Full opinion text
ORDER MOYE, Chief Judge. This case arises out of the sale of Thrift Notes, Thrift Certificates, and Term Notes to the plaintiff class from 1966 until 1974 by the North American Acceptance Corporation (NAAC). The plaintiff class brought claims for losses in their note purchases against several defendants, including the law firm of Arnall, Golden and Gregory (AGG); Touche Ross and Company, an accounting firm (Touche Ross); and The First National Bank of Atlanta and its holding company, the First National Holding Corporation (FNB). Plaintiffs’ claims against these defendants are based on alleged violations of state and federal securities statutes and on alleged breaches of fiduciary and contractual duties. Before the Court are numerous motions to dismiss certain claims, for partial summary judgment, and for summary judgment both by the three defendants listed above and on behalf of the plaintiff class. PLAINTIFFS’ CONTENTIONS Plaintiffs’ original complaint and the amendments thereto make the following allegations: Count I alleges that the defendants directly and/or indirectly as aiders and abettors, co-conspirators and/or as controlling persons pursuant to section 15 of the Securities Act of 1933 (Securities Act), 15 U.S.C. § 77o, are jointly and severally liable to plaintiffs in an amount exceeding $40,-000. 000, the consideration paid for unregistered securities, with interest thereon, as the result of violations of sections 5 and 12(1) of the Securities Act, 15 U.S.C. §§ 77e and 777(1). Count II alleges that the defendants directly and/or indirectly as aiders and abettors and as controlling persons pursuant to section 15 of the Securities Act and section 15 (sic) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78t, are jointly and severally liable to plaintiffs for the amount listed above in Count I as the result of violations of sections 12(2) and 17(a) of the Securities Act, 15 U.S.C. §§ 777(2) and 77q(a), and section 10(b) of the Exchange Act, 15 U.S.C. § 78j, and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission (SEC). Count III alleges that the defendants, as officers, directors, agents and controlling persons of NAAC who participated in the sale of its Thrift Notes and Term Notes are jointly and severally liable to plaintiffs for the amount listed above in Count I as the result of violations of sections 11 and 13 of the Georgia Securities Act of 1957 (the Georgia Act). Count IV alleges that the defendants as officers, directors, agents, and controlling persons of NAAC who participated or aided or abetted in the sale of its Thrift Notes are jointly and severally liable to purchasers of those Thrift Notes in an amount exceeding $25,-000,000, as the result of violations of section 3 of the Georgia Act. Count V alleges that all defendants except GCI, Varner, Burton and DeCarlo (who are not now before the Court on a motion) are jointly and severally liable to plaintiffs who purchased NAAC Term Notes pursuant to a prospectus dated February 26, 1973, as the result of said defendants’ violation of section 13 of the Georgia Act in that said prospectus did not contain audited financial statements as required by section 3 of the Georgia Act. Count VI alleges that defendant Touche Ross is liable to plaintiffs for the amount listed in Count I for violations of section 12(1) of the Securities Act, section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and Section 11 of the Georgia Act. Count VII alleges that defendant FNB is liable to those plaintiffs holding Term Notes and all other Term Note holders of NAAC in an amount exceeding $15,000,000, for breaches of contractual and fiduciary obligations and duties arising out of an indenture agreement between NAAC and FNB. Finally, Count VIII alleges that defendants AGG, NAAC, and FNB are liable to plaintiffs in the amount of $10,000,000 for failure to qualify the indenture agreement pursuant to section 306(a) of the Trust Indenture Act of 1939, 15 U.S.C. § 77fff(a). FACTUAL OUTLINE NAAC was organized in 1963 when its then-parent, Transcontinental Investing Corporation (TIC), acquired the business and assets of a Pennsylvania finance company with headquarters in Atlanta, named North American Acceptance Corporation. TIC retained the name and formed a new Georgia corporation which continued in business until it filed a bankruptcy petition on February 6, 1974. NAAC engaged principally in making first and second mortgage lodns on residential properties and servicing the receivables that it generated. In addition, it bought in bulk from home improvement contractors and acquired other receivables secured by home mortgages. It serviced this paper in the same fashion as on the loans it made itself. In 1966 NAAC began selling what it called Thrift Notes to the public. Thrift Notes were simply promissory notes issued by NAAC payable to the order of the purchaser, bearing specified maturity dates nine months from the date of purchase but redeemable upon demand of the holder. Thrift Notes were never registered with any governmental authority and were sold continuously from 1966 until February 1974. NAAC sold Term Notes from July 1971 through May 1973. These notes were promissory notes payable one to five years after the date of sale. These notes were registered with the Georgia Commissioner of Securities and were sold pursuant to a prospectus. Thrift Certificates, which NAAC began marketing in July 1973 were identical to Thrift Notes except that they were not payable on demand. Like Thrift Notes, they were not registered with any governmental authority. All of these notes were sold only in Georgia to Georgia residents. Because of that fact NAAC saw no need to register the notes with the Securities Exchange Commission because of the exemption provided to securities sold only intrastate by section 3(a)(ll) of the Securities Act. In addition, NAAC saw no need to register the Thrift Notes or Certificates with the Georgia Securities Commissioner because it relied on section 5(g) of the Georgia Securities Act of 1957 which exempted the registration of commercial paper maturing in not more than twelve months from date of issuance. In 1968 NAAC organized Security Mortgage Investors (SMI), a Massachusetts real estate investment trust headquartered in New York. From 1969 to 1972 NAAC owned about 46 percent of the beneficial shares of SMI. SMI became NAAC’s primary customer for the sale of NAAC’s receivables. In addition, NAAC, by virtue of its stock in SMI, received 46 percent of all dividends declared by SMI. Consequently, NAAC’s relationship with SMI had the practical effect of providing NAAC a steady source of cash, through the sale of receivables and receipt of dividends. In 1969 and 1970, NAAC entered the real estate business. By early 1971, NAAC had acquired real estate in states other than Georgia, including Arizona, Mississippi, Washington, and Hawaii. This acquisition occurred as a result of the financial difficulties and eventual bankruptcy of a group of companies (the Wendell-West group) from which NAAC had purchased substantial amounts of land sales contracts and to which NAAC had made available substantial lines of credit. NAAC acquired this out-of-state real property in settlement of its claims under the land sales contracts it had purchased. NAAC then formed a number of wholly-owned subsidiaries which were in the business of developing and selling lots on the real estate it had acquired. The land companies proved to be a cash drain on NAAC, requiring the infusion of millions of dollars to meet development obligations. In March 1972, Omega-Alpha, Inc. (O-A), acquired NAAC through a merger with Transcontinental Investing Corporation (TIC). O-A was a Delaware Corporation organized in November 1970 and conducting business exclusively through its subsidiaries. O-A quickly caused a depletion of NAAC’s cash and other reserves through transfers of securities, dividends paid to O-A, and loans to O-A. A description of these transfers can be found in Form 10-K, filed by O-A with the SEC for the fiscal year ended June 30, 1972, at pp. 16-17. (Ex. C to Affidavit of Robert W. Beynart, filed October 15, 1980). Meanwhile, NAAC lost its favorable position with SMI. A mid-1972 merger agreement joined SMI with another real estate investment trust, Medical Mortgage Investors, to create a new SMI. As a result of this transaction NAAC had no equity in the new SMI. In November 1972, O-A’s chief, James J. Ling, committed NAAC to selling $50,000,000 in receivables to SMI at rates favorable to SMI. In 1973 NAAC’s financial condition began to deteriorate. In January, SMI announced that it would no longer purchase paper from NAAC. Also in January, the SEC proposed Rule 147, which would create explicit location-of-assets and use-of-proceeds criteria relating to the intrastate exemption from registration of securities embodied in section 3(a)(ll) of the Securities Act. It seemed unlikely that NAAC could meet those criteria and consequently NAAC’s unregistered note sales would have to cease if the Rule were formally adopted. In March 1973, Touche Ross prepared financials which restated the past five years’ operations. These financials showed that under newly required accounting guidelines NAAC’s overall operations for that period were virtually at the “break-even” point. In addition, NAAC had lost money in the second half of 1972, and the auditors expressed doubt about the value of $12,144,-000 in notes from O-A. By May 1973, NAAC’s principal source of funds to repay holders of maturing Thrift and Term Notes was the sale of additional Thrift Notes. These were not sold pursuant to any registration statement. They were primarily sold through television, newspaper, and direct mail solicitation. NAAC was sold by O-A to GCI International, Inc., of Los Angeles in August 1973. GCI was primarily a wholesale agent for the sale and subsequent development of large parcels of unimproved land in Hawaii and the western United States. September brought some relief for NAAC; SMI agreed to purchase $15,000,000 of paper over the coming months. The relief was short lived, however. In December 1973, the SEC recommended an investigation into NAAC’s note sales, and on January 7,1974, Rule 147 was adopted effective March 1, 1974. NAAC’s financial collapse came early in 1974. Touche-Ross issued a report on January 15, 1974, in which it outlined NAAC’s shaky financial status and found itself unable to express an opinion on the consolidated financial statements for the year ended June 30, 1973. The financials were mailed to noteholders on February 1, 1974. Shortly thereafter the noteholders’ demands for payment exceeded NAAC’s ability to pay, and on February 6, 1974, NAAC filed a petition under Chapter XI of the Bankruptcy Act, proceedings which were later converted to Chapter X proceedings. The collapse of NAAC was followed by the filing of this action by the noteholders as a class who were unable to collect the full face value of their notes through the bankruptcy proceedings. ARNALL, GOLDEN AND GREGORY AGG was named as a defendant in Counts I, II, III, IV, V, VI and VIII through an amendment to the Consolidated Amended Complaint — Class Action as outlined above. The amendment adding AGG was filed June 18, 1975; however, for statute of limitations purposes, AGG became a defendant on February 1, 1975. The complaint alleges that AGG served as the attorney for NAAC throughout the period during which the facts as outlined above unraveled. AGG, it alleges, participated in the preparation and promulgation of the advertising used in connection with the sale of the Thrift Notes and Term Notes sold by NAAC. Its activity included but was not limited to approval, disapproval, and direction as to the content of said advertising when it knew or should have known the advertising omitted to state material facts necessary in order to make the statements made in light of the circumstances under which they were made, not misleading, and when it knew or should have known that the advertising amounted to an act, practice or a course of business which operated as a fraud and deceit upon the purchasers of Thrift Notes and Term Notes. The complaint further alleges that AGG further participated and assisted in the preparation of and permitted the use of materially misleading and false prospectuses and other written literature which was used by NAAC in connection with the sale of the Thrift Notes and Term Notes when AGG knew or should have known that the information being included in the prospectuses and other written material omitted to state material facts necessary in order to make the statements made in light of the circumstances under which they were made, not misleading and amounted to an act, practice or a course of business which operated as a fraud or deceit upon the purchasers of thrift notes and term notes. In addition, plaintiffs allege that AGG issued legal opinions to the effect that Thrift Notes and Term Notes were exempt from the registration provisions of the Securities Act and that Thrift Notes were exempt from the registration provisions of the Georgia Securities Act at a time when it knew or should have known that these notes were not so exempt. It is further alleged that defendant AGG prepared and approved a trust indenture, under which defendant FNB operated as trustee, without having said trust indenture qualified pursuant to the terms of the Trust Indenture Act of 1939, 15 U.S.C. § 77aaa et seq., when AGG knew or should have known the Act required the indenture to be so qualified. Defendant AGG has moved for judgment on the pleadings and summary judgment dismissing plaintiffs’ claims under the federal and state securities laws, and for summary judgment dismissing or limiting plaintiffs’ claims under the applicable statutes of limitation. Federal Securities Laws. AGG contends that all plaintiffs’ claims under the federal securities laws must be dismissed because (1) there is no private right of action under sections 5 and 17(a) of the Securities Act; (2) AGG is not a proper party-defendant to a claim under section 12 of the Securities Act or section 306(a) of the Trust Indenture Act; and (3) plaintiffs have no implied right of action against AGG under section 10(b) of the Exchange Act or Rule 10b-5 promulgated thereunder. AGG first argues that plaintiffs’ claims under section 5 of the Securities Act must be dismissed because there is no private right of action under that section. Defendant argues that under the analysis contained in the court’s decision in Unicorn Field, Inc. v. Cannon Group, Inc., 60 F.R.D. 217 (S.D.N.Y.1973), private civil liability for violations of sections 5 and 17(a) of the Securities Act exists only when the provisions of section 12 are also met. In simple terms, section 5 of the Securities Act makes unlawful the sale of unregistered securities through the use or medium of any prospectus or otherwise in interstate commerce or through the mails unless the security is exempted by section 3 of the Act-or the transaction is exempted by section 4. Section 12 makes liable to the purchaser any person who offers or sells a security in violation of section 5 or a person who offers or sells a security in interstate commerce by means of a prospectus which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made not misleading. In addition, section 17(a), in summary, makes it unlawful for any offer- or or seller of securities to employ any device or scheme that would operate as a fraud or deceit upon the purchaser. The Court does not disagree with defendant AGG that no civil liability arises solely as a result of a violation of section 5. Plaintiffs, however, have alleged that as a result of NAAC’s failure to register any of its notes with the SEC, AGG is civilly liable to plaintiffs under section 12 as an aider and abettor and a participant. Section 12 specifically refers to registration as required by section 5 and plaintiffs’ reference to section 5 is solely with respect to their claims under section 12. Defendant’s argument that plaintiffs’ claims under section 5 are invalid is misplaced inasmuch as plaintiffs have made no claim under that section alone. Accordingly, defendant AGG’s motion for judgment on the pleadings and summary judgment under section 5 of the Securities Act is DENIED. The Court does, however, find merit in defendant’s motion with respect to section 17(a) of the Securities Act. In Gunter v. Hutcheson, 433 F.Supp. 42 (N.D.Ga.1977), this Court analyzed the question of whether an implied private cause of action arises under that section. The Court therein concluded that no such cause of action arose from the language of section 17. Id. at 47. The Fifth Circuit Court of Appeals has declined to decide the issue, see Pharo v. Smith, 621 F.2d 656, 673 (5th Cir. 1980), and unless and until that court decides the issue differently than did this Court in Gunter this Court will continue to hold that section 17 implies no private right of action. Defendant AGG’s motion for judgment on the pleadings and for summary judgment with respect to section 17 of the Securities Act is therefore GRANTED. Accordingly, that portion of Count II alleging violations by AGG of section 17(a) is hereby dismissed. The next contention of AGG to be considered is whether AGG is a proper party defendant to plaintiffs’ claims under section 12 of the Securities Act. Section 12, as noted above, provides civil liability for any person who offers or sells a security in violation of section 5, or who offers or sells a security by means of a prospectus or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made not misleading. AGG contends first that plaintiffs have abandoned their claims that AGG sold to plaintiffs or caused to be sold to plaintiffs the notes that NAAC issued by virtue of their answers to Defendants’ First Joint Interrogatories. While plaintiffs did state in response to questions 2(a) and 2(b) to those interrogatories that they contended that NAAC was the seller of the notes plaintiffs purchased and that those who caused notes to be sold to plaintiffs were limited to officers and directors of NAAC, O-A and its officers and directors, and GCI and its officers and directors, nevertheless the plaintiffs also alleged in response to question 4(b) that AGG, FNB, and Touche Ross, inter alia, were aiders and abettors of NAAC’s violations of sections 5 and 12(1). Therefore, the Court will consider the merits of defendant’s motion for judgment on the pleadings and summary judgment with respect to plaintiffs’ claims under section 12 of the Securities Act, for it does not believe those claims have been abandoned. It is clear that in order to prove a violation of section 12 of the Securities Act plaintiffs are not required to show privity between purchasers and seller. In Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680 (5th Cir. 1971), the court held that privity between a purchaser and a person held liable under section 12 is not required if the injury to the plaintiff-purchaser flowed directly and proximately from the actions of the defendant. Id. at 693. In Lewis v. Walston & Co., 487 F.2d 617 (5th Cir. 1973), this test was recast as follows: were the defendant’s actions “a substantial factor in bringing about the plaintiff’s purchases.” Id. at 622. The Fifth Circuit reiterated the substantial factor test in Pharo v. Smith, 621 F.2d 656 (5th Cir. 1980), and added clarifying language: “Mere participation in the events leading up to the transaction is not enough.” Id. at 667. The latest Fifth Circuit case discussing the possibility of a person being held liable under section 12 without being an immediate party to the buy-sell agreement is Croy v. Campbell, 624 F.2d 709 (5th Cir. 1980). In Croy the plaintiffs alleged that a lawyer whom they had consulted for tax advice was a seller of an alleged security since he introduced them to the immediate owner of the alleged security and told them the alleged security was the best investment they could make from a tax standpoint. The court held that “ [participation in the sale of a security ... is an important factor only as it relates to the concept of causation. A determination that one has participated in the transaction should not be conclusive as to the participant’s liability as a seller, but it may be a criterion in determining whether or not the defendant caused the transaction to take place.” Id. at 714. While the court in Croy stated that its holding should not be interpreted to mean that a lawyer who participates in the transaction can never be a seller for purposes of section 12, it held that the lawyer therein was not the cause of plaintiff’s purchase and therefore not a seller. Id. In reliance on Croy, this Court held in Westlake v. Abrams, 504 F.Supp. 337 (N.D. Ga., 1980), that an attorney who acted as general counsel to a seller of commodity futures options was not a “seller” for purposes of section 12 despite his knowledge of boiler-room sales tactics used by the seller, his representation of the seller in proceedings to force a telephone company to supply telephones to the seller for the purpose of making sales, his arrangement for registration under state securities laws of the sale of options, and his acquisition of office space for the seller’s activities. Id. at 347. The attorney, the Court held, did not cause the plaintiff to purchase the options despite his efforts on behalf of the actual seller. In response to defendant’s motion to dismiss plaintiffs’ claims under section 12, the plaintiffs argue that defendant AGG is a seller under Pharo, Lewis, and Hill York because AGG’s activities with respect to NAAC were a “substantial factor” in the sale of NAAC notes. Plaintiffs contend that AGG’s January and February 1974 advice to NAAC to continue to sell notes based on the intrastate exemption to the securities laws and its advice in January and February 1973, concerning the applicability of the intrastate exemption create factual questions for resolution at trial as to whether AGG’s activities meet the substantial factor test. The plaintiffs failed to brief the more recent case of Croy in which the court held that participation in the sale of a security is not conclusive as to the partidpant’s liability as a seller, but participation is a mere criterion to be used to determine whether the defendant caused the transaction to take place. 624 F.2d at 714. As in Westlake, the Court today is unable to find that on the voluminous factual record before it that defendant AGG could be found at trial to have caused the plaintiffs to make their purchases of NAAC simply because it advised NAAC that the intrastate exemption was available and applicable and it advised NAAC to continue selling notes in a period of financial instability. Accordingly, the Court hereby GRANTS defendant AGG’s motion to dismiss and for summary judgment with respect to plaintiff’s claims under section 12 of the Securities Act. In doing so, under the holding in Pharo, the Court likewise finds that AGG could have no liability as an aider and abettor of NAAC’s alleged violations of section 12. 621 F.2d at 669. Defendant AGG next argues that it is not a proper party defendant to plaintiffs’ claim under section 306(a) of the Trust Indenture Act. In Count VIII of their complaint, plaintiffs aver that AGG prepared and approved a trust indenture, under which defendant FNB operated as trustee, without having said trust indenture qualified; that failure to qualify the indenture was a violation of section 306(a) of the Trust Indenture Act; and that AGG is therefore liable to all those plaintiffs who purchased Term Notes under the unqualified indenture. While AGG is separately moving for summary judgment on the ground, in part, that Term Notes covered by the trust indenture and thus the indenture itself were exempt from federal registration under the intrastate exemption of the federal securities laws, it also argues here that there is no private right of action under section 306(a) and that under other sections of the Act implied civil liability has only been found to exist with respect to the indenture trustee (FNB). The Court need not today determine whether a private right of action exists under section 306(a) of the Trust Indenture Act, nor whether noteholders may sue one who is an aider, abettor, or participant in a trustee’s violation of that section. Those questions need not be reached because section 306(a) makes liable only sellers of securities for violating its provisions and the Court, above, has found that AGG was not a seller of NAAC notes, nor was it an aider and abettor in the sale of those notes for purposes of the federal securities laws. See 15 U.S.C. § 77fff(a)(l) and (2). Accordingly, the Court GRANTS defendant AGG’s motion for summary judgment with respect to the allegations in Count VIII of the complaint lodged against AGG. Finally, defendant AGG has moved for judgment on the pleadings arguing that plaintiffs have no implied private right of action against AGG under section 10(b) of the Exchange Act or Rule 10b-5 promulgated thereunder. The basis for this claim is that there is no reason for the Court to imply a remedy because each allegation of the complaint falls squarely within the purview of the express remedies afforded by other sections of the securities acts. Because the Court has dismissed plaintiffs’ claims against AGG under sections 17(a) and 12 of the Securities Act and section 306(a) of the Trust Indenture Act, defendant’s argument no longer holds true. In addition, as noted in Woodward v. Metro Bank of Dallas, 522 F.2d 84, 93 (5th Cir. 1975), by now the existence of an implied right of action under section 10(b) and Rule 10b-5 can hardly be gainsaid. See also Wachovia Bank & Trust Co. v. National Student Marketing Corp., 650 F.2d 342 (D.C.Cir.1980). Therefore, this Court will continue to find an implied cause of action for violations of section 10(b) and Rule 10b-5 and accordingly DENIES defendant’s motion to dismiss plaintiffs’ claims thereunder. Georgia Securities Act. Plaintiffs assert claims under sections 3, 11, and 13 of the Georgia Securities Act of 1957 as set out in Counts III, IV, V, and VI of their complaint. AGG’s motion for judgment on the pleadings and summary judgment dismissing said claims is based on the following grounds: (1) AGG is not a proper party-defendant to a claim under § 13 of the Georgia Securities Act; (2) Plaintiffs’ claims in Count IV of their complaint must be dismissed because the failure to register NAAC’s Thrift Notes with the Georgia Commissioner was not a violation of section 3 of the Georgia Securities Act since Thrift Notes were exempt from state registration under section 5(g) of the Georgia Securities Act; (3) the financial statements included in the 1973 Term Note Prospectus were “certified” as required by § 3 of the Georgia Securities Act; (4) and plaintiffs have averred no facts and there is no genuine issue of material fact that AGG knowingly subscribed to, or made, or caused to be made, any material false statement or representation in NAAC’s financial statements within the meaning of § 11 of the Georgia Securities Act. Defendants’ first argument is that AGG is not a proper party defendant to a claim under section 13 of the Georgia Securities Act, which provides the exclusive remedy for damages for violations of sections 3 and 11. Section 13 of the Georgia Securities Act of 1957 reads in part as follows: “Every sale or contract for sale in violation of any of the provisions of this Act ... shall be voidable at the election of the purchaser. The person making such sale or contract for sale, and every director, officer, salesman or agent of or for such seller who shall have participated or aided in any way in making such sale, shall be jointly and severally liable to such purchaser in any action at law in any court of competent jurisdiction upon tender to the seller, in person or in open court, of the securities sold or of the contract made for the full amount paid by any such purchaser, together with all taxable court costs and reasonable attorney’s fees in any action or tender under this section.... ” 1957 Ga. Laws, Vol. 1, p. 161. Defendant argues that section 13 confines the class of persons potentially liable for violations of sections 3 and 11 to the seller and “every director, officer, salesman, or agent of or for such seller,” a group, defendant asserts, which does not include AGG. The Court agrees with defendant’s argument that the civil remedy for violations of sections 3 and 11 of the Georgia Securities Act of 1957 is exclusively provided by section 13 of that Act. While the new Georgia Securities Act of 1973, Ga. Code Ann. § 97-1 et seq., provides for express civil liability for anyone who violates its general anti-fraud provision (Ga.Code Ann. § 97-112), the 1957 Act, which is applicable to transactions occurring before April 1,1974, provides for civil liability only as provided for in section 13 thereof. Kleiner v. Silver, 137 Ga.App. 560, 561-62, 224 S.E.2d 508 (1976). If section 13 allows no avenue of recovery for plaintiffs against defendant AGG as AGG contends, the Court need not examine the substantive requirements of the Georgia Act which plaintiffs allege AGG has breached. The Court therefore turns to the record before it to determine whether a genuine issue of material fact continues to exist as to whether AGG was a seller, director, officer, salesman or agent of a seller of NAAC notes in order to determine if plaintiffs’ substantive claims under the Georgia Act even merit consideration. Since it is undisputed that AGG offered no NAAC notes for sale directly to plaintiffs, and was not a director, officer, or salesman of NAAC, AGG cannot be held liable to plaintiffs under section 13 unless it was an “agent of or for such seller who shall have participated or aided in any way in making such sale.” Plaintiffs contend that AGG acted as NAAC’s agent with regard to note sales in several instances. First, plaintiffs contend that AGG was NAAC’s agent when it first persuaded Commissioner of Securities Ben W. Fortson to accept a Term Note registration of $20,000,000 in 1971. Second, plaintiffs allege that AGG acted as NAAC’s agent when it persuaded the SEC to discontinue its inquiry into note sales in 1972. Third, it is alleged that agency with regard to note sales existed when AGG threatened SMI with NAAC’s bankruptcy and criminal prosecutions in September of 1973, in a successful attempt to keep NAAC alive for a few months more. Finally, plaintiffs allege that AGG was NAAC’s agent in successfully moving to quash the SEC’s investigative subpoena in early January, 1974. Georgia authority is scarce with respect to the question of who constitutes an agent under section 13 of the Georgia Act. While the plaintiffs point to Boddy v. Theiling, 129 Ga.App. 273, 199 S.E.2d 379 (1973), the Court finds that case inapplicable here because it merely defined what was meant by section 13’s reference to the terms “participated or aided” when applied to a corporate director. Section 13 liability attaches to a director regardless of whether he can be considered an agent of the corporation; Boddy, therefore, fails to define “agent.” The Court has found one case, D. K. Properties v. Osborne, 143 Ga.App. 832, 240 S.E.2d 293 (1977), where “agent” as found in the 1957 Securities Act has been discussed. In Osborne the court held that it was error to grant summary judgment for a defendant on the ground that he was not covered by the language of section 13 where the defendant was an assistant secretary of the selling corporation who, as an attorney, assisted in the preparation of the documents closing the sales and signed the closing papers in his capacity as assistant secretary. While the court may have reversed the granting of the motion for summary judgment because the defendant was a corporate officer, it also may have found that a factual question was presented as to whether he was an agent of the seller who participated in any way in making the sale. The opinion is unclear as to the basis of its holding. The court’s references to defendant’s “participation as the attorney closing the sales and as the signatory officer and assistant secretary of the issue,” Id. at 837, 240 S.E.2d 293, seem to infer that the court found that the presence of all these activities together created a factual question concerning defendant’s role as the issuer’s agent. Finding no other cases defining section 13’s reference to agency, the Court looks to Nechtman v. Wellington Plaza, Inc., 97 Ga. App. 40,102 S.E.2d 57 (1958), for an explanation of the elements of an agency relationship under Georgia law. Defendant AGG relies on Nechtman and asserts that for an agency to have been established the following must exist: (1) facts from which agency may be established; (2) the principal, through its agent, must have done the act; and (3) the act must have been done by the alleged agent in the prosecution of the principal’s business and within the scope of his agency. Plaintiffs contend Nechtman is not controlling because it specified that the three above-named elements must be pleaded in order for a plaintiff relying on a theory of agency to have stated a theory under which he might recover under the former rules of pleading. Despite the posture of Nechtman procedurally, it did roughly define the elements of an agency relationship in Georgia. These elements are perhaps more clearly seen in Ga.Code Ann. § 4 — 101 (1975) which defines agency as follows: “The relation of principal and agent arises whenever one person, expressly or by implication, authorizes another to act for him, or subsequently ratifies the acts of another in his behalf.” Having examined the above cases and the applicable provision of the Georgia Code, the Court must now determine whether, on the record before it, a genuine issue as to a material fact exists with respect to the question of whether defendant AGG was an agent of NAAC who participated or aided in any way in making sales of NAAC notes. In order for AGG to be held to be an agent under section 13, one of the following must fulfill the above definition: (1) AGG’s persuading the Georgia Commissioner of Securities to accept registration of a NAAC Term Note offering in 1971; (2) AGG’s persuading the SEC to discontinue its inquiry into NAAC note sales in 1972; (3) AGG’s threatening SMI with NAAC’s bankruptcy and criminal prosecutions in September 1973; or (4) AGG’s successful move to quash the SEC’s investigative subpoena in January 1974. These four factual allegations are the only ones mentioned by plaintiffs in their Brief in Response to Supplementary Motions of AGG where they argue that AGG was NAAC’s agent regarding note sales and consequently are the only ones the Court will examine here. Construing the facts most favorably for the plaintiffs, the Court cannot conclude that any of the above activities by AGG as general counsel to NAAC can be held to have created the relation whereby NAAC authorized AGG to participate or aid in any way in making sales of NAAC notes. Neither do the above facts demonstrate that NAAC has after-the-fact ratified AGG’s participation or aid in making sales of NAAC notes, an action which would also have created an agency under section 13. To hold an individual to be an agent who has participated or aided in making sales of securities, the Court must find that the individual was so entangled in the actual sale of the security that his activities were at least a substantial factor in the purchaser’s decision to buy the security and that his activities were either authorized by or ratified by the issuer. The activities of AGG listed above do not meet that level of participation; accordingly, the Court GRANTS defendant AGG’s motion for judgment on the pleadings and summary judgment with respect to plaintiff’s claims against AGG under the Georgia Securities Act of 1957. Rule 10b-5. Having dismissed plaintiff’s claims against AGG under sections 12 and 17 of the Securities Act, section 306(a) of the Trust Indenture Act, and under sections 3, 11, and 13 of the Georgia Securities Act, the Court now considers the final remaining claim against AGG which is predicated on section 10 of the Exchange Act and Rule 10b-5 promulgated thereunder. Having confirmed above that a private cause of action arises thereunder, the Court will examine defendant AGG’s motion for summary judgment with respect to section 10. Plaintiff’s joinder of AGG as a defendant to Counts I through IV and VIII of their complaint is based on the following four general factual averments: 1) that AGG “issued opinions” that the Thrift Notes and Term Notes were exempt from the registration provisions of the Securities Act and that the Thrift Notes were exempt from the registration provisions of the Georgia Securities Act, when it knew or should have known that those notes were not so exempt; 2) that AGG “participated in the preparation and promulgation of the advertising used in connection with the sale of the Thrift Notes and Term Notes”, including “approval, disapproval, and direction when it knew or should have known” the advertising was misleading, fraudulent, and deceitful; 3) that AGG “participated and assisted in the preparation of and permitted the use of materially misleading and false prospectuses and other written literature” used in connection with the sale of Thrift Notes and Term Notes, when it knew or should have known such literature was misleading, fraudulent, and deceitful; and 4) that AGG “prepared and approved a trust indenture” agreement between NAAC and First National without having it qualified under the Trust Indenture Act, when it knew or should have known that the indenture agreement was required to be so qualified. Defendant AGG’s motion for summary judgment is based on the legal insufficiency of plaintiff’s contentions with respect to AGG’s acts in light of the facts adduced in discovery and as presented in the affidavit of defendant AGG submitted in support of its motion for summary judgment and annexed exhibits. The Court’s consideration of defendant AGG’s motion for summary judgment begins with an examination of section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. Section 10(b) states: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange— (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. The SEC rule promulgated in conjunction therewith reads: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, (1) to make any untrue statement of a material fact or to omit 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, or (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. The Court will first consider the law as it has developed in several recent cases under these provisions and, in view of the law, examine the facts in the record to determine if material facts remain unresolved. Recently, in Croy v. Campbell, 624 F.2d 709 (5th Cir. 1980), the Fifth Circuit stated the elements of a cause of action under section 10(b) and Rule 10b-5 to be: A misrepresentation or omission or other fraudulent device, the plaintiff’s purchase or sale of securities in connection with the fraudulent device, the maturity of the misrepresentation or omission, the defendant’s scienter in making the misrepresentation or omission, the plaintiff’s justifiable reliance on the device (or due diligence against it), and the plaintiff’s damages resulting from the fraudulent device. Cameron v. Outdoor Resorts of America, Inc., 608 F.2d 187, 193-94 (5th Cir. 1979), aff’d in part, vacated and remanded in part on rehearing, 611 F.2d 105 (5th Cir. 1980), citing Dupuy v. Dupuy, 551 F.2d 1005, 1014 (5th Cir.), cert. denied, 434 U.S. 911, 98 S.Ct. 312, 54 L.Ed.2d 197 (1977); Woodward v. Metro Bank, 522 F.2d 84, 93 (5th Cir. 1975). 624 F.2d at 715. The court in Croy continued: In Ernst & Ernst v. Hochfelder, the Supreme Court defined the requisite state of mind, or scienter, as “a mental state embracing intent to deceive, manipulate, or defraud.” 425 U.S. [185] at 194 n. 12, 96 S.Ct. [1375] at 1381 n. 12, 47 L.Ed.2d [668] at 677 n. 12. The court held that negligence will not suffice for the imposition of liability under 10b-5, but it specifically withheld consideration of whether or not reckless behavior was sufficient. This court has recently made clear what it had intimated in the past: that “[t]o sustain a cause of action under [rule] 10b-5, . .. plaintiffs must show that defendants intentionally or recklessly failed to disclose material information.” Broad v. Rockwell International Corp., 614 F.2d 418, 440 (5th Cir. 1980) (emphasis added). The court also noted, however, that proof of recklessness would require a showing that the defendant’s conduct was an extreme departure from the standards of ordinary care, . .. which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it. 614 F.2d at 440, quoting Sanders v. John Nuveen & Co., Inc., 554 F.2d 790, 793 (7th Cir. 1977). Id. While Croy held, in reliance on Broad v. Rockwell International Corp., 614 F.2d 418 (5th Cir. 1980), that to sustain a cause of action under Rule 10b-5 plaintiffs must show defendants either intentionally or recklessly failed to disclose material information, Croy’s reliance on Broad was improper. The Fifth Circuit noted in Dwoskin v. Rollins, Inc., 634 F.2d 285 (5th Cir. 1981), that the opinion in Broad was vacated under Fifth Circuit Local Rule 17 on June 9, 1980, when the court granted a rehearing en banc. Id. at 290 n. 1. Since Croy was not decided until August 22, 1980, Broad was not authority for its holding. The matter is now settled, however, for in G. A. Thompson & Co., Inc. v. Partridge, 636 F.2d 945 (5th Cir. 1981), the court held that the severe recklessness standard which was implicitly adopted in S.E.C. v. Southwest Coal & Energy Co., 624 F.2d 1312 (5th Cir. 1980), would fulfil the requirement of Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n. 12, 96 S.Ct. 1375, 1381 n. 12, 47 L.Ed.2d 668 (1976), that scienter be present on the part of the defendant before it is held liable under section 10(b) on Rule 10b-5. The court in Partridge stated in support of its additional holding that recklessness suffices to prove a cause of action against a controlling person that had Congress meant to require intentional misdoing in that context it would have done so explicitly. 636 F.2d at 960. Apparently the observation is applicable likewise to the violator of Rule 10b-5. The severe recklessness standard adopted in Partridge is defined as follows: Proof of recklessness would require a showing that the defendant’s conduct was an extreme departure from the standards of ordinary care, ... which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it. Id. at 962, quoting Southwest Coal at 1321 n. 17, and Croy at 715. The task for this Court, therefore, in considering defendant AGG’s motion for summary judgment, if Partridge is controlling, is to determine whether among the allegations noted above factual questions remain as to whether AGG’s conduct was an extreme departure from the standards of ordinary care which presented a danger of misleading buyers of NAAC notes and this danger was either known to AGG or was so obvious that AGG must have been aware of it. While the Fifth Circuit in Partridge has adopted the extreme recklessness standard for actions under Rule 10b-5, it remains unclear whether extreme recklessness constitutes a sufficient degree of culpability to hold an aider and abettor liable under that rule. Even though the Fifth Circuit recognized liability for aiding and abetting another’s violation of Rule 10b-5 in Woodward v. Metro Bank of Dallas, 522 F.2d 84, 94-97 (5th Cir. 1975), the court therein suggested that a more remote party must not only be aware of his role, but he should also know when and to what degree he is furthering the fraud. Id. at 95. The general requirements for holding an individual liable as an aider and abettor under Rule 10b-5 are: (1) some party must have committed a securities law violation; (2) the accused party must have had a general awareness that his role was part of an overall activity that was improper; and (3) the accused aider and abettor must have knowingly and substantially assisted the violation. 522 F.2d at 95; Rolf v. Blyth, Eastman Dillon & Co., 570 F.2d 38, 47-48 (2d Cir. 1978); S.E.C. v. National Student Marketing Corp., 457 F.Supp. 682, 712-13 (D.D.C.1978). These requirements may not be exhaustive in a case where there is an absence of some special relationship between the alleged aider and abettor and the defendant that is fiduciary in nature. Woodward indicated that “the scienter requirement scales upward when activity is more remote,” 522 F.2d at 95, and the Second Circuit squarely held in Edwards & Hanly v. Wells Fargo Securities Clearance Corp., 602 F.2d 478 (2d Cir. 1979), that to find an individual liable for aiding and abetting a violation of 10b-5 requires something closer to an actual intent to aid in a fraud in the absence of a fiduciary duty. Id. at 485. The Fifth Circuit in Partridge failed to address the distinction between a principal violator of 10b-5 and an aider and abettor of such a violation. It has been held that where the aider and abettor has reason to foresee that his actions, misrepresentations, or omissions will be relied upon by third parties recklessness is sufficient to establish scienter. The court in Oleck v. Fisher [1979 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 96,898 (S.D.N.Y. 1979) so held where an accountant had reason to foresee that his audit or opinion letter would be relied upon by purchasers. The same analysis and conclusion is found in Sharp v. Coopers & Lybrand, 457 F.Supp. 879 (E.D.Pa.1978) where the court opines: [0]nce there is a breach of a duty extending to persons beyond those in privity with an accountant, i. e., once there is fraud and not mere failure to exercise reasonable care, “If the certified financial statements [or opinions] are intended to be used and are used, to the knowledge of the accountants, in the sale of securities by the company or someone else to the public, there would seem to be little question that the purchasers are persons entitled to complain of that breach of duty even under Cardozo’s opinion in the Ultramares [Ultramares v. Touche, Niven & Co., 255 N.Y. 170, 174 N.E. 441] case which is discussed in Ernst & Ernst.” R. Jennings & H. Marsh, Securities Regulations: Cases and Materials 1132 (1977). 457 F.Supp. at 888. Finding the rationale of these cases persuasive, the Court holds that knowledge by AGG of third party reliance on the advertisements which it commented upon and knowledge by AGG that due to its advice purchasers of Thrift Notes would receive no prospectus disclosing risks related to their purchases would impose on AGG a duty to the buying public not to violate Rule 10b-5. Consequently, the extreme recklessness standard of Partridge applies to this case since the exception in Woodward with respect to remote parties does not. Plaintiff’s Rule 10b-5 Allegations. Plaintiff’s first allegation under Rule 10b-5 is that AGG issued opinions that NAAC Thrift and Term Notes were exempt from the registration provisions of the Securities Act and that the Thrift Notes were exempt from the registration provisions of the Georgia Securities Act, when it knew or should have known that those notes were not so exempt. The plaintiffs contend the facts to be as follows. AGG’s initial opinion letter on the availability of the intrastate exemption of section 3(a)(ll) of the Securities Act for NAAC Term Notes was issued to FNB, the proposed indenture trustee, in August 1971. The opinion contained no supporting legal rationale or factual data whatever. AGG allegedly performed no rigorous analysis of NAAC’s business at that time to determine whether NAAC was in fact an intrastate operation. The next opinion letter was issued in December 1972. The opinion was encompassed in one paragraph and stated: “we do not believe that the transactions outlined in the Touche Ross & Co. letter would themselves constitute any change in the availability or lack of availability of such exemption.” The Touche Ross letter referred to was one by a Touche Ross auditor to NAAC’s president seeking an opinion from NAAC’s lawyers as to whether the upstreaming of $27,000,000 from NAAC to its new parent, O-A, had so changed NAAC’s financial stability as to make it necessary to make an offer of rescission to Term Note purchasers. It was in its negative response to that specific question that NAAC reiterated its position on the availability of the intrastate exemption. In January 1973, Touche Ross requested a thorough opinion letter concerning the exemption. Plaintiffs allege that in response to this request AGG sought out law and facts to sustain their two previous letters’ conclusions in such a way as to preclude an objective determination with respect to the availability of the exemption. The result was the AGG lawyers settled on using an “operating-income” test which allowed the conclusion that NAAC met the “doing business” in Georgia requirement found in section 3(a)(ll) of the Securities Act. Plaintiffs contend that by looking to sources of NAAC funds, principally NAAC notes sold in Georgia, and not to other factors arguably recognized as legally pertinent, AGG acted with sufficient recklessness or intent to be liable to plaintiffs under Rule 10b-5. Plaintiffs point to the initial facts gathered by NAAC’s in-house counsel, Hugh Brock, and later by other AGG attorneys, to show facts which militate against the availability of the exemption and which were known to AGG when they allegedly decided to adopt an “operating-income” test. These include the following: Seventy-four percent (74%) of NAAC’s assets were outside Georgia; Nineteen (19) of NAAC’s twenty-six offices were out-of-state; three of NAAC’s four directors were out-of-state; NAAC made 51.6% of its direct loans out-of-state, and of home improvement loans 76.5% were made outside Georgia; all land loans were out-of-state; of all paper owned by NAAC, only 7.8% related to Georgia property; of all operating assets, only 10.4% were in Georgia. Alleging that AGG’s principal NAAC attorney found the above facts unacceptable since they would indicate a failure to meet the “doing business” requirement noted above, plaintiffs contend that the attorney created the “operating income” criteria and decided that income derived from out-of-state receivables purchased in bulk was Georgia income. Plaintiffs argue that decision allowed AGG to discount the fact that 76% of NAAC’s assets were located outside Georgia and that its principal customer for receivables was SMI, a New York real estate investment trust. The “operating income” test likewise excluded from consideration the $27,000,000 of NAAC cash which was upstreamed to O-A, which was a Delaware corporation headquartered in Texas. In considering defendant AGG’s motion for summary judgment with respect to plaintiffs’ Rule 10b-5 claims grounded in the above-discussed opinion letters the Court, guided by the standard of reasonableness, must view the evidence, and draw all permissible inferences from that evidence, most favorable to plaintiffs. Pharo v. Smith, 621 F.2d 656, 664 (5th Cir. 1980); Keiser v. Coliseum Properties, Inc., 614 F.2d 406 (5th Cir. 1980). In order to determine whether the plaintiffs could never be entitled to recovery under the factual scheme they have presented and thus whether defendant’s motion should be granted, the court must examine the legal sufficiency of AGG’s “operating income” test. Defendant AGG argues that as of January 1973, only three cases addressing the doing business requirement of the intrastate exemption had been reported. These were S.E.C. v. Truckee Showboat, Inc., 157 F.Supp. 824 (S.D.Cal.1957); Chapman v. Dunn, 414 F.2d 153 (6th Cir. 1969); and S.E.C. v. McDonald Investment Co., 343 F.Supp. 343 (D.Minn.1972). In addition, the SEC had issued a number of releases concerning the intrastate exemption, of which only the last two, Securities Act Release Nos. 4434 and 5349, 26 Fed.Reg. 11896 (Dec. 6,1961) and 38 Fed.Reg. 2468 (Jan. 8,1973), respectively, were relevant to the “doing business” requirement of the intrastate exemption. The issuer in Truckee Showboat was a California corporation that kept its books and records in California, which likewise was the state of residence of all of the corporate officers and directors. The corporation made an offer to sell stock solely to California residents through an advertisement placed in the Los Angeles Times. The proceeds of the sales of securities were to be used to acquire, refurbish and operate the El Cortez Hotel in Las Vegas, Nevada. In a short conclusion of law containing no analysis whatsoever the court held that under these facts the intrastate exemption was not available to the issuer. 157 F.Supp. at 825. The determinative factor in this decision must have been the proposed out-of-state use of proceeds, as that factor was the only one not involving the state of California. The next word on the meaning of section 3(a)(ll)’s “doing business” requirement came in 1961 in S.E.C. Release No. 4434. That release stated that the intrastate exemption was designed to apply only to local financing that may practically be consummated in its entirety within the state in which the issuer is both incorporated and doing business. The doing business requirement, the release stated, is satisfied by the performance of substantial operational activities in the state of incorporation, but is not met by functions such as bookkeeping, stock record and similar activities or by offering securities in the state. Chapman, decided in 1969, concluded that an issuer who maintained an office and staff in its state of incorporation but offered and sold fractional undivided interests in oil and gas leases on income producing property located outside the state failed to meet the “doing business” requirement since an issuer must conduct a predominant amount of his business within the state of incorporation. 414 F.2d at 159. The crux of the court’s holding was that the business which the issuer must conduct within the state of incorporation refers to the income producing operations of the business in which the issuer is selling the securities. Id. In addition to Truckee Showboat, Release No. 4434, and Chapman, AGG argues that it relied on S.E.C. v. McDonald Investment Co., 343 F.Supp. 343 (D.Minn.1972), in preparing its opinion letters. In McDonald Investment, the issuer, a Minnesota corporation, sold general unsecured debt obligations consisting of installment promissory notes, the proceeds from the sale of which were to be used principally, if not entirely, to make loans to land developers outside of Minnesota. The court found that the issuance did not meet the doing business requirement of section 3(a)(ll) because of the out-of-state use of proceeds of the note sales. Finally, S.E.C. Release No. 5349, issued in January 1973, proposed the adoption of Rule 147, under which the principal office of the issuer was acquired to be within the state of incorporation and 90% of the proceeds from the intrastate offering were required to be used within the state of incorporation. In addition, Proposed Rule 147 provided that the “doing business” test would be met when at least 80% of the issuer’s gross revenues and those of its subsidiaries on a consolidated basis were derived from the operation of a business or property located in or rendering services within the state; and it was to be required under the proposed rule that at least 80% of the issuer’s assets be located within such state. The legal tests extant at the time AGG drew its January 1973 opinion letter as evidenced in the above cases and S.E.C. Releases on which AGG relied provided four tests by which a court could measure an issuer’s reliance on section 3(a)(ll). These included (1) use of proceeds; (2) a mixture of (a) center of operational activities; (b) conduct of a predominant amount of business; and (c) operations producing income; (3) source of gross revenues; and (4) location of issuer’s assets. While AGG argues the tests should be labeled (1) operational activities; (2) operating assets; (3) use of proceeds; and (4) operating income tests, the Court finds better labels to be as first listed above if support is to be found in the cases and S.E.C. Releases for these tests. AGG argues that as a matter of law its determination that NAAC was entitled to the intrastate exemption on the basis of its application of the facts surrounding NAAC’s business to the tests' listed above was neither reckless nor intentional and therefore cannot lead to any liability under Rule 10b-5. Because of-the alleged facts noted above, among them that over 70% of NAAC’s assets were outside Georgia, that a large percentage of NAAC’s loans were made out-of-state, and that AGG excluded consideration of both the $27,000,000 NAAC loaned to 0-A and SMI’s purchases of receivables held by NAAC, the Court is unable to conclude as a matter of law on this record that AGG’s opinion letters were not recklessly or intentionally erroneously rendered as a matter of law; neither is the Court able to conclude as a matter of law on the present record that AGG did not construct its legal tests to accommodate the facts it deemed material. Either could have misled and defrauded plaintiff purchasers if they would not have made their purchases following a full disclosure of NAAC’s finances as would have occurred under the federal registration. Accordingly, defendant AGG’s motion for summary judgment based on the opinion letters it rendered is DENIED. The second factual averment on which plaintiffs rely and which has evoked a motion for summary judgment under Rule 10b-5 by defendant AGG is that AGG “participated in the preparation and promulgation of the advertising used in connection with the sale of the Thrift Notes and Term Notes”, including “approval, disapproval, and direction as to the content of said advertising when it knew or should have known” the advertising was misleading, fraudulent, and deceitful. While the allegations above could be found to allege both primary and secondary violations of Rule 10b-5, plaintiffs, in their brief in opposition to defendant AGG’s motion, have confined their argument to one which place