Full opinion text
OPINION & ORDER SAND, District Judge. Plaintiffs in these consolidated cases are investors in the Beacon Associates investment fund (“Beacon”), which served as a “feeder fund” to Bernard L. Madoff Securities LLC (“BMIS”). Plaintiffs bring claims against various Defendants associated with the Beacon Fund based on losses ultimately sustained as a result of Madoffs massive Ponzi scheme. All Defendants have moved to dismiss the Second Consolidated Amended Complaint (“SCAC”). For the following reasons, the motions are granted in part, denied in part. I. Background The basic facts surrounding Madoffs historic Ponzi scheme are now well known. Madoff was a prominent and respected member of the investing community, and had served as a member of the NASDAQ stock market’s Board of Governors and as the vice-chairman of the National Association of Securities Dealers (“NASD”). Madoffs investment company, BMIS, had operated since approximately 1960. Madoff, who was notoriously secretive, claimed he utilized a “split-strike conversion strategy.” to produce consistently high rates of return on investment. The split-strike conversion strategy supposedly involved buying a basket of stocks listed on the Standard & Poor’s 100 index and hedging through the use of options. However, since at least the early nineties, Madoff did not actually engage in any trading activity. Instead, Madoff generated false paper account statements and trading records; if a client asked to withdraw her money, Madoff would pay her with funds invested by other clients. During this time, Madoff deceived countless investors and professionals, as well as his primary regulators, the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”). On December 11, 2008, news broke that Madoff had been operating a multi-billion dollar Ponzi scheme for nearly twenty years. Madoff pleaded guilty to securities fraud and related offenses on March 12, 2009, and was subsequently sentenced to 150 years in prison. Many individuals and institutions that invested with Madoff did so through feeder funds such as the Beacon Fund. Investors would invest in the feeder fund, which would then invest its assets with Madoff. The Beacon Fund invested approximately 71% of its assets with Madoff. NYAG Compl. ¶ 43. Between 1995 and 2008, Beacon invested approximately $164 million with Madoff and withdrew approximately $26 million, leaving a net investment of approximately $138 million. Id. In November 2008, just prior to the revelation of Madoff s fraud, the reported value of the Beacon Fund’s Madoff account was approximately $358 million. Id. Alter Madoff s fraud became public, the Beacon Fund’s managing members decided to liquidate the Beacon Fund and distribute its remaining assets. The fund’s liquidation forms the subject matter of another action before this Court and Magistrate Judge Peck. See Beacon Assocs. Mgmt. Corp. v. Beacon Assocs. LLC I, No. 09 Civ. 6910(AJP), 725 F.Supp.2d 451, 2010 WL 2947076 (S.D.N.Y. July 27, 2010); Rounds v. Beacon Assocs. Mgmt. Corp., No. 09 Civ. 6910(LBS), 2009 WL 4857622 (S.D.N.Y. Dec. 16, 2009). a. Formation of the Beacon Fund In 1983, Defendants Lawrence Simon and Howard Wohl formed Ivy Asset Management, LLC (“Ivy”). Ivy is a registered investment advisor, and provides three categories of services: (i) providing investment advice to asset managers and other investment advisors, (ii) managing the assets of high net worth individuals and institutions, and (iii) managing proprietary funds of funds (“FOFs”) in which Ivy, Ivy’s principals, and certain qualified individuals invested. A client introduced Simon and Wohl to Madoff in 1987, and Ivy then began to invest the assets of some of its proprietary funds with Madoff. In the late 1980s, Simon met John P. Jeanneret in a restaurant in upstate New York. Jeanneret offered asset management and investment consulting services to upstate New York union pension and welfare funds as president and owner of J.P. Jeanneret Associates, Inc. (“JPJA”), alongside director Paul L. Perry. In 1990, Ivy introduced Jeanneret to Madoff. In 1991, Ivy and JPJA entered into a advisory agreement under which JPJA would pay Ivy 50% of any fees it earned by placing investors with Madoff or other Ivy-recommended investment managers. If the number of JPJA clients invested with Ivy-recommended managers dropped below two, Ivy would instead be entitled to receive 60% of the investment management fees. In 1992, JPJA founded the Income Plus Investment Fund (“Income Plus”) as a vehicle through which pension funds could invest with Madoff. JPJA would amass a total of over $1 billion in pension fund assets under management by 2008. In 1991 or 1992, Ivy was introduced to Joel Danziger, Esq., and Harris Markhoff, Esq. Danziger and Markhoff practiced law together at the firm Danziger & Markhoff, LLP, and also managed two investment partnerships. Simon encouraged Danziger and Markhoff to found and manage an investment fund, with Ivy acting as the managers’ investment consultant. Danziger and Markhoff formed Andover Associates Management Corporation (“AAMC”), which they owned and of which they were the principals, to serve as general partner for the investment fund. Prior to the formation of the fund, AAMC entered into a consulting agreement with Ivy under which AAMC would pay Ivy 50% of any fees it earned, and Ivy would evaluate and recommend investment managers. In 1993, Danziger and Markhoff founded Andover Associates, LP (“Andover”), with AAMC serving as the general partner. Andover invested with several managers recommended by Ivy, including Madoff. This arrangement served as the blueprint for Danziger and Markhoff s second feeder fund, Beacon Associates, LLC (“Beacon”), which is the focal point for the claims in this action. Danziger and Markhoff formed Beacon Associates Management Corporation (“BAMC”) to serve as the fund’s general partner. In 1995, BAMC entered into a consulting agreement with Ivy. The agreement noted that Ivy had “introduced the Principals [of BAMC] to Madoff,” and that the “Principals intend to form an investment limited liability company ... for the purpose of pooling investment funds to be managed by Madoff.” Rosenthal Decl. Ex. D (“1995 BAMC-Ivy Agreement”), at 1. BAMC agreed to pay Ivy 50% of all management fees it earned, as well as 50% of all fees it earned through introducing a third party to Madoff. In return, Ivy agreed to provide BAMC with certain administrative services, including maintaining account records for all Beacon monies invested in BMIS, reconciling BMIS account statements against “trade tickets received and dividends and interests accrued,” maintaining original “books of entry” for all of Beacon’s BMIS accounts reflecting account activity, and calculating “changes in monthly value” of Beacon’s BMIS accounts based on the foregoing data. Id. at 3-4. Participation in the Beacon Fund was offered to investors through confidential Offering Memoranda (“OMs”). Offering Memoranda were released in 2000 and 2004, and were substantially identical. The minimum capital contribution was generally $500,000. The OMs represented that BAMC retained sole discretion to invest and reallocate Beacon assets, and would do so after consultation with Ivy. BAMC was responsible for selecting investment managers with which to invest (such as BMIS), and for “monitoring the Managers’ performance and their adherence to their stated investment strategies and objectives.” Rosenfeld Decl. Ex. C (“2004 OM”), at 10. BAMC represented that it would “factor[ ] in” analyses of risk control, speed of recovery from draw-downs, experience, organizational infrastructure, and correlation with traditional investments such as stocks and bonds into its “continuing evaluation of Managers.” 2004 OM, at 10. The OMs described Ivy, which was acquired by the Bank of New York Company, Inc. (“BONY”) in 2000, as a “global leader in alternative investment fund-of-funds portfolio management” with “approximately $12 billion of assets under management.” Id. at 27. It further stated that Ivy’s “staff of approximately 125 includes 25 research analysts and other senior investment professionals who devote 100% of their time to researching, reviewing, monitoring and analyzing current and prospective alternative investment managers, 21 Certified Public Accountants, 13 CFA Charterholders, and 8 CFA candidates.” Id. Both iterations of the OMs contained extensive cautionary language about the risks of investing with Beacon. The OMs explained that the investments would not be diversified, and the 2000 OM explained that a “substantial majority” of the fund’s assets would be placed with a single manager employing a “Split-Conversion Hedged Option Transaction strategy.” SCAC ¶ 185. The “manager” referred to was Madoff. The 2004 OM did not refer to this “manager,” but instead notified investors that a “significant portion of the Company’s assets are allocated to a strategy adopted by the Managing Member involving a portfolio of Large Cap Stocks hedged with options (‘Large Cap Strategy’).” 2004 OM, at 1. The OM cautioned that “[t]he evaluation and due diligence process may vary among Managers and will be dependent on each Manager’s individual disclosure practice.” Id. at 11. It also warned that, “[although the Managing Member endeavors to verify the integrity of its Managers and broker it utilizes, there is always the risk that they could mishandle or convert the securities or assets under their control.” Id. at 22. Generalized cautionary language was repeated throughout the OM, such as “[a]n investment in the Company involves a high degree of risk,” “many of the Company’s investments are inherently speculative,” and “the Company does not control its Managers, their choice of investments, or other investment decisions[,] which are totally within the control of the selected managers.” Id. at 2, 14. It also notified investors that “the identity of the Managers will not be disclosed except as required by law or by financial reporting rules.” Id. at 2. Madoff ceased accepting additional investments from JPJA’s Income Plus fund sometime in 1999. Simon suggested to Jeanneret that he could circumvent Madoffs limitation on additional investments by investing client assets in the Beacon Fund. Thereafter, JPJA executed amendments to Discretionary Investment Management Agreements (“DIMAs”) with union pension fund clients. The DIMAs incorporated the terms of the 2004 Beacon II OM and explicitly anticipated the investment of client funds in the Beacon Fund. The DIMAs certified that JPJA was a fiduciary to the client and would comply with the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. The DIMAs provided that JPJA would “perform its duties ... with the care, skill, prudence, and diligence, under the circumstances then prevailing, ... and shall diversify the investment account assets so as to avoid the risk of losses.” SCAC ¶ 278. The DIMAs also described the use of options as hedges to limit risk in the underlying investments, supposedly an essential part of Madoffs proprietary investment strategy. b. Ivy’s Doubts Concerning Madoff and Ivy’s Representations to BAMC and JPJA The Ivy defendants were aware of rumors calling into question Madoff s bona fides since the early 1990s. In 1991, Simon allegedly told a prospective investor that “Madoff could be a Ponzi scheme” and that “they did not know how much [Ma-doff] was running.” NYAG Compl. ¶ 50. In 1997, Ivy became suspicious that the number of Standard & Poor’s 100 Index options (“OEX options”) traded on a given day at the Chicago Board of Options (“CBOE”) was insufficient to support Ma-doffs stated investment strategy based on Ivy’s estimate of the amount of money Madoff had under management. Wohl wrote in an internal Ivy memorandum in 1997 that “We should explore this further!” NYAG Compl. ¶ 52. An Ivy employee wrote in 1997 of further suspicions, noting that “understanding Madoff is like finding Pluto ... you can’t really see it ... you do it through inference, its effect on other objects.” NYAG Compl. ¶ 56. Later that year, an internal Ivy memorandum noted that Madoffs records of option trades were inconsistent with the number of option trades and their prices as reported by Bloomberg. The memo stated, “This is a clear example of our inability to make sense of Madoffs strategy, and one where his trades for our accounts are inconsistent with the independent information that is available to us.” NYAG Compl. ¶ 57. Simon asked Madoff about these irregularities on a return flight from a meeting with investors in 1997. Madoff explained that it was “rare” for him to trade options in excess of the volume reported on the CBOE, and that he traded small amounts of OEX options on foreign exchanges. Madoff provided a second explanation later that year or the next, claiming that he also sometimes traded options on domestic exchanges other than the CBOE. Around this time period, Ivy was also concerned that Madoff might be using client money to fund his separate market-making business, that there was no independent verification of Madoffs trades because of his practice of “self-clearing,” and that Madoff used a small accounting firm without an established reputation. These concerns led Ivy to limit its proprietary investment in Madoff to 3% of the fund’s value, whereas the general rule was to limit investments to 6-7%. Wohl argued that Ivy should divest its Madoff investments completely in 1998, but Simon responded, “[w]e have said that it is important to maintain at least some level of Ivy fund investments with Madoff in order to send a message to [our] advisor clients that we have confidence in [Madoff].” NYAG Compl. ¶ 67. On August 8, 1997, Ivy wrote to Jeanneret, “As you know, we have not been able to assure ourselves as to how Bernie is able to successfully trade as much money as we believe he manages.” SCAC ¶ 282. In August 1998, Ivy sent letters to Danziger and Jeanneret stating that Ivy’s only concern about Madoff was his continued ability to manage such a large pool of assets successfully. Ivy wrote that Ma-doffs “[p]erformance continues to be extremely strong.... We continue to question their ability to manage what must be an enormous pool of capital with such consistently outstanding results. They will not quantify the total amount that they manage, but we estimate it to be at least $3 billion.... As a result, we recommend a below median allocation.” NYAG Compl. ¶ 68. On December 15, 1998, Ivy met with Madoff again, and Madoff provided a third explanation of his option trading practices. He claimed that up to 50% of his option trading was done off-exchange, with counter-parties he identified only as major banks and institutions. Wohl testified that Madoffs explanation concerned him because he had never heard of OEX options being traded off-exchange in large volumes. The day after the meeting with Madoff, Wohl proposed that Ivy withdraw all of its proprietary funds from Madoff. He wrote that investment with Madoff “remains a matter of faith based on great performance — this doesn’t justify any investment, let alone 3%.” NYAG Compl. ¶ 75. Simon responded, Amount we now have with Bernie in Ivy’s partnerships is probably less than $5 million. The bigger issue is the 190 mill or so that our relationships have with him which leads to two problems, we are on the legal hook in almost all of the relationships and the fees generated are estimated based on 17 + % returns .... [to be] $1,275 Million Are we prepared to take all the chips off the table, have assets decrease by over $300 million and our overall fees reduced by $1.6 million or more, and, one wonders if we ever “escape” the legal issue of being the asset allocator and introducer, even if we terminate all Madoff related relationships? NYAG Compl. ¶76. $300 million represented approximately 15% of Ivy’s total assets under management (which was calculated to include assets held by advisory clients such as BAMC and JPJA). $1.6 million in fees represented approximately 16% of Ivy’s annual revenue. In response to these concerns, Fred P. Sloan, then Ivy’s Chief of Investment Management, suggested a “middle of the road approach” in which Ivy would “terminate all [Madoff] investments for the [proprietary] Ivy Funds,” then “write to the advisory clients telling them we have done so and the reasons why ... [t]hen leave the rest up to them.” NYAG Compl. ¶ 76. Sloan reasoned that “we will of course still have liability as an investment advisor, particularly for the ERISA entities, but we will have insulated ourselves from liability as GP of our funds.... I image that our letters to clients would serve to at least partially exculpate Ivy should the worst happen.” Id. Sloan explained that “[f]ull withdrawals from the Ivy funds would send a very clear message to the clients regarding Ivy’s concerns about this investment.” Id. Sloan doubted that “Jeanneret and others” would “walk away from Ma-doff’ if Ivy withdrew its proprietary money because “they are quite satisfied with Madoff and would not want to leave,” and in “the case of Jeanneret, he hardly listens to our advice at all.” Id. This middle of the road approach would “enable [Ivy] to preserve the majority of fees while reducing our legal risk.” Id. However, this strategy was not adopted, and Ivy retained its 3% investment in Madoff. On December 30, 1998, two weeks after the e-mail exchange, Simon and Wohl met with Jeanneret and another Ivy client. The client wanted to increase greatly its Madoff investment, but Simon recommended a smaller increase, citing Madoffs age, the inability to replicate his results, and the small size of his accounting firm. The client asked if it should completely withdraw from Madoff instead, but Simon only recommended limiting total investment with Madoff. Jeanneret’s notes from this meeting reflect that Ivy’s due diligence “shows no problem for Madoff,” that Ivy “tend[s] not to have more than 5-7% with any one mgr,” and that “Madoff[’s] accountant is ok but small.” NYAG Compl. ¶ 87. On January 12, 1999, Ivy sent a letter to the client and Jeanneret to “clarify and expand” on what had been discussed in the meeting. NYAG Compl. ¶ 88. The letter stated that “[w]e have no reason to believe that the Madoff account is anything other than what Ivy’s experience has shown and what the record demonstrates.” Id. It continued, “due to a lack of external corroborative evidence, we cannot ‘close the loop’ in a manner that gives us total comfort,” and restated Ivy’s concern regarding Madoffs lack of a separate custodian for the securities he traded and Ivy’s practice of “limiting investments (generally between 8% and 15%, depending on the circumstances) to any manager in Ivy’s roster.” Id. In January and July of 1999, Ivy sent letters to Danziger and Jeanneret that said, “As we have stated many times, while we have no reason to believe there is anything improper in the Madoff operation, we continue to question their ability to manage what must be an enormous pool of capital with such consistently outstanding results.” Id. In internal notes memorializing a September 1999 meeting with a prospective business partner, a non-advisory client, Ivy noted that he “appeared to be taken aback by the suggestion that the explanation of how [Madoff] works could be that something improper is being done.” NYAG Compl. ¶ 100. When Ivy met with Jeanneret in April 2000, internal Ivy notes record that Jeanneret asked, “is [Madoff] essentially legitimate?,” to which Defendant Adam L. Geiger, Ivy’s Director of Research, responded, “essentially legitimate.” Id. ¶ 102. Geiger went on to explain that Ivy had not been able to “fully close the loop on him and therefore Madoff is limited to no more than 4% in the Ivy funds.” Id. In the fall of 2000, Ivy completely withdrew its proprietary investments from Ma-doff. Ivy was about to be acquired by BONY, a transaction in which Simon and Wohl would make approximately $100 million each. SCAC ¶ 92. Simon testified that he told Danziger that Madoff had demanded the withdrawal; he further elaborated to Jeanneret that Madoffs reason for the demand was that he believed BONY’S acquisition of Ivy would create a potential conflict of interest. However, Simon’s son, Sean Simon, wrote to a prospective client on August 20, 2001 that “Ivy had chosen not to invest with Madoff in its proprietary funds but had exposure through Beacon and one customized account.” NYAG Compl. ¶ 105. Sean Simon reiterated this in 2008 when he told BONY that “we fired [Madoff] in 2000.” Id. Wohl would later testify that “we chose to terminate our relationship with Madoff.” Id. ¶ 106. In January 2001, Simon advised a client with a small investment in BMIS to divest completely, which the client did. In August 2001, an internal Ivy memorandum noted that Wohl told a client that Ivy had withdrawn its proprietary funds from Ma-doff, and the client responded that, “if it’s not good enough for [Ivy], then it should be out of [client].” NYAG Compl. ¶ 108. Another internal memorandum from September 2001 reflected that Simon told a client, “we have exposure remaining through mandate of individual clients but no current investment within our proprietary funds. Madoff provided a good example of some red flags raised by research and overall process of Ivy in regards to risk/reward.” Id. at 109. In March 2001, Wohl suggested to Simon that Ivy exclude a large pension fund client that was heavily invested in Madoff from Ivy’s responsibility; Simon responded, “You may be spending too much time in the sun! If we give up Madoff, [Jeanneret] has opportunity to move in.” NYAG Compl. ¶ 117. Simon wrote in June 2001 that this client’s assets with Madoff “helped to contribute towards building Ivy’s [assets under management] and credibility, despite our real concerns about [Madoff].” Id. ¶ 118. Simon concluded, “legal question: Now that [BONY] owns Ivy, who has the ultimate liability? ?” Id. ¶ 119. Ivy again sent letters to Danziger and Jeanneret in February of 2001, listing the growth in Madoffs assets under management as Ivy’s only concern. Letters sent in August of 2001 and 2002 also noted that Ivy was “unable to perform [its] usual and customary due diligence due to limitations set by Madoff.” Id. ¶ 112. Simon testified that Madoff had not prohibited Ivy from making due diligence visits, but that Ivy had decided to stop making due diligence visits after Ivy withdrew its proprietary investment because it decided that Ivy was no longer welcome. On June 29, 2001, Wohl wrote that “Ma-doff can personally bankrupt the Jewish community if he is not ‘real.’ ” Id. ¶ 113. On April 1, 2002, Wohl responded to a subordinate’s attempt to analyze Madoff s consistent success by writing, “Ah, Ma-doff. You omitted one other possibility— he’s a fraud!” Id. An internal Ivy memorandum from January 14, 2002 reflects that Ivy told a client that, due to “qualitative issues” with Madoff, “no matter how successful he continuéis] to be, we are [not] satisfied as a fiduciary to invest client assets” with him. Id. ¶ 114. When Wohl was asked by a subordinate whether Ivy would be interested in investing with Madoff, Wohl responded “NO.” Id. ¶ 115. Around this time, Ivy wrote to another advisory client with money invested in Madoff that “we have not recommended allocations to [Madoff].” Id. ¶ 116. In a January 2003 email discussing potential managers to recommend to a client, Wohl wrote, “Madoff (NOT!).” Id. ¶ 115. In 2002, 2003, and 2004, Ivy again sent letters to Danziger and Jeanneret listing Madoffs growing assets under management as Ivy’s only concern. Ivy sent no further written reports to Danziger and Jeanneret after 2004. In 2005 and 2007, Ivy assessed its ten largest business risks, and Madoff was included both times. On January 1, 2006, BAMC and Ivy executed a new advisory contract, which was not disclosed to Plaintiffs. This contract explicitly excluded Madoff from the managers Ivy agreed to research, monitor, meet with, and evaluate. In the contract, Madoff was down-graded to a “Non-Recommended Manager.” SCAC ¶ 249. The contract stated that “[BAMC] has expressly requested that Ivy not monitor or evaluate or meet with any representatives of Madoff including Bernard L. Madoff.” Id. On December 1, 2007, Ivy made similar amendments to its advisory agreement with JPJA. c. Friedburg’s Role as Auditor of the Beacon Fund Pursuant to the Beacon OMs, Plaintiffs received quarterly unaudited account statements and yearly audited statements. For example, one of the unaudited quarterly statements issued just prior to the revelation of Madoffs fraud in 2008 stated that Beacon’s Madoff account was “approximately 75% in U.S. Treasury securities for most of September, thereby largely insulating [the Fund] from the chaotic market losses over the past month.” Id. ¶ 268. Friedberg was engaged to perform audits of the Beacon Fund financial statements. These audits were to be performed in accordance with Generally Accepted Auditing Standards (“GAAS”), established by the Accounting Standards Board (“ASB”) of the American Institute of Certified Public Accountants (“AIC-PA”). GAAS required Friedburg to “obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.” Id. ¶ 370. If an independent third party was the “custodian of a material amount of the audited entity’s assets,” GAAS also required the auditor to consider whether the third party’s response to a request for confirmation would provide “meaningful and appropriate audit evidence.” Id. ¶ 375. Plaintiffs allege numerous red flags which they claim should have prompted further inquiry by Friedburg. First, there was no published SAS 70 audit report available for BMIS. A SAS 70 audit report is a widely recognized auditing standard developed by the AICPA and represents that a service organization such as an investment adviser has been the subject of an in-depth audit of their control objectives and control activities. Second, the vast majority of the Beacon Fund was invested in BMIS, increasing risk. Third, Madoffs accounting firm, Friehling & Horowitz, had been telling the AICPA that it did not perform audits for fifteen years, despite serving as Madoffs auditor. Fourth, Madoff ran his own “back office,” which entailed that BMIS calculated its own net asset values and prepared its own account statements. BAMC’s engagement letter with Fried-berg states that BAMC had “made available to [Friedberg] all financial records and related data.” Id. ¶ 391. In addition, Friedberg’s May 8, 2008 audit report states that Friedberg “examin[ed], on a test basis, evidence supporting the amounts and disclosures in the financial statements.” Id. In each audit report, Friedberg expressed its unqualified opinion that the Beacon Fund’s financial statements “present fairly, in all material respects, the financial position of [the fund] ... and the results of its operations and changes in net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America.” Id. ¶ 403. d. Alleged “Red Flags” Suggesting that Miadoff was a Fraud Plaintiffs allege that many publicly available facts suggested that Madoff was a fraud, and that many private investors decided Madoff was suspicious after examining the publicly available data. The alleged red flags include: Madoffs intense secretiveness; investors’ inability to replicate Madoffs results using his claimed strategy; the low correlation of Madoffs performance to the market, despite the fact that his hedging strategy should have closely correlated to overall market performance; the suspiciousness of Madoffs claims to buy a security at its daily high and sell it at its daily low consistently; instances of Madoffs records reflecting a trade of a security at a price outside of the daily reported range for that security; the fact that an insufficient volume of options were traded on certain days to support Madoffs stated strategy; Madoffs decision to forego the standard hedge fund management fee of 1% plus 20% of profits and settle for commissions on trades, possibly to avoid heavier audit requirements; Madoffs stated practice of liquidating all securities at the end of each reporting quarter and investing the proceeds in treasury bills, ensuring that auditors could not verify the existence of Madoff securities for that period; Madoffs lack of a third-party custodian to hold BMIS’s securities; Madoffs use of a small, unknown accounting firm; the fact that BMIS audits did not show any customer activity; the fact that key positions at BMIS were staffed by Madoffs family members; and Ma-doffs use of paper documentation of account activity and trades despite BMIS’s supposed technological sophistication. The SEC and FINRA failed to catch Madoffs fraud. In the SEC’s investigation of its failure to catch Madoff, it noted that “numerous private entities conducted basic due diligence of Madoffs operations and, without regulatory authority to compel information, came to the conclusion that an investment with Madoff was unwise.” Id. ¶ 413. As early as 2002, Rogerscasey, a domestic registered investment adviser, warned clients away from Madoff feeder funds. In 2005, Harry Markopolos submitted a complaint to the SEC alleging that Madoff was a fraud. Hedge fund adviser Acorn Partners doubted Madoffs bona fides. Many European hedge funds avoided Madoff because he did not pass their due diligence. In 2007, investment manager Akasia advised clients not to invest with Madoff after becoming suspicious of him. In July 2008, Albourne Partners, a London due diligence firm, advised a client to liquidate a $10 million investment in a Madoff feeder fund. e. Discovery of Madoffs Fraud and Aftermath On December 11, 2008, Madoff was arrested by federal authorities for operating a multi-billion dollar Ponzi scheme. Plaintiffs allege that immediately after the Madoff fraud was disclosed, on or about December 16, 2008, Perry conceded to several Trustees of Plaintiff pension funds that he had tried to replicate Madoffs results multiple times, but the calculations and analysis never supported Madoffs reported results. On March 12, 2009, Madoff pleaded guilty to securities fraud and related offenses arising out of his Ponzi scheme. On March 18, 2009, the United States Attorney’s Office indicted BMIS’s accountant, David Friehling of Friehling & Horowitz, CPAs, P.C., on charges of securities fraud, filing false audit reports, and related offenses. On August 11, 2009, BMIS’s Chief Financial Officer, Frank DiPascali, pleaded guilty to conspiracy to commit securities fraud and related offenses. On November 13, 2009, the United States Attorney’s Office charged two computer programmers with aiding Madoffs scheme by developing software to generate false trading data. On May 11, 2010, the Attorney General of the State of New York (“NY AG”) filed a civil complaint against Ivy, Simon, and Wohl in the Supreme Court of the State of New York, alleging that the Ivy Defendants committed fraud and related offenses. Plaintiffs’ SCAC is “based in part” on the allegations contained in the N.Y. AG’s complaint. II. Standard of Review On a motion to dismiss, a court reviewing a complaint will consider all material factual allegations as true and draw all reasonable inferences in favor of the plaintiff. Lee v. Bankers Trust Co., 166 F.3d 540, 543 (2d Cir.1999). “To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient to raise a right to relief above the speculative level.” ATSI Commc’ns Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 93 (2d Cir.2007) (internal quotation marks omitted). Ultimately, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “[A] simple declaration that defendant’s conduct violated the ultimate legal standard at issue ... does not suffice.” Gregory v. Daly, 243 F.3d 687, 692 (2d Cir.2001). Allegations of fraud must meet the heightened pleading standard of Rule 9(b), which requires that the plaintiff “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). The 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.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir.1994). “[W]hile Rule 9(b) permits scienter to be demonstrated by inference, this must not be mistaken for license to base claims of fraud on speculation and conclusory allegations. An ample factual basis must be supplied to support the charges.” O’Brien v. Nat’l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir.1991) (internal citations omitted). On a motion to dismiss, a court is not limited to the four corners of the complaint; a court may also consider “documents attached to the complaint as an exhibit or incorporated in it by reference, ... matters of which judicial notice may be taken, or ... documents either in plaintiffs’ possession or of which plaintiffs had knowledge and relied on in bringing suit.” Brass v. Am. Film Techs., Inc., 987 F.2d 142,150 (2d Cir.1993). III. Discussion a. Federal Securities Fraud Claims Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), prohibits conduct “involving manipulation or deception, manipulation being practices ... that are intended to mislead investors by artificially affecting market activity, and deception being misrepresentation, or nondisclosure intended to deceive.” Field v. Trump, 850 F.2d 938, 946-47 (2d Cir.1988). Section 10(b) makes it unlawful to “use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may proscribe.” Id. The SEC rule implementing the statute, Rule 10b-5, prohibits “mak[ing] any untrue statement of a material fact or [omitting] to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b). In order to state a securities fraud claim under Section 10(b), a “plaintiff must establish that ‘the defendant, in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that the plaintiffs reliance on the defendant’s action caused injury to the plaintiff.’” ECA Local 131 IBEW Joint Pension Trust of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 197 (2d Cir.2009) (“ECA”) (quoting Lawrence v. Cohn, 325 F.3d 141, 147 (2d Cir.2003)). Section 10(b) claims are subject to the heightened pleading requirements of Rule 9(b) and the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. §§ 77z-1, 78u-4. See ATSI Commc’ns, 493 F.3d at 99. Under the PSLRA, the complaint must “specify each statement alleged to have been misleading [and] the reason or reasons why the statement is misleading,” and “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind,” namely, with intent “to deceive, manipulate or defraud.” 15 U.S.C. § 78u-4(b)(1), (2). “Therefore, ‘[w]hile we normally draw reasonable inferences in the non-movant’s favor on a motion to dismiss,’ the PSLRA ‘establishes a more stringent rule for inferences involving scienter’ because the PSLRA requires particular allegations giving rise to a strong inference of scienter.” ECA, 553 F.3d at 196 (quoting Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190, 194 (2d Cir.2008)). i. Ivy Defendants 1. Scienter Scienter is a “mental state embracing intent to deceive, manipulate, or defraud.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (internal quotation marks and citation omitted). “[T]he facts alleged must support an inference of an intent to defraud the plaintiffs rather than some other group.” ECA, 553 F.3d at 197 (quoting Kalnit v. Eichler, 264 F.3d 131, 140-41 (2d Cir.2001)). Moreover, the PSLRA requires a plaintiff to “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2); see also Rombach v. Chang, 355 F.3d 164, 170 (2d Cir.2004). “[A]n 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, 551 U.S. at 314, 127 S.Ct. 2499. The Court 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, non-culpable explanations for the defendant’s conduct.” Tellabs, 551 U.S. at 314, 127 S.Ct. 2499. In determining whether a plaintiff adequately pleads scienter, the Court must consider whether “all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any individual allegation, scrutinized in isolation, meets that standard.” Id. at 323, 127 S.Ct. 2499. Scienter can be shown by (1) demonstrating that a defendant had motive and opportunity to commit fraud, or (2) providing evidence of conscious recklessness. See South Cherry, 573 F.3d at 108-09. Conscious recklessness is a “state of mind approximating actual intent, and not merely a heightened form of negligence.” South Cherry, 573 F.3d at 109 (quoting Novak v. Kasaks, 216 F.3d 300, 312 (2d Cir.2000)). Recklessness is “at the least, ... an extreme departure from the standards of ordinary care ... to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it.” Novak, 216 F.3d at 308. Thus, scienter is adequately pleaded when the “complaint sufficiently alleges that the defendants (1) benefited in a concrete and personal way from the purported fraud ...; (2) engaged in deliberately illegal behavior ...; (3) knew facts or had access to information suggesting that their public statements were not accurate ...; or (4) failed to check information that they had a duty to monitor....” South Cherry, 573 F.3d at 110 (quoting Novak, 216 F.3d at 311). Plaintiffs plead facts persuasively indicating that the Ivy Defendants “knew facts or had access to information suggesting that their public statements were not accurate.” Id. “[Securities fraud claims typically have sufficed to state a claim based on recklessness when they have specifically alleged defendants’ knowledge of facts or access to information contradicting their public statements. Under such circumstances, defendants knew or, more importantly, should have known that they were misrepresenting material facts.” Novak, 216 F.3d at 308. “Where plaintiffs contend defendants had access to contrary facts, they must specifically identify the reports or statements containing this information.” Id. at 309. Ivy’s alleged knowledge of facts and information indicating that investing with Madoff was a highly risky venture strongly suggests that Ivy’s public statements to BAMC and JPJA were not accurate. Plaintiffs persuasively allege that Ivy knew, inter alia, that (1) Madoff s records of option trades were inconsistent with the number of option trades and their prices as reported by Bloomberg in 1997, providing a “clear example of [an instance] where his trades for our accounts are inconsistent with the independent information that is available to us,” NYAG Compl. ¶ 56; (2) Madoff provided dubious and shifting explanations of how his business operated, which led Wohl to propose complete divestment from Madoff in 1998; (3) there was a possibility that Madoff was using client money to fund his separate market-making business; (4) there was no independent verification of Madoff s trades because of his practice of “self-clearing”; and (5) Madoff used a small accounting firm without an established reputation. Plaintiffs also persuasively allege that Ivy had grave doubts about Madoff, doubts which were candidly discussed in internal memoranda and e-mails and which led Ivy to steer other investors away from Madoff. For example, Simon advised a client to divest completely from Madoff in January 2001, and an internal Ivy memorandum from January 14, 2002 reflects that Ivy told a client that, due to “qualitative issues” with Madoff, “no matter how successful he eontinue[s] to be, we are [not] satisfied as a fiduciary to invest client assets” with him. Id. ¶ 114. Despite Ivy’s grave concerns over Ma-doff, and Wohl’s explicit consideration of the possibility that Madoff might be a “fraud” in 2002, NYAG Compl. ¶ 113, BAMC and JPJA were told in letters from 2001-04 that “we have no reason to believe there is anything improper in the Madoff operation,” and that the primary risk associated with investing with Madoff was the size of assets under his control. NYAG Compl. ¶ 88. This contradiction between what Ivy told BAMC and JPJA and what Ivy privately knew about Madoff supports a strong inference of scienter. This inference is bolstered by Ivy’s motive and opportunity to commit fraud. “In order to raise a strong inference of scienter through ‘motive and opportunity’ to defraud, Plaintiffs must allege that [defendant] or its officers ‘benefited in some concrete and personal way from the purported fraud.’” ECA, 553 F.3d at 197 (quoting Novak, 216 F.3d at 307-08). “Motives that are common to most corporate officers, such as the desire for the corporation to appear profitable and the desire to keep stock prices high to increase officer compensation, do not constitute ‘motive’ for purposes of this inquiry.” Id. Under Plaintiffs’ theory of Ivy’s motive to commit fraud, Ivy realized in the late 1990s that investing with Madoff was too risky given Ivy’s many doubts. However, Ivy did not want to lose BAMC and JPJA as advisory clients because Ivy included advisory clients’ assets under management (“AUM”) when calculating its own AUM. Ivy’s AUM was a key factor in its success and its eventual sale to BONY, a transaction in which Simon and Wohl each made approximately $100 million. Ivy also believed that it would not escape any legal liability already incurred as a result of being the “allocator and introducer” if it warned BAMC and JPJA away from Ma-doff, and thus had little to gain by divulging the full extent of its doubts. Thus, Ivy developed a strategy through which it would not reveal the full extent of its doubts to BAMC and JPJA, but limit its liability by divesting its proprietary Ma-doff investment and advising new clients not to invest with Madoff. This theory alleges more than a garden-variety motive for business success and personal profits. See, e.g., In re AstraZeneca Sec. Litig., 559 F.Supp.2d 453, 468 (S.D.N.Y.2008) (holding that in pleading scienter, “arguing that the motive for defrauding investors was to increase the company’s profits or to increase officer compensation is not sufficient”), affd sub nom. State Univ. Ret. Sys. of Ill. v. AstraZeneca PLC, 334 Fed.Appx. 404 (2d Cir.2009). It alleges more than a desire to keep Ivy’s AUM high and retain clients. See, e.g., Stephenson v. Citco Grp. Ltd., 700 F.Supp.2d 599, 620-21 (S.D.N.Y.2010) (economic interest in retaining clients not probative of motive to ignore Madoff s fraud). Rather, Plaintiffs’ theory alleges that Ivy carefully balanced the risks and rewards of revealing the true severity of its concerns to two classes of clients: those clients for whom Ivy had already incurred potential legal liability would be sent veiled messages, while new clients would be strongly and explicitly steered away from Madoff. The Ivy defendants benefited concretely and personally from such a course of conduct by keeping Ivy’s AUM high enough to be acquired by BONY while managing their legal liability. Ivy advised BAMC and JPJA to deploy their assets in the most advantageous way given that Ivy had likely already incurred legal liability, and Ivy limited its additional exposure to legal liability by providing much stronger warnings to clients who had not already invested large sums with Madoff. With the benefit of the New York Attorney General’s allegations, Plaintiffs plead facts adequately supporting this theory of Ivy’s motive. Simon, Wohl, and Sloan explicitly discussed the pitfalls of sending too strong a signal of discomfort with Madoff to BAMC and JPJA in 1998. In arguing against withdrawing Ivy’s proprietary investment with Madoff, Simon wrote, “[a]re we prepared to take all the chips off the table, have assets decrease by over $300 million and our overall fees reduced by $1.6 million or more, and, one wonders if we ever ‘escape’ the legal issue of being the asset allocator and introducer, even if we terminate all Madoff related relationships?” NYAG Compl. ¶ 76. Simon would later acknowledge the crucial role that advisory client assets invested with Madoff played in Ivy’s success and the lingering worries over legal liability for introducing those clients to Madoff. Simon wrote in June 2001 that a large advisory client’s Madoff investment “helped to contribute towards building Ivy’s [assets under management] and credibility, despite our real concerns about [Madoff].” Id. ¶ 118. Simon concluded, “legal question: Now that [BONY] owns Ivy, who has the ultimate liability? ?” Id. ¶ 119. In sum, Plaintiffs’ allegations of contradictions between Ivy’s statements to BAMC and JPJA and the facts Ivy knew, as well Plaintiffs’ allegations of Ivy’s motive and opportunity, raise a strong inference of scienter. This inference is “cogent and at least as compelling as any opposing inference of nonfraudulent intent.” Tellabs, 551 U.S. at 314, 127 S.Ct. 2499. Based on the facts alleged, Ivy’s possession of intent to deceive BAMC and JPJA is at least as strong an inference as a mere uncertainty as to Madoffs bona fides on Ivy’s part. 2. Misstatement or Omission upon Which Plaintiffs Relied in Connection with the Purchase or Sale of Securities Ivy contends that even if the Court finds scienter adequately pled, Ivy did not make any statement or omission to upon which Plaintiffs relied. Ivy argues that essentially all of its communications were made only to BAMC and JPJA, and that Ivy’s direct statements to Plaintiffs were limited to periodic performance reports on the Madoff investments. These performance reports were printed on Ivy letterhead, but stated that “[t]he information presented is based on estimates provided by the individual hedge funds the Portfolio invests with as of or prior to the date of this report and is preliminary, unaudited and subject to change.” Hart Supp. Deck Ex. F. Furthermore, Ivy points to the fact that its consulting agreements with BAMC and JPJA explicitly provided that Ivy was exclusively retained to advise the managing member of the respective funds, and would not provide advice directly to the funds or the funds’ investors. The BAMC-Ivy agreement also stated that third parties were not intended beneficiaries of the contract, and the Beacon OMs informed plaintiffs of this fact. Additionally, Ivy maintains that it had no role in drafting the Beacon OMs and JPJA DIMAs, and that no statement was attributed to Ivy in the Beacon OMs and the JPJA DIMAs. This lack of direct communication between Ivy and Plaintiffs poses difficulties for pleading reliance in light of the Court of Appeals for the Second Circuit’s recent decision in Pacific Inv. Mgmt. Co. v. Mayer Brown LLP, 603 F.3d 144 (2d Cir.2010) (“PIMCO”). The PIMCO court held that “a secondary actor can be held liable in a private damages action brought pursuant to Rule 10b-5 only for false statements attributed to the secondary actor at the time of dissemination.” 603 F.3d at 148. In reaffirming the “bright-line” attribution rule, the court held that “[t]he mere identification of a secondary actor as being involved in a transaction, or the public’s understanding that a secondary actor ‘is at work behind the scenes’ are alone insufficient” to hold a secondary actor liable under Rule 10b-5. Id. at 155 (quoting Lattanzio v. Deloitte & Touche LLP, 476 F.3d 147, 155 (2d Cir.2007)). “To be cognizable, a plaintiffs claim against a secondary actor must be based on that actor’s own ‘articulated statement,’ or on statements made by another that have been explicitly adopted by the secondary actor.” Id. at 155. The PIMCO court identified “parties who are not employed by the issuing firm whose securities are the subject of the allegations of fraud” as “secondary actors.” Id. at 148 n. 1. Plaintiffs argue that even if no statements in the Beacon OMs and JPJA DI-MAs were explicitly attributed to Ivy, BAMC was acting as Plaintiffs’ agent, and misrepresentations made to an agent are deemed to made to the principal. Plaintiffs cite some authority for this proposition, but Ivy cites no authority whatsoever in opposition to this general legal principle or its application in a federal securities fraud action. Indeed, courts have endorsed such a “fraud on the agent theory” in 10b-5 cases. See Bd. of Trs., Vill. of Bolingbrook Police Pension Fund v. 909 Corp., 33 F.3d 56 (7th Cir.1994) (table decision) (“[T]his court recognized in O’Brien ... that fraud against [a plaintiffs] agent by a broker gives either the agent or his principal the right to maintain a 10b-5 action against the broker.... In the circumstance in which the broker defrauds the agent, ... the principal should be able to vindicate the wrong done to it through its agent.”) (citing O’Brien v. Cont’l Ill. Nat’l Bank & Trust Co., 593 F.2d 54, 63 (7th Cir.1979)); In re Fine Host Corp. Secs. Litig., 25 F.Supp.2d 61, 71-72 (D.Conn.1998) (“Under well-settled principles of agency law, one who defrauds an agent is liable to the principal.... In other words, a principal may sue [pursuant to 10b — 5] when it is his agent who has been defrauded. Applying that general principle of agency law to this action, plaintiffs need only allege that an agent acting on them behalf reasonably relied on the alleged misrepresentations of the defendants.”). It would be a strange result to allow a third party to make misrepresentations to a principal’s agent, misrepresentations which played a leading role in causing catastrophic investment losses to the principal and relatively minor harm to the agent himself, and permit the third party to escape liability to the principal under the federal securities laws. There exists a rebuttable presumption that Plaintiffs’ agents relied on BAMC’s omissions. See Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 159, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008) (“[I]f there is an omission of a material fact by one with a duty to disclose, the investor to whom the duty was owed need not provide specific proof of reliance.”) (citing Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 154, 92 S.Ct. 1456, 31 L.Ed.2d.741 (1972)); see also duPont v. Brady, 828 F.2d 75, 78 (2d Cir.1987) (“[I]f the plaintiff proves that the facts withheld are material in the sense that a reasonable investor might have considered them important, reliance will be presumed.” (internal citation omitted)). “[T]o fulfill the materiality requirement there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available.” In re Salomon Analyst Metromedia Litig., 544 F.3d 474, 482 (2d Cir.2008) (quoting Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)) (internal quotation marks omitted). Cf. Affiliated Ute, 406 U.S. at 153-54, 92 S.Ct. 1456 (explaining that facts are material if “a reasonable investor might have considered them important in the making of [a] decision”). There can be no doubt that Ivy’s alleged omissions were material under this standard. See In re Sadia, S.A. Securities Litigation, 269 F.R.D. 298, 308 (S.D.N.Y. 2010) (“Material facts include those which affect the probable future of the company and those which may affect the desire of investors to buy, sell, or hold the company’s securities. They include any fact which in reasonable and objective contemplation might affect the value of the corporation’s stock or securities.” (quoting SEC v. Mayhew, 121 F.3d 44, 52 (2d Cir.1997)) (internal quotation marks omitted)). Ivy’s primary defense to a fraud on the agent theory is to argue that the alleged misrepresentations it made to BAMC and JPJA were not made in connection with the purchase or sale of securities. Ivy argues that the only securities ever purchased directly by Plaintiffs were their ownership interests in the Beacon Fund, and BAMC could not be acting as Plaintiffs’ agent in that transaction because Plaintiffs had not yet invested in the fund. Under Section 10(b), actionable fraud must be “in connection with the purchase or sale of any security.” 15 U.S.C. § 78j(b). The “in connection with” factor must be construed “not technically and restrictively, but flexibly to effectuate its remedial purpose.” SEC v. Zandford, 535 U.S. 813, 820-21, 122 S.Ct. 1899, 153 L.Ed.2d 1 (2002). “The Supreme Court has defined the scope of ‘in connection with’ very broadly to encompass a ‘fraudulent scheme in which the securities transactions and breaches of fiduciary duty coincide.’ ” Levinson v. PSCC Servs., Inc., No. 09 Civ. 269(PCD), 2009 WL 5184363, '"at *6 (D.Conn. Dec. 23, 2009) (quoting Zandford, 535 U.S. at 825, 122 S.Ct. 1899); see also Ling v. Deutsche Bank, AG, No. 04 Civ“4566(HB), 2005 WL 1244689, at *3 (S.D.N.Y. May 26, 2005) (“[T]he requirement is satisfied when the securities transactions and breaches complained of coincide and are not independent events.”). Accordingly, it has been found that feeder fund defendants’ “alleged misrepresentations and omissions relate to Madoff s purported purchase and sale of securities with Plaintiffs’ funds[,] ... [as] the omnibus account created by Defendants was clearly for the purpose of allowing Madoff to purchase and sell securities using Plaintiffs’ funds.” Levinson, 2009 WL 5184363, at *7. The Court finds the reasoning in Levinson persuasive. Ivy’s alleged misrepresentations related to its appraisal of Madoff, who was alleged to be making securities trades with Plaintiffs’ money on a regular basis. Ivy was also responsible for reporting the results of Madoffs purported securities transaction to Plaintiffs. Moreover, pursuant to the Beacon OMs, Ivy was to be consulted each time BAMC made a decision to allocate or reallocate Plaintiffs’ funds with different managers. Lastly, and most importantly, Ivy’s alleged misrepresentations placed upon Ivy a continuing duty to update or correct past statements when they became known to be misleading. See In re NovaGold Resources Inc. Secs. Litig., 629 F.Supp.2d 272, 301 (S.D.N.Y.2009) (“The duty to correct applies to statements that are false at the time they are made, and it arises ‘when [the defendant] learned that its prior statement ... was untrue.’ In contrast, the more limited duty to update applies to ‘a statement made misleading by intervening events, even if the statement was true when made.’ ” (quoting Lattanzio, 476 F.3d at 154; Overton v. Todman and Co., 478 F.3d 479, 487 (2d Cir.2007))); see also In re Time Warner Inc. Secs. Litig., 9 F.3d 259, 267 (2d Cir.1993) (holding that duty to update prior statements arises when those statements “have become misleading as the result of intervening events”), cited in Illinois State Bd. of Inv. v. Authentidate Holding Corp., 369 Fed.Appx. 260, 263 (2d Cir.2010) (table decision). Accordingly, even if Ivy had rarely spoken about Madoff, Ivy was under a continuing duty to disclose its true concerns so as to render prior statements of opinion not misleading during the time period Madoff was making trades with Plaintiffs’ money. This satisfies section 10(b)’s “in connection with the purchase or sale of any security” requirement. 15 U.S.C. § 788(b). Accordingly, Plaintiffs state a viable claim for securities fraud against Ivy under section 10(b). 3. 10(b) and 20(a) Claims Against Individual Ivy Defendants and BONY In addition to 10(b) claims against Ivy, Plaintiffs bring claims against Simon and Wohl for primary violations of section 10(b). Ivy’s arguments against individual liability for Simon and Wohl rest entirely on arguments rejected in the course of finding Ivy liable under section 10(b). Moreover, Simon and Wohl are alleged to have made many of the alleged misrepresentations underlying the claims against Ivy and to have played the leading roles in the allegedly fraudulent course of conduct. Accordingly, Plaintiffs state viable individual claims against Simon and Wohl under section 10(b). In order to state a control person claim pursuant to section 20(a), Plaintiffs must allege facts showing (1) “a primary violation by the controlled person,” (2) “control of the primary violator by the targeted defendant,” and (3) that the “controlling person was in some meaningful sense a culpable participant in the fraud perpetrated.” ATSI Commc’ns, 493 F.3d at 108 (internal quotation marks omitted). A finding of “control” under the second prong requires a fact-intensive inquiry into 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.” See In re IPO Secs. Litig., 241 F.Supp.2d 281, 393 (S.D.N.Y.2003) (internal citation omitted). This “fact-intensive inquiry ... generally should not be resolved on a motion to dismiss.” Katz v. Image Innovations Holdings, Inc., 542 F.Supp.2d 269, 276 (S.D.N.Y.2008). Plaintiffs need to meet the PSLRA’s heightened pleading standards only for the third prong, involving culpable participation. See In re Bristol Myers Squibb Co. Sec. Litig., 586 F.Supp.2d 148, 170-71 (S.D.N.Y.2008). Ivy does not contest that section 20(a) claims against Simon and Wohl are adequately pleaded so long as an underlying 10(b) violation by Ivy survives the motion to dismiss. Ivy’s Supp. Mem. Resp. SCAC, at 41 n. 38. While Ivy maintains that Plaintiffs have not sufficiently alleged Geiger’s and Sloan’s control over Ivy, Plaintiffs have alleged that Geiger and Sloan were high-level executives at Ivy with discretion over the investment advice, oversight, and administrative services that Ivy provided to clients generally. These allegations of control suffice to survive a motion to dismiss. See Anwar v. Fairfield Greenwich Ltd., No. 09 Civ. 0118(VM), 728 F.Supp.2d 372, 413-14, 2010 WL 3341636, at *27 (S.D.N.Y. Aug. 18, 2010) (control adequately pleaded against “high-level player[s]” who participated in feeder fund’s decision-making). Additionally, Plaintiffs show Geiger’s and Sloan’s culpable participation by identifying specific statements attributed to them bearing directly on Ivy’s misrepresentations. For instance, Sloan suggested a strategy in 1998 to “insulate[ ][Ivy] from liability as GP of our funds” while maintaining advisory clients’ investments with Madoff. NYAG Compl. ¶ 76 Geiger represented to Jeanneret in 2000 that Madoff was “essentially legitimate.” Id. ¶ 102. However, Plaintiffs fail to plead that BONY was sufficiently culpable or involved in the underlying securities fraud violation. Plaintiffs assert that BONY required Ivy to withdraw its proprietary investment with Madoff, but this is contrad