Full opinion text
MEMORANDUM OPINION AND ORDER JAMES 0. BROWNING, District Judge. THIS MATTER comes before the Court on: (i) the Motion to Dismiss on Behalf of Defendants Larry Goldstone and Clarence G. Simmons and Memorandum of Law in Support, filed May 21, 2012 (Doc. 35)(“Goldstone & Simmons MTD”); (ii) the Defendant Jane Starrett’s Motion to Dismiss and Memorandum of Points and Authorities in Support, filed May 21, 2012 (Doc. 36)(“Starrett MTD”); and (in) the Request for Judicial Notice in Support of Defendants’ Motions to Dismiss Complaint, filed May 21, 2012 (Doc. 39)(“Re-quest for Judicial Notice”). The Court held a hearing on July 31, 2012. The primary issues are: (i) whether the Court may or must take judicial notice of certain documents which Defendants Larry A. Goldstone, Clarence G. Simmons, III, and Jane E. Starrett have attached to their motions to dismiss; and (ii) whether the Plaintiff Securities and Exchange Commission (“SEC”) has stated a plausible claim that the Defendants made, aided and abetted, or are liable as control persons for material misrepresentations and omissions to the investing public and Thornburg Mortgage, Inc.’s outside auditor, Klynveld, Peat, Marwick, Goerdeler (“KPMG”), in connection with the filing of Thornburg Mortgage’s 2007 Form 10-K Annual Report. The Court will grant the Request for Judicial Notice in part, and deny it in part, and will grant the motions to dismiss in part, and deny them in part. The Court will dismiss the SEC’s allegations based upon the statement in the 2007 Form 10-K and to Thornburg Mortgage’s outside auditor that Thornburg Mortgage successfully met its margin calls without violating its lending agreements, and did not sell assets to meet margin calls. The Court will also dismiss the SEC’s allegations that Starrett engaged in a scheme to defraud the investing public, and that the Defendants schemed to defraud Thorn-burg Mortgage’s outside auditor in connection with the 2007 Form 10-K. On the other hand, the Court has determined that the SEC has sufficiently alleged that the representation that Thorn-burg Mortgage had the intent and ability to hold its impaired assets to maturity or their value recovered in the market at the time it filed the 2007 Form 10-K was materially false or misleading. The Court determines that the Defendants’ knowledge of objective financial factors — including that Thornburg Mortgage was late in meeting margin calls in February, 2008, Thornburg had diminished liquidity and cash on hand to meet margin calls on a daily basis, and Goldstone and Simmons’ awareness that Thornburg would likely receive additional margin calls — undermines the statement that Thornburg would be able to continue to meet margin calls without selling assets at a loss. The Court will not dismiss the SEC’s allegation that Gold-stone and Simmons are primarily liable or liable as control persons for that misrepresentation in the 10-K, and the Court will not dismiss the SEC’s allegations that the Defendants aided and abetted the misrepresentation, as the Court has determined that the SEC sufficiently alleged that Goldstone and Simmons made, and the Defendants provided substantial assistance to, the misrepresentation with knowledge of or recklessness to its falsity. Similarly, the Court will not dismiss the SEC’s allegations that the Defendants misled Thorn-burg Mortgage’s auditor before the 2007 Form 10-K was filed through the statement that Thornburg Mortgage had the intent and ability to hold its impaired assets to maturity or their value recovered in the market. The Court will also allow certain claims to proceed against Goldstone and Simmons individually. The SEC has sufficiently alleged that Goldstone and Simmons failed to disclose the material information to KPMG before the 2007 Form 10-K was filed that the collapse of a European hedge fund would negatively impact Thornburg Mortgage’s financial condition. The SEC has sufficiently alleged that Simmons misrepresented to KPMG the purpose of certain transactions Thornburg Mortgage used to satisfy margin calls before the 2007 Form 10-K was filed. The SEC has also sufficiently alleged that Goldstone materially misrepresented Thornburg Mortgage’s financial condition after the 2007 Form 10-K was filed. The SEC has sufficiently alleged that Goldstone and Simmons materially misled KPMG by not providing correspondence confirming that Thornburg Mortgage experienced an event of default in the two weeks before the 2007 Form 10-K was filed, and that Simmons misrepresented that unforeseen events had an unexpected negative financial impact on Thornburg Mortgage after the 2007 Form 10-K was filed. FACTUAL BACKGROUND The SEC alleges that the Defendants— Larry A. Goldstone, Clarence G. Simmons, III, and Jane E. Starrett — were involved in fraudulent misrepresentations and omissions made in connection with the Thorn-burg Mortgage, Inc. 2007 Form 10-K Annual Report, filed May 21, 2012 (Doc. 37-2)(“2007 Form 10-K”). Complaint ¶¶ 1-3, at 1-2, filed March 13, 2012 (Doc. 1). Thornburg Mortgage, Inc. (“Thornburg Mortgage”) was a publicly traded single-family mortgage lender and real estate investment trust, founded in 1993, headquartered in Santa Fe, New Mexico and previously was the second-largest independent mortgage company after Countrywide Financial Corporation. See Complaint ¶ 2, at 1; id. ¶ 20, at 7. During the time frame of the allegations in the Complaint, Thorn-burg Mortgage’s shares were traded on the New York Stock Exchange. See Complaint ¶ 20, at 7. : 1. The Defendants and Thornburg Mortgage. At the time of the allegations set forth in the Complaint, Goldstone, as Thornburg Mortgage’s president and chief executive officer (“CEO”), and also one of Thornburg Mortgage’s directors, signed and certified Thornburg Mortgage’s filings with the SEC, and exercised control over Thorn-burg Mortgage’s management, general operations, and policies. . Complaint 17, at 6. Simmons, as senior executive vice-president, chief financial officer (“CFO”), and one of Thornburg Mortgage’s directors, signed and certified Thornburg Mortgage’s filings with the SEC, and exercised control over Thornburg Mortgage’s management, general operations, and policies. Complaint ¶ 18, at 6-7. Starrett was Thorn-burg Mortgage’s chief accounting officer (“CAO”), and as such, was responsible for Thornburg Mortgage’s financial reporting and served as Thornburg Mortgage’s principal contact with its outside auditor. Complaint ¶ 19, at 7. Starrett became a certified public accountant in 1976, but her license has been inactive since 1989. See Complaint ¶ 19, at 7. Thornburg Mortgage’s lending operations focused on “jumbo” and “superjumbo”' ' adjustable-rate mortgage (“ARM”) securities, and also purchased ARM securities third parties originated. Complaint ¶21, at 7. Thornburg Mortgage paid' most of its earnings into dividends, and obtained financing for its mortgage and investment business through reverse repurchase agreements backed by ARM securities. Complaint ¶ 3, at 2. Thorn-burg Mortgage’s reverse repurchase agreements “typically consisted of a simultaneous sale- of pledged securities to a lender at an agreed price in return for Thornburg Mortgage’s agreement to repurchase the same securities at a future date (the maturity date) at a higher price.” Complaint ¶ 22, at 7-8. The reverse repurchase agreements required Thornburg Mortgage to maintain a certain degree liquidity and- subjected Thornburg Mortgage to margin calls if the value of the ARM securities serving as collateral on the agreements fell below a specified level. See Complaint ¶22, at 8. A margin call would generally require Thornburg Mortgage to pay cash to reduce its loan amount or to pledge additional collateral to the lender, either on the same day that Thornburg Mortgage received the margin call or on the following day, unless- the parties otherwise agreed. See Citigroup Global Markets, Inc. as Intermediating Agent for Citigroup Global Markets Limited and [Counterparty] Thornburg Mortgage, Inc., International Securities Lenders Association ISLA Global Master Securities Lending Agreement § 5.8, at 11, filed May 21, 2012 (Doc. 37-6)(“Citigroup Global Repo Agreement”); Master Repurchase Agreement Between Greenwich Capital Markets, Inc., and Thornburg Mortgage, Inc. § 4(c) at 5,- § 11(a), at 7-8, filed July 20, 2012 (Doc. 60-2)(“Green-wich Repo Agreement”); Master Repurchase Agreement Between Credit Suisse First Boston Corporation and Thornburg Mortgage Asset Corporation § 4(c), at 4, § 11(a), at 7, filed July 20, 2012 (Doc. 60-3)(“Credit Suisse Repo Agreement”); Complaint ¶23, at 8. Thornburg Mortgage’s failure to timely meet a margin call would be an event of default and allows a lender to declare Thornburg Mortgage in default, which would trigger cross-defaults on Thornburg Mortgage’s other reverse repurchase agreements, and all lenders with whom Thornburg Mortgage had defaulted would then be allowed to seize and to sell the ARM securities collateralizing Thornburg Mortgage’s loans. See Complaint ¶24, at 8. Receiving margin calls was part of Thornburg Mortgage’s normal course of business, as the value of its ARM securities would often fluctuate. See Complaint ¶ 25, at 8. As part of Thornburg Mortgage’s auditing process in 2007, Thornburg Mortgage had to assess whether it had the intent and ability to hold its ARM securities until maturity or when they recovered their value on the market — referred to as an “other-than-temporary impairment ... analysis” (“OTTI analysis”). Complaint ¶¶ 49-50, at 50-51. If Thornburg Mortgage had the intent and ability to hold its ARM securities to maturity, any losses associated with those securities would not need to be reflected on Thornburg Mortgage’s balance sheet; conversely, if Thornburg Mortgage determined it did not have the intent and ability to hold its ARM securities to maturity, any losses associated with those securities would be deemed “other than temporary,” and Thornburg Mortgage would be required to include those losses on its balance sheet. Complaint ¶¶ 49-50, at 14-15 (citing Statement of Financial Accounting Standards No. 115, filed May 21, 2012 (Doc. 37-34)(“SFAS 115”)). 2. Thornburg Mortgage’s Financial Troubles in 2007-2008. In August, 2007, disruptions in the housing and financial markets led Thornburg Mortgage to receive approximately two billion dollars in margin calls. See Complaint ¶¶ 25-26, at 8. To meet these margin calls, Thornburg Mortgage had to sell twenty-two billion dollars of its mortgage-backed securities (“MBS”) at a loss of $1.1 billion and not issue a dividend in the third quarter of 2007. See Complaint ¶ 26, at 8. Thornburg Mortgage’s Board of Directors expressed concerns in Thornburg Mortgage’s Form 10-Q for the third quarter of 2007 regarding the company’s “ongoing availability of financing for mortgage assets in the fourth quarter given the substantial likelihood of continued rating agency downgrades of MBS, and the still fragile state of the financial markets.” Complaint ¶ 26, at 8-9. In the fourth quarter of 2007 — November and December, specifically — Thornburg Mortgage paid approximately $360 million in margin calls. See Complaint ¶ 27, at 9. Thornburg Mortgage received approximately $650 million in margin calls from January through the middle of February, 2008. See Complaint ¶ 28, at 9. Thornburg Mortgage received approximately $300 million in margin calls in the last two weeks of February, 2008, which it could not timely meet. See Complaint ¶ 3, at 2; id. ¶ 29, at 9. Thornburg Mortgage was late in meeting margin calls, in violation of its reverse repurchase agreements, with Credit Suisse First Boston (“Credit Suisse”), Greenwich Capital Markets, Inc. (“Greenwich”), and Citigroup Global Markets Limited. Complaint ¶ 29, at 9. On February 21, 2008, a senior vice-president with Thornburg Mortgage’s structured finance group informed the Defendants that, in connection with Thornburg Mortgage’s anticipated capital raise: “ ‘[Credit Suisse] is willing to withdraw from the underwriting group since they realize their attorneys will probably not agree to anything short of disclosing the delay in meeting their margin call earlier this week.’” Complaint ¶ 64, at 18-19 (emphasis in originalXquoting Electronic Mail Transmission from Deborah Burns to Larry Goldstone at 2 (February. 21, 2008, 2:47 p.m.), filed July 20, 2012 (Doc. 60-l)(“Feb. 21 Burns/Goldstone Email”)). Goldstone discussed Thornburg Mortgage’s margin calls in an electronic mail transmission with Simmons and Starrett on February 22, 2008, in which he stated that Thornburg Mortgage had paid approximately $100 million in margin calls and he had “ ‘plans to satisfy the rest over the next week.’ ” Complaint ¶ 62, at 18 (quoting Electronic Mail Transmission from Larry Goldstone to Garrett Thornburg, et al. at 2 (Feb. 22, 2008, 8:42 a.m.), filed May 21, 2012 (Doc. 37-8)(“Feb. 22 BOD Email”)). Goldstone also stated, regarding Thornburg Mortgage’s recent margin calls: “ ‘We had negotiated some additional [borrowing] capacity with Credit Suisse a few weeks ago, but they pulled back on that commitment when we had margin issues with them.’ ” Complaint ¶ 63, at 18 (alteration in originalXquoting Feb. 22 BOD Email at 3). Citigroup Global’s margin call on February 21, 2008 was the largest of the three Thornburg Mortgage could not immediately meet — $196 million. See Complaint ¶ 33, at 10. In response to Thornburg Mortgage’s inability to meet the Citigroup Global margin call on February 21, 2008, Citigroup Global sent a letter to Goldstone and Simmons, on February 21, 2008, stating that Thornburg Mortgage was in breach of the parties’ reverse repurchase agreement and reserving Citigroup Global’s right to declare Thornburg Mortgage in default (“the Citigroup Global Letter”). Complaint ¶ 3, at 2; id. ¶ 34, at 10-11. See Letter from Stephen G. Malekian to Thornburg Mortgage, Inc., Re: The Global Master Securities Lending Agreement dated as of September 20, 2007 between Citigroup Global Markets, Inc. (“CGMI”) as intermediating agent for Citigroup Global Markets Limited (“CGML”) and together with CGMI (“CITI”) and Thornburg Mortgage, Inc. (the “Fund”) (the “Agreement”), sent February 21, 2008, filed May 21, 2012 (Doc. 37-7)(“Citigroup Global Letter”). Citigroup Global made clear that, although Citigroup Global was not exercising its rights under the reverse repurchase agreement, it was not waiving its right to declare Thornburg Mortgage in default, or amend the underlying reverse repurchase agreement. See Complaint ¶ 34, at 11. In an electronic mail transmission from Gold-stone to Simmons, Starrett, and others, dated February 21, 2008, Goldstone stated that he had negotiated a “payment plan with Citigroup Global in order to satisfy the call by the end of [the following] week[.]” Complaint ¶ 61, at 18 (alterations in originalXquoting Electronic Mail Transmission from Clay Simmons to Nyira Ghana, re: FW:TMA update at 2 (February 21, 2008, 9:30 a.m.), filed May 21,.2012 (Doc. 37-10)(“Feb. 21 BOD Email”)). Thornburg Mortgage paid the Citigroup Global margin call over seven days and made the final payment of seventy-five million dollars on February 27, 2008. Complaint ¶ 35, at 11. In the last week of February, 2008, Thornburg Mortgage had to sell the interest only portions of its ARM loans (“I/O Strip Transactions”) to generate sufficient cash to meet the margin calls it received in the second half of the month. Complaint ¶ 36, at 11. The' I/O Strip Transactions further depleted Thornburg Mortgage’s liquidity to meet margin calls. See Complaint ¶ 36, at 11. In an electronic mail transmission from Goldstone to Simmons and Starrett on February 22, 2008, Gold-stone informed them of some of Thornburg Mortgage’s plans to raise liquidity to meet margin calls: “ ‘Citi sold two of [Thorn-burg’s] IO securities as well for a gain of approximately $25 million and net proceeds to Citi of $10 million.’ ” Complaint ¶ 67, at 19-20 (alteration in original)(Feb. 22 BOD Email at 2). In an electronic mail transmission sent February 25, 2008, Gold-stone informed Simmons and Starrett that Thornburg Mortgage was “moving towards resolving [its] margin issues’ ” through, among other strategies, having “ ‘sold some additional IO securitiesf.]’ ” Electronic Email Transmission from Larry Goldstone to the Thornburg Board of Directors, sent February 25, 2008, at 5:03 p.m., filed May 21, 2012 (Doc. 37-9)(“Feb. 25 BOD Email”). See Complaint ¶ 68, at 20 (quoting Feb. 25 BOD Email). The Defendants planned to quickly raise cash to satisfy Thornburg Mortgage’s future margin calls after ' filing the 2007 Form 10-K. See Complaint ¶ 32, at 10. The Defendants did,-not plan to disclose that Thornburg Mortgage was late in meeting margin calls. See Complaint ¶ 32, at 10. In an electronic mail transmission from Goldstone to Simmons and Starrett on February 22, 2008, Goldstone stated that Thornburg Mortgage was “ ‘planning to sell two of [its] TMA securities’ ” to meet margin calls and that this sale would “ ‘allow[ ] us to keep our current situation quiet while we deal with it.’ ” Complaint ¶ 67, at 20 (alterations in original)(quoting Feb. 22 BOD Email at 2). The Defendants “scrambled” to meet Thornburg Mortgage’s margin calls before filing the 2007 Form 10-K. Complaint ¶ 30, at 9-10. In an electronic mail transmission from Goldstone dated February 22, 2008, which Simmons and Starrett received, Goldstone stated: “We don’t want to disclose our current circumstance until it is resolved. Our goal for resolution i[s] the filing of our 10-K. How we disclose this issue and what we say will depend on where we are next week when we need to file. But, our plan is to say that we had margin calls and all have been met.” Complaint ¶ 30, at 10 (alteration in originalXquoting Feb. 22 BOD Email at 2). Goldstone also discussed strategies that would allow Thornburg Mortgage “ ‘to keep [its] current situation quiet while we deal with it’ ” in the same electronic mail transmission. Complaint ¶ 31, at 10 (alteration in originalXquoting Feb. 22 BOD Email at 2). Goldstone also stated: “ ‘Hopefully our disclosure will be a simple one, meaning all margin calls have been met.’ ” Complaint ¶ 31, at 10 (quoting Feb. 22 BOD Email at 3). Goldstone and Simmons also learned, on February 27, 2008, that a large European hedge fund with substantial MBS holdings, similar to those Thornburg Mortgage held, was collapsing. See Complaint ¶ 38, at 12. Goldstone anticipated that European hedge fund’s collapse would negatively impact Thornburg Mortgage’s ARM Securities, and sent an electronic mail transmission to Simmons on February 27, 2008, in which he said: “Also, you should know that a large Alt-A hedge fund in Europe is blowing up this afternoon. UBS credit just mentioned it to me1. They got his with 20 point haircuts on Alt-A and AAA’s overnight. I think we will get this a little more gradually, but we should be ready for it.” Complaint ¶38, at 12 (quoting Electronic Mail Transmission from Larry Goldstone to Clay Simmons at 2 (February 27, 2008, 3:48 p.m.), ‘filed May 21, 2012 (Doc. 37-21)(“Feb. 27 Goldstone/Simmons Email”)). Simmons sent an electronic mail transmission to Goldstone, and others, regarding the potential collapse of a European hedge fund, stating: “ ‘This makes it even more critical to be done with Citi today so we can get the K filed.’ ” Complaint ¶ 39, at 12 (quoting Electronic Mail Transmission from Clay Simmons to Patrick Feldman and Larry Goldstone at 2, (February 27, 2008, 8:08 a.m.), filed May 21, 2012 (Doc. 37-20)(“Feb. 27 Simmons/Feldman Email”)). Later on February 27, 2008, Simmons sent an electronic mail transmission to Starrett, in which he stated: “T gave [Thornburg’s SEC Reporting manager] a 6:00 AM Thursday deadline to file the K. I do not want there to be any issues based on Thursday activity.’ ” Complaint ¶ 40, at 12 (alteration in originalXquoting Electronic Mail Transmission from Clay Simmons to Jane Starrett at 2 (February 27, 2008, 10:35 a.m.), filed May 21, 2012 (Doc. 37-38)(“Feb. 27 Simmons/Starrett Email”)). Thornburg Mortgage filed its 2007 Form 10-K on February 28, 2008, approximately twelve hours after sending its last payment to Citigroup Global and meeting its outstanding margin calls. Complaint ¶ 3, at 6; id. ¶ 41, at 12. Goldstone, Simmons, and Starrett drafted and reviewed Thorn-burg Mortgage’s 2007 Form 10-K before filing it, and Goldstone and Simmons signed the Form 10-K. See Complaint ¶ 7, at 3. In the 2007 Form 10-K, Goldstone and Simmons represented that Thornburg Mortgage had successfully met its margin calls without selling any assets. See Complaint ¶ 7, at 3; 2007 Form 10-K at 35 (“[D]espite these challenges, we successfully continue to meet all margin calls, we maintain existing short-term financing facilities with our existing finance counter-parties and we have successfully added new financing capacity since year end.”); id. at 39 (“In the event that we cannot meet future margin calls from our available cash position, we might need to selectively sell assets in order to raise cash. To date, no such sales have been required. ...”). Thornburg Mortgage’s 2007 Form 10-K accounted for the I/O Strip Transactions as the issuance of secured debt. See Complaint ¶ 37, at 11. The 2007 Form 10-K also stated that Thorn-burg Mortgage had the “ ‘intent and ability to hold its ARM Securities until their value recovered in the market,’ ” notwithstanding that the lenders which declared Thorn-burg Mortgage in default of reverse repurchase agreements could have seized Thornburg Mortgage’s ARM securities pledged as collateral. Complaint ¶ 8, at 3 (quoting 2007 Form 10-K at 41). In accordance with the statement that Thornburg Mortgage had the intent and ability to hold its ARM securities until their value recovered, Thornburg Mortgage did not recognize $427.8 million in losses associated with its ARM securities that serve as collateral on its reverse repurchase agreements. See Complaint ¶ 8, at 4. Thorn-burg Mortgage also reported a fourth-quarter 2007 profit. See Complaint ¶ 11, at 4. Thornburg Mortgage’s financial statements in the 2007 Form 10-K were incorporated into its Form S-3 ASR registration statement, which relates to Thornburg Mortgage’s dividend reinvestment and stock purchase plan, which Goldstone and Simmons signed and was filed with the SEC on December 10, 2007. See Complaint ¶ 89, at 26. Thornburg Mortgage began receiving margin calls at 6:00 a.m. on February 28, 2008. See Complaint ¶ 41, at 12-13. Thornburg Mortgage’s stock prices fell after the 2007 Form 10-K was filed. See Complaint ¶ 10, at 4; Thornburg Hit with Margin Calls; Shares Slide, Down Jones Newswires, Feb. 28, 2008, filed May 21, 2012' (Doc. 87-29)(“Feb. 28 Dow Jones Newswire”); MarketWatch Feb. 28, 2008, Thornburg, MF Global Send Financial Stocks Lower, MarketWatch, filed May 21, 2012 (Doc. 37-30)(“Feb. 28 Market-Watch”). Simmons commented to Gold-stone, in an early-morning electronic mail transmission regarding Thornburg Mortgage’s falling stock prices: “I guess the recent development section did not go over well. If they only knew.” Complaint ¶ 10, at 4 (quoting Electronic Mail Transmission from Clay Simmons to Larry Goldstone at 2 (February 28, 2008, 6:33 a.m.), filed May 21, 2012 (Doc. 37-24)(“Feb. 28 Simmons/Goldstone Email”)). In an electronic mail transmission from Goldstone to Thornburg Mortgage’s investor relations department on February 28, 2008 at 5:29 a.m., Goldstone instructed the group to “ ‘try to calm the panic,’ ” and to inform investors that “ ‘[a]ll margin calls met,’ ‘[l]enders are fine,’ and ‘[w]e have sufficient operating cash[.]’ ” Complaint ¶ 94, at 27 (alterations in original). See Electronic Mail Transmission from Larry Gold-stone to Amy Pell, Suzanne O’Leary Lopez, and Allison Yates at 2 (February 28, 2008, 5:29 a.m.), filed May 21, 2012 (Doc. 37-27)(“Feb. 28 IR Email”). At 6:56 a.m., Goldstone informed Thornburg Mortgage’s Board of Directors in an electronic mail transmission that he estimated Thornburg Mortgage had approximately forty million dollars available in cash at that time. See Complaint ¶ at 28; Electronic Mail Transmission from Larry Goldstone to Thorn-burg Mortgage Board of Directors at 2 (February 28, 2008, 6:56 a.m.), filed May 21, 2012 (Doc. 37-ll)(“Feb. 28 BOD Email”). As of 7:30 a.m. on February 28, 2008, Thornburg Mortgage had received over $100 million in margin calls. Complaint ¶ 9, at 4; id. ¶ 41, at 13. In the afternoon of February 28, 2008, Goldstone appeared on Street Signs on the Consumer News and Business Channel (“CNBC”). Complaint ¶ 98, at 28. On Street Signs, Goldstone stated that: (i) he did not believe Thornburg Mortgage would need to sell assets; (ii) Thornburg Mortgage had “ ‘met all of [its] lending requirements’”; and (iii) Thornburg Mortgage had “‘liquidity and cash available to continue to support the portfolio.’ ” Complaint ¶ 98, at 28 (alterations in original), (quoting Street Signs: Interview with Larry Goldstone at 3:54-4:09 (CNBC television broadcast February 28, 2008), filed May 21, 2012 (Doc. 37-1)). On the evening of February 28, 2008, Thornburg Mortgage received a default notice from J.P. Morgan Chase Bank, N.A. for an unpaid margin call J.P. Morgan had issued to Thornburg Mortgage earlier that day. Complaint ¶ 41, at 13. At the end of day on February 28, 2008, Goldstone, Simmons, and Starrett confirmed, via electronic mail transmission, that the “top messages [they] reinforced in the market” were: “ “We have met all margin calls to date, and we expect to continue to do so. We have sufficient operating cash, and we don’t expect to sell assets to meet margin calls. We returned to profitability during the fourth quarter despite a tough market.’ ” Complaint ¶ 96, at 28 (alterations in original). By the morning of February 29, 2008, Thornburg Mortgage had received over $200 million in margin calls. See Complaint ¶ 41, at 13. Because of the additional margin calls, on March 3, 2008, Thornburg Mortgage filed a Form 8-K announcing that it had received $270 million in margin calls, most of which it could not meet, and that it had received a default notice from a lender. See Complaint ¶ 9, at 4; id. ¶ 42, at 13. Thornburg Mortgage’s stock price fell by over fifty-percent after filing the Form 8-K. See Complaint ¶ 43, at 13. On March 5, 2008, Thornburg Mortgage filed a second Form 8-K, announcing that the lender which had issued a notice of default was exercising its right to seize Thornburg Mortgage’s collateral because Thornburg Mortgage could not meet its twenty-eight million dollar margin call. See Complaint ¶ 44, at 13. Thorn-burg Mortgage also stated in the March 5, 2008 Form 8-K that, because of the lender’s actions, Thornburg Mortgage was cross-defaulting on all of its reverse repurchase agreements. See Complaint ¶ 44, at 13. At this time, Wall Street analysts began to question whether Thornburg Mortgage would go bankrupt. See Complaint ¶ 45, at 13. On March 7, 2008, Thornburg Mortgage filed another Form 8-K, and announced that it had received over $1.77 billion in margin calls since December 31, 2007, and that it did not have sufficient cash to cover $610 million of its outstanding margin calls. See Complaint ¶ 46, at 13-14. Thornburg Mortgage also announced that it would restate its 2007 Form 10-K. See Complaint ¶ 11, at 4; id. ¶46, at 14. In the restated 2007 Form 10-K, filed March 11, 2008, Thornburg Mortgage recognized a loss of $427.8 million in ARM securities, a loss in the fourth quarter of 2007,' and a qualification that Thornburg Mortgage might not be able to continue as a going concern without restructuring or new capital. See Complaint ¶ 11, at 4; id. ¶ 46, at 14. By March 11, 2008, Thornburg Mortgage’s stock price had fallen over ninety-percent from what it was on February 28, 2008. See Complaint ¶ 47, at 14. Thorn-burg Mortgage filed for Chapter 11 bankruptcy on May 1, 2009. See Complaint ¶ 48, at 14. 3. The Defendants’ Representations to Thornburg Mortgage’s Auditor. As part of Thornburg Mortgage’s 2007 audit, Thornburg Mortgage’s auditor, KPMG, assessed whether Thornburg Mortgage’s OTTI analysis was accurate. See Complaint ¶ 49, at 14-15. The Defendants did not disclose to KPMG: (i) Thornburg Mortgage’s “precarious” financial condition; (ii) that Thornburg Mortgage was in violation of its reverse repurchase agreements and relying on lender forbearance to meet its margin calls; (iii) that Thornburg Mortgage had used I/O Strip Transactions to meet margin calls in the last two weeks of February, 2008; (iv) that Thornburg Mortgage had received the Citigroup Global Letter; and (v) that the European hedge fund was on the verge of collapsing. Complaint ¶ 51, at 15; id. ¶ 76, at 22; id. ¶ 99', at 29. On February 20, 2008, Starrett and Simmons reviewed and approved, and circulated to Goldstone, KPMG’s “year-end going concern analysis,” which “repeatedly represented that Thornburg Mortgage successfully continued to meet all margin calls and returned to profitability in the fourth quarter.” Complaint ¶ 72, at 21. The going-concern analysis also stated: “As the Company has the ability and intent to hold its Purchased ARM assets until recovery, losses are not considered to be other than temporary impairments. The basis for the Company’s ability to hold these securities is predicated on its going profitability, liquidity position and ability to continue to make margin ealls[J” Complaint ¶ 74, at 22 (quoting Going Concern Analysis at 12, filed May 21, 2012 (Doc. 37-23)). In an electronic mail transmission from Goldstone to Starrett and Simmons on February 21, 2008, Goldstone stated that Thornburg Mortgage planned to meet the Citigroup Global margin call by “‘[h]aving Citi sell a $100 million Interest Only security that may generate $20 to $25 million.... We may undertake additional asset sales depending on how market conditions evolve ' over the next few weeks[.]’ ” Complaint ¶ 66, at 19 (alterations in originalXquoting Feb. 2i BOD Email at 2). Simmons informed KPMG that it had entered into the I/O Strip Transactions to take advantage of opportune pricing. See Complaint ¶ 65, at 19. On February 25, 2008, Starrett stated, in an electronic mail transmission to Gold-stone and Simmons, that: “ ‘We have purposely not told [the auditors] about the margin calls so that we don’t escalate an issue which we believe will be put to rest by the time they have to issue their opinion.’ (Emphasis added).” Complaint ¶53, at 16 (emphasis and alterations in originalXquoting Electronic Mail Transmission from Larry Goldstone to Jane Starrett at 2) (Feb. 25, 2008, 10:09 a.m.), filed May 21, 2012 (Doc. 38-5) (“Feb. 25 Starrett/Goldstone Email”). Starrett also informed Goldstone and Simmons of the “essence of an OTTI analysis”: “In short, selling some assets is substan- ■ tially the same as selling all assets because the only reason we don’t have to recognizé the impairments on all assets with negative marks in income now is that we represent we have the intent and ability to hold the assets to maturity. Selling some assets calls into question our intent and having to sell them to meet margin calls or reduce exposure, calls into question our ability to hold them.” Complaint ¶ 54, at 16 (quoting Feb. 25 Goldstone/Starrett Email at 2-3). Gold-stone responded: “ ‘Got it. Understand it. Thanks.’ ” Complaint ¶ 55, at 16 (quoting Feb. 25 Goldstone/Starrett Email at 2). The Defendants each signed Thornburg Mortgage’s February 27, 2008 management representation letter to. KPMG, in which they stated that: (i) Thornburg Mortgage was in compliance with all aspects of its contractual obligations that would have a material effect on its consolidated financial statements in the event of a noncompliance; (ii) Thornburg Mortgage had the intent and ability to hold its impaired securities for a sufficient period of time to allow for them to recover their value in the market; (iii) Thornburg Mortgage had experienced no subsequent events requiring it to adjust or disclose its financial statements; and (iv) Thornburg Mortgage’s financial statements disclosed all matters of which the Defendants were aware were relevant regarding Thornburg Mortgage’s ability to continue as a going concern. See Complaint ¶ 57, at 17. Gold-stone and Simmons did not inform the auditor of the possible collapse of a large European hedge fund, holding ARM securities similar Thornburg Mortgage’s. See Complaint ¶ 76, at 22. “[A]t or about the time” that Simmons learned of the possible collapse of the European hedge fund, he had “just advised ... Thornburg’s outside auditor that he believed the MBS market had reached its lowest point and MBS prices were not likely to deteriorate further.” Complaint ¶ 77, at 22-23. On March 3, 2008, KPMG requested evidence from the Defendants “that the events subsequent to filing were unforeseeable catastrophic events,” such as “correspondence with lenders/attorneys/shareholders, emails” Electronic Mail Transmission from Jennifer Hall to Larry Goldstone, Jane Starrett, Clay Simmons, Shawn Buniel at 2 (March 3, 2008 11:44 p.m.), filed May 21, 2013 (Doc. 37-28)(“Mar. 3 Hall Email”); Request for Correspondence at 3-4, filed May 21, 2012 (Doc. 37-28). , See Complaint ¶ 100, at 29. KPMG also requested a “position paper” which “provide[d] the Company’s assessment of the ability to hoid securities for the foreseeable future as of August 27, 2008, including but not limited to.... Correspondence with counter parties for the two weeks prior to filing, along with süpporting evidence.” Request for Correspondence at 4. See Complaint ¶ 100, at 29 (“Thornburg’s outside auditor sent an email ... requesting, among other items, all correspondence between Thornburg and its lenders during the two-week period leading to the ... Form 10-K.”). At the time, the auditor was considering whether to restate Thornburg Mortgage’s financial statements and was reevaluating the validity of its audit opinion. See Complaint ¶ 99, at 29. Goldstone and Simmons were aware of the Citigroup Global Letter, but did not provide it to the auditor. See Complaint ¶ 101, at 29. KPMG did not become aware of the Citigroup Global Letter while preparing its restatement. See Complaint ¶ 101, at 29. Simmons reviewed and approved an analysis to the auditor that explained Thornburg Mortgage’s margin calls on February 28, 2008, and the corresponding collapse in the mortgage market, were part of “ ‘an unforeseeable catastrophic' decline in mortgage market valuations.’ ” Complaint ¶ 102, at 29 (quoting ABX Index Moves Late February at 2-3, filed May 21, 2012 (Doc. 37-25)(“Position Paper”)). The analysis continued to state: “ ‘Due to a number of factors including the unexpected collapse of a major hedge fund in Europe the mortgage market gapped significantly wider ... [.] No one in the market could have foreseen the sudden decline in mortgage valuations.’ (Emphasis ’ added).” Complaint ¶ 103, at 30 (quoting Position Paper at 2). PROCEDURAL BACKGROUND The SEC contends that the Defendants misrepresented and/or engaged in a scheme to deceive, or aided and abetting material misrepresentations of Thornburg Mortgage’s financial condition to, KPMG and the investing public regarding Thorn-burg Mortgage’s financial situation as stated in the 2007 Form 10-K. See Complaint ¶ 5, at 3; id. ¶ 13, at 5. The SEC contends that the Defendants “violated, or aided and abetted the violation of, and, unless restrained and enjoined, will continue to violate or aid and abet the violation of’ the following statutes and federal rules: (i) 15 U.S.C § 77q(a), also known as § 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77a-77bbb (“the Securities Act”); (ii) 15 U.S.C. §§ 78j(b), 78m(a), 78m(b)(2), and 78m(b)(5), also known as §§ 10(b), 13(a), 13(b)(2), and 13(b)(5) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-78pp (“the Exchange Act”); and (iii) 17 C.F.R. §§ 240.10b-5, 240.12b-20, 240.13a-l, 240.13b2-l, and 240.13b2-2. Complaint ¶ 14, at 5. The SEC contends that Gold-stone and Simmons have violated, and “unless restrained and enjoined, will continue to violate” 17 C.F.R. § 240.13a-14, and rules 13a-14 promulgated under the Exchange Act. Complaint ¶ 14, at 5. The SEC asserts, in the alternative, that Goldstone and Simmons are liable as control persons under 15 U.S.C. § 78t, § 20(a) of the Exchange Act, for Thornburg Mortgage’s violations of §§ 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) and rules 10b-5, 12b-20, 13a-l of the Exchange Act. See Complaint ¶ 14, at 5. The SEC asserts that the Defendants, either directly or indirectly, used instruments of transportation or communication in interstate commerce, the means and instrumentalities of interstate commerce, or the mail, in connection with, the acts, practices, and courses of business alleged in the Complaint. See Complaint ¶ 15, at 6. The SEC’s first, second, third and fourth claims for relief are related to alleged violations of § 17(a) of the Securities Act and § 10(b) and rule 10b-5 of the Exchange Act. The SEC’s first claim for relief that the Defendants’ actions violated, and will continue to violate if not enjoined, Exchange Act Section 10(b) and rule 10b-5. See Complaint ¶¶ 106-108, at 31. The SEC’s second claim for relief is alleged alternatively against Goldstone and Simmons, and asserts that Goldstone and Simmons are liable as control persons under § 20(a) of the Exchange Act for Thorn-burg Mortgage’s violations of § 10(b) and rule 10b-5 of the Exchange Act. See Complaint ¶¶ 109-112, at 31-32. The SEC’s fourth claim for relief alleges that the Defendants violated § 17(a) of the Securities Act and committed fraud in the offer or sale of securities, and that the Defendants will continue to violate § 17(a) of the Securities Act if not enjoined. See Complaint ¶¶ 117-119, at 33-34. The SEC’s third claim for relief is alleged against all Defendants, alternatively, and asserts that the Defendants are liable for aiding and abetting Thornburg Mortgage’s violations of § 10(b) and rule 10b-5 of the Exchange Act. The SEC asserts that the Defendants “each aided and abetted the fraud violations of Thornburg, in that they knowingly or recklessly provided substantial assistance to Thornburg in committing these reporting violations.” Complaint ¶¶ 113-116, at 32-33. The SEC’s eighth and ninth claims for relief allege violations of § 13(a) and rules 12b-20 and 13a-l of the Exchange Act— false SEC filings. The SEC asserts that Thornburg Mortgage, “an issuer of securities registered pursuant to Section 12 of the Exchange Act,” filed a materially false and misleading annual report with the SEC. Complaint ¶ 129, at 36. The SEC’s eighth claim for relief asserts that the Defendants aided and abetted Thornburg Mortgage’s violations of § 13(a) and rules 12b-20 and 13a-l of the Exchange Act, by “knowingly or recklessly providing] substantial assistance to Thornburg in committing these reporting violations.” Complaint ¶¶ 130-131, at 36. Alternatively, the SEC also asserts that Goldstone and Simmons are liable as control persons for Thornburg Mortgage’s false SEC filings, under § 20(a) of the Exchange Act. See Complaint ¶¶ 132-135, at 37. The SEC’s tenth and eleventh claims for relief relate to alleged false SEC filings. The SEC’s tenth claim for relief asserts that the Defendants aided and abetted Thornburg Mortgage’s violation of § 13(b)(2) of the Exchange Act, by “knowingly or recklessly providing] substantial assistance to Thornburg[’s]” failure to keep “books, records, and accounts which, in reasonable detail, accurately and fairly reflected the company’s transactions and dispositions of its assets,” and failure to “devise and maintain a system of internal accounting controls” sufficient to assure reasonable conformity with generally accepted accounting principles. Complaint ¶¶ 137-39, at 37-38. Alternatively, the SEC’s eleventh claim for relief alleges that Goldstone and Simmons are liable as control persons, under § 20(a) of the Exchange Act, for Thornburg Mortgage’s failure to keep accurate books, records and accounts, in violation § 13(b)(2) of the Exchange Act. See Complaint ¶¶ 140-143, at 38-39. The SEC’s fifth claim for relief alleges that the Defendants falsified books, records, or accounts, in violation of § 13(b)(5) and rule 13b2-l of the Exchange Act. The SEC asserts that the Defendants “knowingly circumvented or knowingly failed to implement a system of internal accounting controls to assure that Thornburg’s financial statements were prepared in conformity with GAAP or knowingly falsified or caused to be falsified books, records, or accounts of Thornburg,” in violation of § 13(b)(5) and rule 13b2-l of the Exchange Act. Complaint ¶¶ 12-122, at 34. The SEC’s Sixth claim for relief asserts that Goldstone and Simmons “each falsely certified in connection with Thornburg’s 2007 10-K,” in violation of rule 13a-14 promulgated under the Exchange Act, and that they will continue to violate rule 13a-14 if not enjoined. Complaint ¶¶ 123-125, at 34-35. The SEC’s seventh claim for relief asserts that the Defendants deceived auditors, in violation of rule 13b2-2 promulgated under the Exchange Act, and will in the future violate rule 13b2-2 if not enjoined. See Complaint ¶¶ 126-128, at 35-36. 1. The Defendants’ Alleged Misrepresentations and Omissions Concerning the 2007 Form 10-K. The SEC contends that the Defendants w;ere “scrambling” to meet Thornburg Mortgage’s outstanding margin calls before filing the 2007 Form 10-K, “so they could claim in [the 2007 Form 10-k] ... to have successfully met all margin calls.” Complaint ¶ 38, at 12. The SEC contends that the Defendants misrepresented in the 2007 Form 10-K that Thornburg Mortgage had successfully met all of its margin calls without selling any assets. See Complaint ¶¶ 5, 7 at 3; id. ¶ 59, at 17; id. ¶ 65, at 19. The SEC asserts that the Defendants either knew, or were reckless in not knowing, that Thornburg Mortgage was late in margin call payments under its reverse repurchase agreements, as Gold-stone and Simmons had received the Citigroup Global Letter on or about February 21, 2008, which declared Thornburg Mortgage in default. See Complaint ¶ 60, at 17. The SEC asserts that the Defendants’ electronic mail transmissions in the final two weeks of February, 2008, demonstrate that Thornburg Mortgage was late in meeting margin calls, was relying on the cooperation and forbearance of its lenders to meet margin calls, and had entered into payment plans with its lenders. See Complaint ¶ 61, at 18. The SEC asserts that Simmons has conceded that, if the 2007 Form 10-K contained the “truth relating to Thornburg’s financial position,” Thorn-burg Mortgage’s stock prices would have fallen much more after the filing of the 2007 Form 10-K. Complaint ¶ 92, at 27 (“ ‘I guess the recent development section did not go over well. If they only knew’ ” (emphasis in original)(quoting Feb. 28 Simmons/Goldstone Email, at 2)). The SEC also asserts that the Defendants should have recognized the I/O Strip Transactions as sales, rather than as the issuance of secured debt, to avoid misleading investors in the 2007 Form 10-K. The SEC contends that the Defendants “each knew, or were reckless in not knowing,” that Thornburg Mortgage entered into the I/O Strip Transactions to meet margin calls, as the Defendants’ electronic mail transmission on February 21, 2008, demonstrates. Complaint ¶ 66, at 19. The SEC also contends that the Defendants have, in the past, characterized I/O Strip Transactions as sales, and not as the issuance of secured debt, as the Defendants accounted for the Thornburg Mortgage’s I/O Strip Transaction in the 2007 Form 10-K. See Complaint ¶37, at 11. The SEC highlights that, in electronic mail transmissions discussing the I/O Strip Transactions, the Defendants refer to the transactions as “sales” or state that the I/O Strips were “sold” to meet margin calls. Complaint ¶¶ 67-69, at 19-20. The SEC contends that the I/O Strip Transactions were “in form sales and contemporaneously referred to as sales.” Complaint ¶ 69, at 20. The SEC also contends that the Defendants misrepresented in the 2007 Form 10-K that Thornburg Mortgage had the intent and ability to hold its ARM securities until their value was recovered in the market. The SEC asserts that the OTTI analysis was “directly contradicted by Thornburg’s severe liquidity crisis and exposure to declarations of default by lenders who then could have seized the company’s ARM Securities collateral,” and-by Thornburg Mortgage’s use of I/O Strip Transactions to meet margin calls. Complaint ¶ 8, at 3-4; id. ¶¶ 51-52, at 15. The SEC asserts that the Defendants “knew, or were reckless in not knowing,” that the I/O Strip Transactions informed the OTTI analysis. Complaint ¶ 71, at 21. The SEC contends that Starrett provided “clear accounting guidance” to Goldstone and Simmons, which indicates that the Defendants knew that “ ‘selling some assets callfed] into question [Thornburg’s] intent and having to sell them to meet margin calls or reduce exposure, call[ed] into question [the company’s] ability to hold them.’ ” Complaint ¶ 70, at 20 (alterations in originalXquoting Feb. 25 Goldstone/Starrett Email at 2). Similarly, the SEC asserts that, just as the Defendants’ OTTI analysis was fraudulent, the Defendants knew, or were reckless in not knowing, that Thornburg Mortgage was required to recognize a loss of approximately $400 million in its ARM securities in the 2007 Form 10-K, because Thornburg Mortgage could not hold those assets to maturity. See Complaint ¶ 70, at 20-21; id. ¶ 85, at 25. The SEC asserts that Starrett “accurately” relayed this information to Gold-stone and Simmons in an electronic mail transmission on February 25, 2008. Complaint ¶ 56, at 16; id. ¶ 70, at 20-21; id. ¶ 85, at 25. The SEC contends that, if the Defendants had properly accounted for an impairment of $427.8 million in its ARM securities in the 2007 Form 10-K, Thorn-burg Mortgage would have suffered a net loss of approximately $357 million, instead of a net profit of sixty-five million dollars in the fourth quarter of 2007, an annual net loss of approximately $1.3 billion, instead of $875 million, and losses per share of $10.94, instead of $7.48. See Complaint ¶¶ 8, 12, at 4, 5; id. ¶¶ 86-88, at 25-26. The SEC asserts that, because Thornburg Mortgage’s Form S-3 ASR registration, which Goldstone and Simmons signed, incorporated the financial statements in the 2007 Form 10-K, was, therefore, materially false. See Complaint ¶ 89, at 26. The SEC asserts that, because Starrett served as Thornburg Mortgage’s CAO and directly participated in “materially misrepresenting the company’s financial condition,” she “knew or reasonably could have anticipated” that Thornburg Mortgage’s “false Form 10-K and accompanying financial statements would be incorporated into Thornburg’s pending registration statements.” Complaint ¶ 90, at 26. The SEC asserts that Goldstone and Simmons “continued to project a materially false image of Thornburg’s financial condition and to perpetuate the materially false image they had presented in the Form 10-K” in the days and hours after filing the 2007 Form 10-K. Complaint ¶ 93, at 27. The SEC asserts that Goldstone “knew, or was reckless in not knowing,” that his electronic mail transmission to the investor relations department on February 28, 2008 was misleading, because Thorn-burg Mortgage had violated reverse repurchase agreements the previous week. Complaint ¶ 95, at 27. The SEC also asserts that Goldstone’s electronic mail transmission to the investor relations department became false within “approximately one hour of his instructions,” as Thornburg Mortgage received escalating margin calls that exceeded Thornburg Mortgage’s liquidity, consisting of approximately forty million dollars in cash at that time. Complaint ¶ 95, at 27. The SEC asserts that Goldstone knew, or was reckless in not knowing, that, inconsistent with the “ ‘top- messages’ ” the Defendants “ ‘reinforced in' the market,’ ” on February 28, 2008, Thornburg Mortgage did not have sufficient cash to meet the margin calls it received that day. Complaint ¶¶ 96-97, at 28. The SEC similarly asserts that Gold-stone knew, or was reckless in not knowing, that Thornburg Mortgage did not have liquidity and cash sufficient to support its margin calls on February 28, 2008, contrary to his statements on Street Signs. See Complaint ¶ 98, at 28. 2. The Defendants’ Alleged Misrepresentations to KPMG. The SEC contends that the Defendants made misrepresentations and omissions to KPMG. The SEC asserts that the Defendants “misrepresented and/or concealed the fact -that” Thornburg Mortgage had violated reverse repurchase agreements, and was at risk of having its ARM securities seized as collateral by its lenders, and that Thornburg Mortgage was required to enter into I/O Strip Transactions to meet margin calls in the last two weeks of February, 2008. Complaint ¶ 51, at 15; id. ¶79, at 23. The SEC asserts that the Defendants’ misrepresentations and omissions precluded the auditor from having “critical information to evaluate Thorn-burg’s OTTI analysis of its ARM Securities and to determine whether Thornburg had the intent and ability to hold those securities until maturity or their value recovered in the market.” Complaint ¶ 79, at 23. The SEC asserts that Goldstone and Simmons failed to disclose that a large European hedge fund holding ARM securities similar to Thornburg Mortgage’s was close to collapsing, which made Simmons’ statements regarding the ARM securities market false and misleading. See Complaint ¶ 76, at 22. The SEC also asserts that Goldstone and Simmons perpetuated Thornburg Mortgage’s materially false financial statements in the 2007 Form 10-K by not disclosing to the auditor that Thornburg Mortgage had received the Citigroup Global Letter in the days after the 2007 Form 10-K was filed. See Complaint ¶ 80, at 23; id. ¶ 99, at 29. The SEC asserts that the Defendants’ electronic mail transmissions on February 25, 2008, demonstrate a “plan ... not to disclose the margin call situation until it was resolved” to KPMG. Complaint ¶ 52, at 16. Regarding Thornburg Mortgage’s overall financial situation, the SEC asserts that the Defendants’ repeated statements in Thornburg Mortgage’s going-concern analysis that Thornburg Mortgage “successfully continued to meet all margin calls” was materially false and misleading, given Thornburg Mortgage’s failure to timely meet the Credit Suisse, Citigroup Global, and Greenwich margin calls. Complaint ¶ 72, at 21. The SEC also asserts that the Defendants either knew, or were reckless in not knowing, that the statements in the going-concern analysis that Thornburg Mortgage had “returned to profitability in the fourth quarter,” were false, because of the Defendants’ improper OTTI analysis of the ARM securities. Complaint ¶ 73, at 21-22. The SEC contends that, had the Defendants disclosed the truth of Thorn-burg Mortgage’s liquidity crisis and exposure to default and cross-defaults, KPMG would have questioned its OTTI analysis in the 2007 Form 10-K, and the Defendants’ plan to raise additional cash would have been undermined. See Complaint ¶ 2, at 2; id. ¶ 52, at 15-16. The SEC also asserts that the Defendants’ February 27, 2008 management representation letter to KPMG misrepresented that Thornburg Mortgage was not in violation of its reverse repurchase agreements, that Thorn-burg Mortgage was in compliance with all aspects of its reverse repurchase agreements which would have an effect on its financial statements in the event of non-' compliance, that Thornburg Mortgage had the intent and ability to hold its impaired securities until their value recovered in the market, that Thornburg Mortgage had not experienced subsequent events which would require it to adjust its financial statements, and that the financial statements disclosed all matters relevant to Thornburg Mortgage’s ability to continue as a going concern. See Complaint ¶¶ 57-58, at 17. Regarding the I/O Strip Transactions, the SEC contends that the Defendants either “knew, or were reckless in not knowing,” that the “circumstances of the I/O Strip Transactions were important information” that KPMG needed to know to properly review Thornburg Mortgage’s OTTI analysis regarding its ARM securities. Complaint ¶71, at 21. The SEC asserts that Simmons misrepresented to KPMG that Thornburg Mortgage entered into the I/O Strip Transactions to take advantage of opportune pricing. See Complaint ¶ 65, at 19. The SEC contends that the Defendants’ statement in the going-concern analysis that Thornburg Mortgage “ ‘has the ability and intent to hold its Purchased ARM assets until recovery,’ ” based upon Thorn-burg Mortgage’s “ongoing profitability, liquidity position and ability to continue to make margin calls,” was a misrepresentation. Complaint ¶ 12, at 4-5; id. ¶ 74, at 22 (quoting Going Concern Analysis at 12). The SEC also asserts that the. statement demonstrates the Defendants knew, or were reckless in not knowing, “the relevant criteria for an OTTI analysis.” Complaint ¶ 75, at 22. The SEC asserts that the Defendants “misrepresented or failed to disclose” to the auditor that Thornburg Mortgage’s “margin calls events” were a continuation “of a condition that existed as of Thornburg’s fiscal year,” and that Thornburg Mortgage’s margin calls were “reaching crisis proportions” in the first two months of 2008. Complaint ¶ 81, at 24. The SEC asserts that Thornburg Mortgage’s margin calls in the last two weeks of February, 2008, “were a continuation of a condition that existed as of Thornburg’s December 31, 2007 balance sheet,” and, therefore, were a “Type 1 subsequent event for accounting purposes,” and KPMG should have considered the margin calls in its opinion. Complaint ¶ 82, at 24. The SEC asserts that, if the Defendants had provided KPMG with “accurate and complete information about Thornburg’s margin call situation during the two-week period leading to the filing of Thornburg’s 2007 Form 10-K,” KPMG would have disagreed with the Defendants’ OTTI analysis. Complaint ¶ 83, at 24. The SEC also contends that Goldstone and Simmons knew, or were reckless in not knowing, that failing to inform the auditor that the impending collapse of a European hedge fund, of which Goldstone and Simmons became aware on February 27, 2008, would “likely further depress the price of Thornburg’s ARM Securities and trigger additional margin calls.” Complaint ¶ 76, at 22. The SEC contends that the collapse of the European hedge fund was “material information that” Goldstone and Simmons should have provided to the auditor to allow it to properly review Thornburg Mortgage’s OTTI analysis of its ARM securities. Complaint ¶ 78, at 23. The SEC asserts that Simmons “improperly failed to update” his previous statement to KPMG expressing his belief that the MBS market had “reached its lowest point and ... [would] not likely [ ] deteriorate further.” Complaint ¶ 77, at 22-23. The SEC asserts that Goldstone and Simmons perpetuated Thornburg Mortgage’s false 2007 Form 10-K subsequent to its filing. The SEC contends that Gold-stone and Simmons failed to provide the “critical” Citigroup Global Letter in response to the Request for Correspondence. Complaint ¶ 99, at 29. The SEC also contends that the Position Paper, which Simmons approved, falsely stated that the collapse of the European hedge fund was “ ‘unexpected’ ” and that Thornburg Mortgage’s' margin calls after the filing of the 2007 Form 10-K’ were “ ‘unforeseeable.’ ” Complaint ¶ 105, at 30 (quoting Position Paper at 2). The SEC asserts that Simmons was aware that the hedge fund was collapsing on February 27, 2008, and understood at that time that the collapse would likely “have a negative impact on the price of Thornburg’s ARM Securities.” Complaint ¶¶ 38-40, at 12, id. 104, at 30. The .SEC asserts that Simmons “continued to deceive the company’s auditor” “in an attempt to defend Thornburg’s improper OTTI analysis and failure to recognize the losses associated with its ARM Securities.” Complaint ¶ 105, at 30. 3. Goldstone and Simmons’ Motion to Dismiss. Goldstone and Simmons move to dismiss the SEC’s eleven claims against them. See Goldstone & Simmons MTD at 9. Goldstone and Simmons assert that the SEC has failed to allege a plausible claim against them in the Complaint, and assert that the SEC’s allegations of fraud fail to meet the requirements of rule 9(b) of the Federal Rules of Civil Procedure. See Goldstone & Simmons MTD at 8. Gold-stone and Simmons assert that the SEC “uses 20/20 hindsight, the SEC’s own sinister characterization of events, and misleading excerpts of internal documents in a belated attempt to hold the defendants liable for, in essence, not having done even more to predict the future.” Goldstone & Simmons MTD at 8. Goldstone and Simmons assert that the claims against them are “facially invalid in at least five respects:” (i) the Thornburg Mortgage 2007 Form 10-K was not misleading, and that the Defendants had no duty to “disclose incidental details about how Thornburg met its margin calls or to attempt to predict the extent of future margin calls,” Goldstone & Simmons MTD at 9-10; (ii) the Complaint “fails to allege facts demonstrating that Defendants prepared the 10-K with any intent to defraud investors,” Goldstone & Simmons MTD at 10; (iii) the Complaint fails to allege plausible facts that Goldstone acted with fraudulent intent to misrepresent Thornburg Mortgage’s “ability to support its portfolio with cash and liquidity during an interview on Street Signs and in instructions he gave to the Company’s investor relations department on February 28, 2008,” Gold-stone & Simmons MTD at 11; (iv) the information Goldstone and Simmons withheld regarding the means Thornburg Mortgage used to meet its margin calls and the European hedge fund “rumor,” and related issues was not material in light of the full disclosures in the 2007 Form 10-K, was not relevant to Thornburg Mortgage’s financial conditions, and would not have changed the auditors’ view on Thornburg Mortgage’s OTTI analysis, Goldstone & Simmons MTD at 11; (v) the SEC has not sufficiently alleged facts to support Goldstone and Simmons’ liability as “control persons,” because the SEC has not adequately alleged a primary securities violation and has not sufficiently alleged that Goldstone and Simmons had “actual knowledge that they substantially assisted Thornburg in its alleged commission of the securities fraud, books and records violations, and internal control violations at issue,” Goldstone & Simmons MTD at 11-12. Goldstone and Simmons also join in Starrett’s arguments set forth in the Starrett MTD, and incorporate by reference all of Starrett’s arguments into the Goldstone & Simmons MTD. See Goldstone & Simmons MTD at 12 n. 1. First, Goldstone and Simmons assert that the SEC has failed to state a claim in connection with representations and omissions in Thornburg Mortgage’s 2007 Form 10-K. Goldstone and Simmons contend that Thornburg Mortgage’s disclosures therein were accurate and not misleading, and further contend that the SEC has not plausibly alleged that Goldstone and Simmons .made misrepresentations and omissions with fraudulent intent. Goldstone and Simmons assert that, under federal securities laws, “a statement or omission is material only if there is 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’ to the public.” Goldstone & Simmons MTD at 37 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757