22, 2008. See 1934 Act Response; Plaintiffs’ Opposition to the Motions to Dismiss Plaintiffs’ Securities Act Claims Submitted By: 1) Thorn-burg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, AnneDrue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman; 2) The May/June 2007 Underwriter Defendants; 3) Friedman, Billings, Ramsey & Co., Inc.; 4) UBS Securities LLC and Bear Stearns & Co, Inc.; and 5) Stifel, Nicolaus & Company, Incorporated, filed December 22, 2008 (Does. 152, 153)(“1933 Act Response”). The Defendants filed their reply on February 5, 2009. See Reply Memorandum in Support of Motion to Dismiss Consolidated Amended Complaint by Defendants Thornburg Mortgage, Inc., Garrett Thornbm-g, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Anne-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman, filed February 5, 2009 (Doc. 168)(“Reply”). On May 1, 2009, TMI filed for a petition for voluntary Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Maryland. See Suggestion of Bankruptcy at 1, filed May 4, 2009 (Doc. 192); Voluntary Petition at 1 (dated May 1, 2009), filed May 4, 2009 (Doc. 192-2). The Suggestion of Bankruptcy asserted that the bankruptcy of TMI operated as an automatic stay of judicial proceedings against TMI under 11 U.S.C. §§ 362(a)(1) and 362(a)(3). See Suggestion of Bankruptcy at 1. Beginning on June 1, 2009, the Court filed a series of Minute Orders in which it asked the parties to keep it informed of the status of the pending bankruptcy proceedings and to give it recommendations whether the Court should continue work on the pending motions to dismiss. On November 16, 2009, after receiving a number of updates as to the status of the pending bankruptcy proceeding in Maryland, the Court issued another Minute Order informing the parties that it would continue work on the motions to dismiss as to the Defendants other than TMI. See Minute Order, filed November 16, 2009 (Doc. 224). Because TMI’s bankruptcy proceeding continues in the United States Bankruptcy Court in Maryland, the Court decides this motion— to the extent that it can — only as to the Defendants other than TMI. See Mason v. Okla. Turnpike Auth., 115 F.3d 1442, 1450 (10th Cir.1997). (“[T]he rule followed by this circuit and the general rule in other circuits is that the stay provision does not extend to solvent codefendants of the debtor.”)(quoting Okla. Federated Gold & Numismatics, Inc. v. Blodgett, 24 F.3d 136, 141 (10th Cir.1994)); Fortier v. Dona Anna Plaza Partners, 747 F.2d 1324, 1330 (10th Cir.1984) (“The language of [11 U.S.C. § 362] extends stay proceedings only to actions ‘against the debtor.’ There is nothing in the statute which purports to extend the stay to causes of action against solvent co-defendants of the debtor.”); 11 U.S.C. § 362(a) (“[A] petition filed under section 301 [voluntary petition] ... of this title ... operates as a stay ... of ... the ... continuation ... of a judicial ... proceeding against the debtor that was ... commenced before the commencement of the case under this title .... ”). STANDARD FOR A MOTION TO DISMISS UNDER RULE 12(b)(6) Under rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir.1994). The sufficiency of a complaint is a question of law, and when considering and addressing a rule 12(b)(6) motion, a court must accept as true all well-pleaded factual allegations in the complaint, view those allegations in the light most favorable to the non-moving party, and draw all reasonable inferences in the plaintiffs favor. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007); Moore v. Chithrie, 438 F.3d 1036, 1039 (10th Cir.2006); Hous. Auth. of Kaw Tribe v. City of Ponca, 952 F.2d 1183, 1187 (10th Cir.1991). A complaint challenged by a rule 12(b)(6) motion to dismiss does not require detailed factual allegations, but a plaintiffs burden to set forth the grounds of his or her entitlement to relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 546, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 545, 127 S.Ct. 1955 (internal citation omitted). “[T]he Supreme Court recently ... prescribed a new inquiry for us to use in reviewing a dismissal: whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.’ ” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. at 1967, 1969). “The [Supreme] Court explained that a plaintiff must ‘nudge his claims across the line from conceivable to plausible’ in order to survive a motion to dismiss.” Ridge at Red Haiok, L.L.C. v. Schneider, 493 F.3d at 1177 (quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. at 1974) (alterations omitted). “Thus, the mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d at 1177. The United States Court of Appeals for the Tenth Circuit has stated: “[Plausibility” in this context must refer to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs “have not nudged their claims across the line from conceivable to plausible.” The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief. Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir.2008) (quoting Bell Atl. Corp. v. Twombly, 127 S Ct. at 1974) (internal citations omitted). RELEVANT SECURITIES LAW During the early days of the New Deal, Congress enacted two landmark statutes regulating securities. The [Securities] Act was described as an Act “to provide full and fair disclosure of the character of securities sold in interstate and foreign commerce and through the mails, and to prevent frauds in the sale thereof, and for other purposes.” The Securities Exchange Act ... was described as an Act “to provide for the regulation of securities exchanges and of over-the-counter markets operating in interstate and foreign commerce and through the mails, to prevent inequitable and unfair practices on such exchanges and markets, and for other purposes.” Blue Chip Stamps v. Manor Drag Stores, 421 U.S. 723, 727-28, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975). The Securities Act deals with the initial issuance of securities, and with the required contents of registration statements and prospectuses. See id. at 728, 95 S.Ct. 1917. The Exchange Act, on the other hand, is primarily known for prohibiting fraud in connection with the purchase or sale of securities. See id. at 728-29, 95 S.Ct. 1917. The Plaintiffs accused the Defendants of violating both statutes. 1. Relevant Law Regarding 10b-5 Claims “In order to state a claim under 10(b) of the Exchange Act and Rule 10b-5, Plaintiffs must allege: (1) a misleading statement or omission of a material fact; (2) made in connection with the purchase or sale of securities; (3) with intent to defraud or recklessness; (4) reliance; and (5) damages.” In re Sun Healthcare Group, Inc. Sec. Litig., 181 F.Supp.2d 1283, 1286-87 (D.N.M.2002). Furthermore, “[w]hen evaluating a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the district court must evaluate ‘the totality of the pleadings’ to determine if the plaintiffs have stated an actionable claim of securities fraud.” Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1092 (10th Cir.2003). The Supreme Court “has long recognized that meritorious private actions to enforce federal antifraud securities laws are an essential supplement to criminal prosecutions and civil enforcement actions brought, respectively, by the Department of Justice and the Securities and Exchange Commission (SEC).” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 313, 127 S.Ct. 2499. On the other hand, “[p]rivate securities fraud actions, ... if not adequately contained, can be employed abusively to impose substantial costs on companies and individuals whose conduct conforms to the law.” Id. Thus, because a 10b-5 claim is in essence a fraud claim, it is subject to stringent pleading requirements. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1095 (explaining that rule 9(b) alone governed prior to the PSLRA, but that the PSLRA “strengthened what is required adequately to plead two of [the] elements [of a 10b-5 claim].”); Seattle-First Nat. Bank v. Carlstedt, 800 F.2d 1008, 1010 (10th Cir.1986) (“Given the specific reliance on Rule 9(b) in our decision in Utah State University v. Bear, Stearns & Co. [549 F.2d 164, 171 (10th Cir.1977) ], we hold that in this circuit the particularity requirement of Rule 9(b) is applicable generally in securities fraud cases.”). Those requirements extend to the allegations relevant to each defendant’s required mental state. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1095; 15 U.S.C. § 78u-4(b)(2) (“In any private action arising under [Chapter 2B of the Exchange Act] in which the plaintiff may recover money damages only on proof that the defendant acted with a particular state of mind, the complaint shall ... state with particulars ty facts giving rise to a strong inference that the defendant acted with the required state of mind.”)(emphasis added) a. Pleading Scienter. Under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), a plaintiff must, for each act or omission alleged to violate the Exchange Act, state with particularity facts giving rise to a strong inference that each defendant alleged to be responsible for that act or omission acted with an intent to deceive, manipulate, or defraud — in other words, acted with a mental state known as scienter. See City of Phila. v. Fleming Co., Inc., 264 F.3d 1245, 1259 (10th Cir.2001); 15 U.S.C. § 78u-4(b)(2). To allege scienter in connection with non-disclosure of material facts, a plaintiff must plead facts demonstrating that (i) the defendant knew of the potentially material fact; and (ii) the defendant knew that failure to reveal the potentially material fact would likely mislead investors. See City of Phila. v. Fleming Co., Inc., 264 F.3d at 1261. Under certain circumstances, recklessness can satisfy the mental-state requirement, although “courts have been cautious about imposing liability for securities fraud based on reckless conduct.” Id. at 1260. “The requirement of knowledge in this context may be satisfied under a recklessness standard by the defendant’s knowledge of a fact that was so obviously material that the defendant must have been aware both of its materiality and that its non-disclosure would likely mislead investors.” Id. at 1261. The Tenth Circuit has also described recklessness in a Section 10(b) context as “conduct that is an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it.” Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1232 (10th Cir.1996). To create the “strong” inference of scienter that the PSLRA requires, a plaintiff must allege specific facts giving rise to an inference of culpability that is at least as strong as any competing inference of good faith. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 328-29, 127 S.Ct. 2499. The strength of an inference cannot be decided in a vacuum. The inquiry is inherently comparative: How likely is it that one conclusion, as compared to others, follows from the underlying facts? To determine whether the plaintiff has alleged facts that give rise to the requisite “strong inference” of scienter, a court must consider plausible nonculpable explanations for the defendant’s conduct, as well as inferences favoring the plaintiff. Id. As the Supreme Court expressed: [T]o determine whether a complaint’s scienter allegations can survive threshold inspection for sufficiency, a court governed by § 21D(b)(2) [, i.e., 15 U.S.C. § 78u-4(b)(2),] must engage in a comparative evaluation; it must consider, not only inferences urged by the plaintiff, ... but also competing inferences rationally drawn from the facts alleged. An inference of fraudulent intent may be plausible, yet less cogent than other, nonculpable explanations for the defendant’s conduct. To qualify as “strong” within the intendment of § 21D(b)(2), we hold, an inference of scienter must be more than merely plausible or reasonable^ — it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 314, 127 S.Ct. 2499. The scienter analysis is holistic, requiring the court to analyze all allegations in the complaint and not view any particular allegation in isolation. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 322-23, 127 S.Ct. 2499; Adams v. Kinder-Morgan, Inc., 340 F.3d at 1105. In addition to the complaint’s allegations, a court must consider any documents incorporated by reference into the complaint, as well as matters of which a court may take judicial notice. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. at 322-23, 127 S.Ct. 2499. Directors and officers, like all people, tend to act in their own economic self interest. See In re Sun Healthcare Group, Inc. Sec. Litig., 181 F.Supp.2d 1283, 1297 (D.N.M.2002). Alleging such motives, therefore, does not significantly advance the ball in proving a strong inference of scienter, though a court should not completely ignore such allegations. See City of Phila. v. Fleming Co., Inc., 264 F.3d at 1262, 1269-70 (discussing the unhelpful nature of “generalized motives shared by all companies and which are not specifically and uniquely related to” a defendant). Once scienter is successfully alleged against an officer or executive of a corporation, however, that liability may be attributed to the corporation itself, if that officer is a senior controlling officer and was acting within the scope of his or her apparent authority. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1106-07. b. Pleading False or Misleading Statements or Omissions. “[T]he PSLRA increased the burden on a plaintiffs pleading of ... the allegation that the defendant made a false or misleading statement, or failed to state a material fact necessary to make statements made not misleading.” Adams v. Kinder-Morgan, Inc., 340 F.3d at 1095. The PSLRA requires: In any private action arising under this chapter in which the plaintiff alleges that the defendant— (A) made an untrue statement of 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. 15 U.S.C. § 78u-4(b)(1). “A statement or omission is only material if a reasonable investor would consider it important in determining whether to buy or sell stock,” but “[wjhether information is material also depends on other information already available to the market; unless the statement significantly altered the total mix of information available, it will not be considered material.” Grossman v. Novell, Inc., 120 F.3d 1112, 1119 (10th Cir.1997) (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976), and Basic, Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988))(internal quotation marks omitted). In other words, materiality depends not only on the importance of the misstated or omitted facts, but also upon the facts about which investing public is already aware. No matter how material a piece of information may be, however, “[s]ilence, absent a duty to disclose, is not misleading under Rule 10b-5.” Basic v. Levinson, 485 U.S. at 239 n. 17, 108 S.Ct. 978. 2. Claims under Section 20(a) of the Exchange Act. Section 20(a) of the Exchange Act states: Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. 15 U.S.C. § 78t(a). To establish a defendant’s liability as a controlling person, a plaintiff must prove two things: (i) a primary violation of the securities laws, and (ii) that the defendant had “control” over the primary violator. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1107. “The second element of the prima facie case [under Section 20(a) ] requires that the plaintiffs plead facts from which it can be reasonably be inferred that the individual defendants were control persons.” Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (citing Maher v. Durango Metals, Inc., 144 F.3d 1302, 1306 (10th Cir.1998)). “The Tenth Circuit observed that § 20(a) ‘has been interpreted as requiring only some indirect means of discipline or influence short of actual direction to hold a controlling person liable.’ ” Lane v. Page, 649 F.Supp.2d 1256, 1306 (D.N.M.2009) (Browning, J.)(quoting Richardson v. MacArthur, 451 F.2d 35, 41 (10th Cir.1971)). This showing requires the plaintiff to specify facts that “indicate that the defendants had ‘possession, direct or indirect, of 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.’ ” Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1306). See 17 C.F.R. § 230.405 (“The term control (including the terms controlling, controlled by and under common control with) means the possession, direct or indirect, of 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.”). In Adams v. Kinder-Morgan, Inc., the Tenth Circuit addressed whether certain individuals involved in Kinder-Morgan, Inc. qualified as control persons for the purposes of Section 20(a) liability. First, the Tenth Circuit held that the directors were not, ipso facto, control persons. We ... conclude that the plaintiffs have failed to allege sufficient facts to support the conclusion that Kinder was a control person. During the period in question, he was not an executive of the company, but simply a member of the board of directors. The assertion that a person was a member of a corporation’s board of directors, without any allegation that the person individually exerted control or influence over the day-to-day operations of the company, does not suffice to support an allegation that the person is a control person within the meaning of the Exchange Act. Accordingly, the district court was correct to dismiss the claim of control person liability against Kinder. Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (citing Dennis v. Gen. Imaging, Inc., 918 F.2d 496, 509-10 (5th Cir.1990); Burgess v. Premier Corp., 727 F.2d 826, 832 (9th Cir.1984); Cameron v. Outdoor Resorts of Am., Inc., 608 F.2d 187, 195 (5th Cir.1979)). On the other hand, the Tenth Circuit held that being a significant executive within the corporation, with ultimate management authority, is a control person: [W]e conclude that the plaintiffs have pled facts supporting the allegation that [Defendant] Hall was a control person. He was the Chairman, President, and CEO of Kinder-Morgan during the relevant period. As President and CEO, Hall would have possessed the ultimate management authority of the corporation on a daily basis. There were no managers higher than Hall. He thus clearly possessed “the power to direct or cause the direction of the management and policies of [Kinder-Morgan].” Hall also had direct control over McKenzie, his chief financial officer and an alleged primary violator of Rule 10b-5. Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108 (quoting Maher v. Durango Metals, Inc., 144 F.3d at 1305; citing In re Ribozyme Pharms., Inc. Sec. Litig., 119 F.Supp.2d 1156, 1167 (D.Colo.2000)). A high-ranking position within the corporation, however, standing alone, is unlikely to satisfy the “control” element of a control-person claim, unless the circumstance of the defendant’s position and the nature of the underlying violation would lead to an inference that the person had control. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1109 (holding that the CFO of Kinder-Morgan, purely based on his position as CFO, was a control person where the securities-fraud violations related specifically to official reports on the company’s financial performance). Importantly, it is not necessary that the control person actively participate in the alleged fraudulent activity. See Adams v. Kinder-Morgan, Inc., 340 F.3d at 1108. 3. Securities Act of1933. Congress put the Securities Act of 1933 in place to provide greater protection to purchasers of registered securities. See Herman & MacLean v. Huddleston, 459 U.S. 375, 383, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983). Claims under the Securities Act are much more limited in scope than are those under the Exchange Act. The Securities Act in not concerned with the “aftermarket.” In a Securities Act claim, the only pertinent representations are those made within the four corners of the issuers’ offering documents or in documents expressly incorporated therein. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. at 752, 95 S.Ct. 1917.