Full opinion text
LIPEZ, Circuit Judge. In this enforcement action brought by the Securities and Exchange Commission (“SEC” or “the Commission”), the Commission seeks to hold defendants James R. Tambone and Robert Hussey, executives of Columbia Funds Distributor, Inc., the primary underwriter for the Columbia family of mutual funds, responsible both as primary violators of the federal securities laws and as aiders and abettors of uncharged primary violations of Columbia Advisors and/or Columbia Distributor. After carefully reviewing the relevant statutes and precedents, we conclude that Tambone and Hussey may be held primarily liable for using false or misleading fund prospectuses to sell mutual fund shares under Section 17(a)(2) of the Securities Act of 1933 (“section 17(a)(2)”) and Section 10(b) of the Exchange Act of 1934 (“section 10(b)”), and its implementing regulation, Rule 10b-5. Additionally, we conclude that the scope of conduct encompassed by section 17(a)(2)’s prohibition on obtaining money or property “by means of’ any untrue statement of material fact may, in certain circumstances, be broader than Rule 10b-5(b)’s prohibition against “making” an untrue statement. Here, however, we conclude that the SEC’s second complaint alleges with sufficient particularity violations of both prohibitions by Tambone and Hussey, as well as aiding and abetting violations. We therefore reverse the district court’s judgment dismissing the SEC’s complaint against Tambone and Hussey. I. A. The Roles of the Defendants The following description of the alleged conduct, drawn primarily from the SEC’s second complaint, is presented in the light most favorable to the plaintiff. Miss. Pub. Employees’ Ret. Sys. v. Boston Scientific Corp., 523 F.3d 75, 85 (1st Cir.2008). During the relevant time period, defendants Tambone and Hussey were senior executives of Columbia Funds Distributor, Inc. (“Columbia Distributor”), a broker-dealer registered with the SEC since 1992. Between 1998 and 2003, the company was the principal underwriter and distributor for a group of approximately 140 mutual funds (“the Columbia Funds”) and, in that capacity, was primarily responsible for selling those securities and disseminating informational materials on the funds, including prospectuses, to investors and potential investors. See 15 U.S.C. § 80a-2(a)(40) (describing the duties of an underwriter to include purchasing securities from an issuer for resale, or selling securities for an issuer). Columbia Distributor was also responsible for answering inquiries from the investing public and other entities seeking additional information about any of the Columbia Funds. Columbia Distributor and the issuer of the funds, Columbia Advisors, a registered investment adviser, were both wholly-owned subsidiaries of Columbia Management Group, Inc. and indirect subsidiaries of FleetBoston Financial Corporation. As issuer and sponsor, Columbia Advis-ors was primarily responsible for creating the content of the prospectuses for the Columbia Funds. See 15 U.S.C. § 80b-2(a)(ll) (defining an investment adviser as “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities”). Columbia Fund Services, Inc. (“Columbia Services”), also a subsidiary of Columbia Management Group, was responsible for determining whether “market timing” activities were occurring in the Columbia funds and responding to such activity. Market timing refers to the practice of buying and selling mutual funds in rapid succession to exploit short-term inefficiencies in the pricing of the funds. Among the specific Columbia Funds pertinent to this case were the Acorn Fund Group, the Newport Tiger Fund, the Columbia Growth Stock Fund, and several others. Beginning in 1997, Tambone, a registered securities principal, was employed as Co-President of Liberty Distributor, and later Columbia Distributor, where he was one of the executives responsible for managing all of Columbia Distributor’s activities, including the fulfillment of its obligations as underwriter of the Columbia Funds. These duties included the sale and marketing of the Columbia Funds and the dissemination to investors of the fund prospectuses and other materials. As Co-President, Tambone was at times involved in the process of revising the prospectuses, although the SEC does not allege that he was responsible for drafting them. Hussey served as Senior Vice President of the Alliance Group at Liberty Distributor from 1998 until 2000, where he was responsible for selling funds to investment advisers and others for the benefit of their clients. In 2000, he became Liberty Distributor’s Managing Director for National Accounts. In that capacity, he managed the sale of the funds to broker-dealers and other entities. Hussey held the same position, with substantially similar responsibilities, at Columbia Distributor from January 2002 until March 2004. Throughout this period, Hussey reported directly to Tam-bone. Both Tambone and Hussey thus played substantial and direct roles in the sale and distribution of securities, and, according to the complaint, more than half of the total compensation that defendants received each year consisted of commissions from fund sales. B. The Nature of the Alleged Wrongdoing Between 1998 and 2003, various Columbia Funds adopted disclosure statements in their mutual fund prospectuses addressing market timing practices engaged in by fund investors. The market timing practice of rapidly shuffling an investment into and out of certain targeted funds is known as engaging in “round-trips.” Although potentially beneficial to an individual investor, and not per se illegal, round-trips and other market timing practices can adversely affect mutual fund shareholders because the profits obtained from market timing practices dilute the value of shares in the fund held by long-term shareholders. Further, round-trips increase a fund’s trading costs (which are borne by all shareholders), and may cause the mutual fund to realize capital gains at inopportune times. To prevent such practices, language was inserted into many of the Columbia Fund prospectuses limiting the number of round-trips — specifically, an exchange from one fund to another and then back again- — -a shareholder could engage in during a given period. As market timing practices became more prevalent, Columbia took additional steps to prevent such behavior. In May 1999, certain of the prospectuses for the funds belonging to the Acorn Fund Group began representing that “[t]he Acorn funds do not permit market timing and have adopted policies to discourage this practice.” Consistent with the goal of limiting market timing behavior, Hussey, in 2000, co-led a working group that recommended that all of the Columbia Funds adopt a consistent position against such practices in their prospectuses. The complaint states, based on information and belief, that in April and May 2000, Hussey and Tambone each reviewed drafts of the market timing representations to be included in the prospectuses and offered comments via e-mail to the in-house counsel for Columbia Advisors. Months later, a number of the Columbia Funds revised their prospectuses to include a statement prohibiting market timing (the “Strict Prohibition”). By the spring of 2001, the remaining Columbia Funds belonging to Liberty had also adopted the Strict Prohibition language in their prospectuses. That language remained in these funds’ prospectuses until at least 2003, and was later added to prospectuses for funds previously owned by Fleet before the acquisition. The SEC alleges that, concurrent with these amendments, defendants affirmatively approved or knowingly allowed frequent trading in particular mutual funds in violation of the Strict Prohibition disclosures contained in their prospectuses. The Commission’s second complaint details six arrangements that Tambone approved or knowingly allowed and seven arrangements that Hussey approved or knowingly allowed, most, but not all of which, overlapped. We describe the alleged arrangements, none of which were disclosed to the investors or the independent trustees of the Columbia Funds. (1) Hussey and Tambone approved an arrangement allowing Ilytat, L.P. to engage in frequent and short-term trading in Newport Tiger Fund, a Columbia mutual fund. According to the arrangement, Ily-tat would place $20 million in the Newport Tiger Fund, with two-thirds remaining static and one-third being actively traded. Tambone approved or became aware of the arrangement by October 2000, when the portfolio manager for the Newport Tiger Fund, who had initially approved the arrangement, communicated to both Tam-bone and Hussey his concern about Ilytat’s market timing practices and the potential harm it could have on the fund and its investors. With Hussey’s approval, Ilytat was added to Columbia Services’ list of “Authorized Accounts for Frequent Trading,” and Hussey, in 2002, reversed a stop placed on Ilytat’s trading by Columbia Services market timing surveillance personnel. In total, between April 2000 and October 2002, Ilytat made 350 round-trips in seven international Columbia Funds, including the Newport Tiger Fund and the Acorn International Fund. At least 30 of the round-trips in the Newport Tiger Fund were made during the period from May 2001 through September 2002 when the fund prospectus contained the Strict Prohibition representation. Moreover, despite language in the prospectus for the Acorn International Fund between September 1998 and September 2000 preventing investors from engaging in more than four round-trips per year, Ilytat engaged in 27 such round-trips in 1999 and 18 in 2000. Ilytat also engaged in at least 20 round-trips in the fund between July 2000 and June 2001, when the fund prospectus included the Strict Prohibition language. (2)From January 2000 through September 2003, Ritchie Capital Management, Inc. traded frequently in a number of Columbia Funds, including the Newport Tiger Fund and the Columbia Growth Stock Fund. In late 2001, Hussey became aware of Ritchie’s short-term trading activities in the two Columbia Funds. In early 2003, Ritchie Capital Management, Inc. entered into an arrangement with Columbia Distributor, approved by Tambone and Hus-sey, designating certain of Ritchie’s investments as “sticky assets,” or long-term assets, and others as available for short-term trading. (3) In late 2002 or early 2003, Edward Stern entered into two separate agreements with Columbia Distributor through intermediaries. One arrangement, secured by Epic Advisors on behalf of Stern’s Canary Investment Management firm, and approved by Tambone, allowed Stern entities to make three round-trips per month in each of three Columbia funds. Each fund’s prospectus contained the Strict Prohibition language. The second agreement involved the placement of $5 million in the Columbia High Yield Fund, whose prospectus also contained the Strict Prohibition disclosure. That arrangement, approved by the fund’s portfolio manager, permitted Stern to make one round-trip each month. (4) In 1999, Daniel Calugar was allowed to place up to $50 million in the Columbia Young Investor Fund and the Columbia Growth Stock Fund, with permission to make one round-trip per month with the entire amount. In 2000, knowing that Ca-lugar was trading at levels exceeding their arrangement, Hussey expressed concern that Calugar’s activities were harming the funds, but took no action to limit the trading activities. Tambone was apprised by Hussey of Calugar’s activities, but also took no action. Calugar continued the short-term trading activities until at least August 2001, several months after the funds at issue adopted the Strict Prohibition language in their prospectuses. (5) Tambone approved a “sticky asset” arrangement between Columbia Distributor and broker Sal Giacalone in late 2000. Per the terms of the arrangement, Giacal-one was allowed to make four round-trips per month of up to $15 million in the Newport Tiger Fund so long as he also placed $5 million in the long-term assets of the Acorn Fund. Between November 2000 and April 2001, Giacalone made a total of 43 round-trips in the Newport Tiger Fund pursuant to the arrangement. (6) Hussey approved an arrangement with D.R. Loeser in late 1998 allowing Loeser to make five round-trips per month of up to $8 million in the Columbia Growth Stock Fund. In the first five months of 2000, Loeser made approximately 20 round-trips in the Growth Stock Fund and another 20 round-trips in the Young Investor Fund. Despite knowledge by Tambone and Hussey of Loeser’s trading practices, neither took action to halt the trading activities. (7) Signalert entered into an arrangement with Columbia Distributor in 1999, approved by Hussey, in which it agreed to invest $7.5 million in the Growth Stock Fund and $7.5 million in the Young Investor Fund in exchange for permission to engage in 10 round-trips annually in each of the funds. Pursuant to the arrangement, Signalert was also required to place $5 million in each of six other funds, which could be traded just once each quarter. During 2000-2001, Signalert made over 50 round-trips in the Growth Stock Fund and approximately 50 round-trips in the Young Investor Fund. These included 20 round-trips in the Young Investor Fund between February and August 2001, after the fund’s prospectus had been amended to include the Strict Prohibition language. (8)In early 2000, Columbia Distributor agreed to allow Tandem Financial to make an unlimited number of trades in one or more of the Columbia Funds. During the period from April 2001 through September 2003, Tandem made 106 round-trips in the Columbia Tax Exempt Fund, despite the Strict Prohibition disclosure in the fund prospectus. Hussey and one of Tambone’s subordinates became aware of Tandem’s activities in early 2003. The complaint alleged that Columbia Advisors, itself or through portfolio managers for the separate funds, knew or approved of all of the market timing arrangements, except the arrangement with Tandem. In total, during the approximately five-year period from 1998 to 2003, hundreds of round-trips were executed in the Columbia Funds in amounts approaching $2.5 billion. Meanwhile, in his position as Managing Director for National Accounts, Hussey also helped lead a task force established to develop procedures for detecting and preventing market timing activities in the Columbia Funds. Hussey was the designated contact for inquiries about market timing, including what actions, if any, should be taken if such activity was detected. In this capacity, he participated in the creation of a list of “Accounts Approved for Frequent Trading.” According to the second complaint, both Hussey and Tambone, on multiple occasions, blocked or allowed their subordinates to block efforts to halt the trading activity of preferred customers. In addition to overseeing the distribution of prospectuses, Tambone, on behalf of Columbia Distributor, signed hundreds of selling agreements for Columbia Funds during this period. Each selling agreement stated the procedures by which the customer would purchase shares of the Columbia Funds from Columbia Distributor and contained express representations and warranties related to the content of the prospectuses. Tambone referred the purchaser to the fund prospectuses for information on the fund and specifically stated in each agreement that “[w]e shall furnish prospectuses and sales literature upon request.” The SEC learned of the alleged conduct of defendants and the various Columbia entities during the course of its investigation of market timing practices of many fund companies. See Gretchen Morgenson & Landon Thomas, Jr., S.E.C. Finding Fund Abuses, Official Says, N.Y. Times, Oct. 25, 2003, at Cl (“[A]fter sending out 88 letters to mutual fund companies and brokerage firms, [the SEC] found that half ... had arrangements with one or more investors allowing them to trade in and out of shares. These arrangements occurred even though about half of the fund companies have policies specifically barring market timing, the official said.”). Prior to filing its initial complaint in this case, the Commission obtained extensive discovery from Columbia, reviewing hundreds of thousands of pages in documents and taking the sworn testimony of Mr. Hussey and over 20 other witnesses. C. Procedural History The SEC filed a complaint against defendants Tambone and Hussey in February 2005 alleging securities fraud based on the above allegations. The complaint alleged that defendants committed primary acts of fraud in violation of section 10(b) of the Securities Exchange Act, Rule 10b-5, and section 17(a)(2) of the Securities Act. It also alleged that defendants aided and abetted primary violations committed by Columbia Advisors and Columbia Distributor in violation of section 206 of the Advisers Act, and primary violations committed by Columbia Distributor in violation of section 15(c)(1) of the Exchange Act. The complaint sought three remedies: (1) a permanent injunction to restrain Tambone and Hussey from further violating, either directly or indirectly, the statutory provisions implicated in this case; (2) disgorgement and pre-judgment interest; and (3) unspecified civil penalties. See 15 U.S.C. §§ 77t(d), 78u(d)(3), and 80b-9(e). The defendants moved to dismiss the complaint for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b) and for failure to state a claim upon which relief could be granted under Rule 12(b)(6). The district court granted the motions without prejudice on January 27, 2006. On March 16, 2006, the SEC moved for leave to amend the original complaint. Before that motion was resolved, the SEC moved for relief from judgment pursuant to Fed.R.Civ.P. 60(b), having realized that a motion for leave to amend cannot be considered after a case has been dismissed. The district court denied both motions on May 5, 2006. On May 19, 2006, the SEC filed a second complaint which sought the same remedies but raised an additional aiding and abetting offense and offered supplemental factual allegations to support all of the claimed violations. As characterized by the district court, the Commission’s second complaint contained 110 paragraphs nearly identical to those in the initial complaint, and twelve additional paragraphs alleging new facts. The additional paragraphs state generally that both defendants participated in the review and oversight processes related to market timing issues for the Columbia Funds, and specifically allege that defendants were responsible for misrepresentations on market timing in the fund prospectuses. Despite these additions, the district court again dismissed the Commission’s claims on December 29, 2006, this time with prejudice. Addressing the question of primary liability, the court applied an attribution test. That is, the court stated that to be liable under “Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act, a defendant must have personally made either an allegedly untrue statement or a material omission.” Despite the SEC’s allegations that defendants had participated in working groups and task forces that led to the revision of the market timing statements in the false and misleading prospectuses, and then used those prospectuses to sell the mutual funds, the court concluded that “[t]he major flaw with the SEC’s complaint was then, and continues to be, a failure to attribute misleading statements to either Tambone or Hussey.” According to the district court, neither the defendants’ roles in disseminating the allegedly misleading prospectuses nor their participation in the process of revising the disclosures was sufficient to satisfy the provisions’ attribution requirement. The court also found other deficiencies in the SEC’s complaint. First, the court ruled that the SEC had failed to satisfy the pleading particularity requirements imposed by Fed.R.Civ.P. 9(b), noting that “[t]he new paragraphs fail [] to identify the substance of the comments made by either Tambone or Hussey ... and ... fail to allege that any of the language reviewed or proposed by either defendant was ever actually incorporated into the fall 2001 prospectus.” Second, the court rejected the Commission’s allegation that Tambone and Hussey owed a duty to the investors to whom they sold the funds. It wrote: “[A]n individual owes a duty to clarify a misleading statement only if that statement is attributable to the individual.” Without any statement attributable to them, the defendants could not be held liable for misleading statements or omissions in the prospectuses, nor for failing to correct the false prospectuses. Finally, the court dismissed the SEC’s aiding and abetting allegations, finding that the “SEC had not sufficiently alleged that the defendants consciously threw in their lot with the primary violators.” The SEC challenges these conclusions of the district court on appeal. II. We review the district court’s grant of a motion to dismiss de novo. Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir.2007). Although Fed.R.Civ.P. 8(a)(2) requires only “a short and plain statement of the claim” sufficient to give the defendant fair notice of the claim and its factual basis, see Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), the “plain statement” must “possess enough heft to ‘sho[w] that the pleader is entitled to relief.’ ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1966, 167 L.Ed.2d 929 (2007) (quoting Fed. R.Civ.P. 8(a)(2)). A plaintiffs task “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Id. at 1965, 127 S.Ct. 1955; see also Rodriguez-Ortiz, 490 F.3d at 95. When reviewing a ruling on a motion to dismiss under Rule 12(b)(6), we accept all well-pleaded facts as true and draw all reasonable inferences in favor of the plaintiff. ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d 46, 58 (1st Cir.2008). We are not limited to the district court’s reasoning, but “may affirm an order of dismissal on any basis made apparent by the record.” Ramos-Pinero v. Puerto Rico, 453 F.3d 48, 51 (1st Cir.2006). The SEC must also satisfy the heightened pleading standard set by Fed. R.Civ.P. 9(b) for allegations of fraud. The heightened standard applies both where fraud is an essential element of the claim, as in the Commission’s claims under section 10(b), and where the plaintiff alleges fraud even though it is not a statutory element of the offense, as in the SEC’s claims under section 17(a)(2). Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1223 (1st Cir.1996) (“It is the allegation of fraud, not the ‘title’ of the claim that brings the policy concerns [underlying Rule 9(b) ] ... to the forefront.” (quoting Haft v. Eastland Fin. Corp., 755 F.Supp. 1123, 1133 (D.R.I.1991))); see also ACA Fin., 512 F.3d at 68. Rule 9(b) mandates that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Fed.R.Civ.P. 9(b). “Malice, intent, knowledge, and other condition of mind of a person may be averred generally.” Id. To satisfy the particularity element, we require that the Commission’s complaint include the “time, place, and content of the alleged misrepresentation with specificity.” Greebel v. FTP Software, Inc., 194 F.3d 185, 193 (1st Cir.1999). Further, “[w]here allegations of fraud are explicitly or ... implicitly! ] based only on information and belief, the complaint must set forth the source of the information and the reasons for the belief.” Romani v. Shearson, Lehman, Hutton, 929 F.2d 875, 878 (1st Cir. 1991). To establish scienter, we ordinarily require that a plaintiff allege sufficient facts to give rise to a “strong inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u — 4(b)(2); see also ACA Fin., 512 F.3d at 58-59. We developed this heightened standard in the context of private securities actions “to minimize the chance ‘that a plaintiff with a largely groundless claim will bring a suit and conduct extensive discovery in the hopes of obtaining an increased settlement, rather than in the hopes that the process will reveal relevant evidence,’ ” Shaw, 82 F.3d at 1223 (quoting Romani, 929 F.2d at 878), and it was largely codified by Congress in the Private Securities Law Reform Act of 1995 (“PSLRA”). See ACA Fin., 512 F.3d at 58 n. 7 (noting that our prior application of Fed.R.Civ.P. 9(b) to allegations of scienter in private securities fraud actions is consistent with the standard imposed by the PSLRA); Greebel, 194 F.3d at 193 (“The PSLRA’s pleading standard is congruent and consistent with the pre-existing standards of this circuit.”). Here, however, we are evaluating a securities complaint filed by the SEC, not a private actor. Therefore, on its face, the requirements of the PSLRA do not apply. Additionally, the rationales we set forth for a more demanding standard in private securities actions do not apply to this SEC enforcement action. Whereas private parties have a financial incentive to initiate “strike” suits and drag deep-pocketed defendants into court on allegations of fraud in hopes of obtaining a lucrative settlement, the SEC’s statutory task is to protect the investing public by policing the securities markets and preventing fraud. Moreover, as noted above, the SEC possesses the authority to investigate conduct prior to filing a complaint, thereby minimizing the concerns that may result from a lengthy and intense discovery process. See 15 U.S.C. § 78u(a)(1); cf. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 80-81, 126 S.Ct. 1503, 164 L.Ed.2d 179 (2006) (noting that the standard for establishing a claim under section 10(b) is higher in the context of a private suit than in an SEC enforcement action because courts are rightly concerned with limiting the “vexatiousness” associated with private Rule 10b-5 suits). Therefore, the additional scrutiny applied to allegations of scienter in private securities fraud complaints is unwarranted in this case. See, e.g., SEC v. Lucent Techs., Inc., 363 F.Supp.2d 708, 717 (D.N.J.2005) (“[T]he heightened requirements for pleading scienter under the PSLRA do not apply to actions brought by the SEC.”); U.S. SEC v. ICN Pharm., Inc., 84 F.Supp.2d 1097, 1099 (C.D.Cal.2000) (“[T]he ‘more rigorous’ pleading requirements under the PSLRA, which go beyond the Rule 9(b) requirements only apply to private securities fraud actions; they do not apply to a case ... brought by the SEC.”). Of course, the ordinary scienter requirements of Rule 9(b) apply. The SEC need only allege scienter generally. Fed.R.Civ.P. 9(b). Although we decline to apply the “strong inference” requirement of the PSLRA, we rely on the method elucidated recently by the Supreme Court to assess whether scienter has been adequately alleged. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308,--, 127 S.Ct. 2499, 2509, 168 L.Ed.2d 179 (2007). Accordingly, we evaluate “the complaint in its entirety” to determine “whether all of the facts alleged, taken collectively” meet the scienter standard. Id. Further, we conduct a fact-specific inquiry that considers the circumstances and allegations of the particular case, rather than relying on a generalized pattern of facts as evidence of motive and opportunity. Greebel, 194 F.3d at 196 (“The categorization of patterns of facts as acceptable or unacceptable to prove scienter or to prove fraud has never been the approach this circuit has taken to securities fraud.”); In re Cabletron Sys., Inc., 311 F.3d 11, 32 (1st Cir.2002) (“Each securities fraud complaint must be analyzed on its own facts; there is no one-size-fits-all template.”). III. A. Statutory Background We begin our analysis of the SEC’s claims with the text, history, and purpose of the provisions at issue. See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 197, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976) (“[t]he starting point in every case involving construction of a statute is the language itself.” (quoting Blue Chip Stamps v. Manor Drag Stores, 421 U.S. 723, 756, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975) (Powell, J., concurring))). The Securities Act of 1933 and the Exchange Act of 1934 were enacted to “set the economy on the road to recovery” after the 1929 stock market crash and reports of widespread fraud and abuse in the securities industry. United States v. Naftalin, 441 U.S. 768, 775, 99 S.Ct. 2077, 60 L.Ed.2d 624 (1979); see also Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N. A, 511 U.S. 164, 170-71, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994). Together, the acts promote this goal by prohibiting fraud through a scheme of civil and criminal liability and “substituting] a philosophy of full disclosure for the philosophy of caveat emptor.” SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963). Although the Securities Act was primarily concerned with the regulation of new offerings and the Exchange Act with post-distribution trading, section 17(a) of the Securities Act “was meant as a major departure” from the scope of the rest of that statute, and was “intended to cover any fraudulent scheme in an offer or sale of securities, whether in the course of an initial distribution or in the course of ordinary market trading.” Naftalin, 441 U.S. at 777-78, 99 S.Ct. 2077; see also Central Bank, 511 U.S. at 171, 114 S.Ct. 1439. The text of the statutes confirms their common purpose to prohibit a wide swath of fraudulent behavior that Congress believed impeded the smooth and honest functioning of the securities markets. See Naftalin, 441 U.S. at 775-78, 99 S.Ct. 2077; Ernst & Ernst, 425 U.S. at 194, 96 S.Ct. 1375. Section 17(a) was designed to address the most egregious abuses of securities sellers by authorizing the SEC to punish violators through injunctive relief or criminal liability rather than by means of private causes of action. See, e.g., SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 867 (2d Cir.1968) (Friendly, J., concurring) (“[T]here is unanimity ... that § 17(a)(2) of the 1933 Act — indeed the whole of § 17 — was intended only to afford a basis for injunctive relief and, on a proper showing, for criminal liability .... ”); see also David S. Ruder, Civil Liability under Rule 10b-5: Judicial Revision of Legislative Intent?, 57 Nw.U. L.Rev. 627, 656 (1963) (referencing the statute’s legislative history). Section 17(a) states: It shall be unlawful for any person in the offer or sale of any securities ... by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly (1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. 15 U.S.C. § 77q(a). Section 10(b) of the 1934 Act performs a similar catch-all function and also extends coverage beyond securities sellers. See Texas Gulf Sulphur, 401 F.2d at 859-60. Section 10(b) states: It shall be unlawful for any person, directly or indirectly.... (b) To use or employ, in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b). “Section 10(b) of the Exchange Act bars conduct involving manipulation or deception, manipulation being practices ... that are intended to mislead investors by artificially affecting market activity, and deception being misrepresentation, or nondisclosure intended to deceive.” Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir.2000) (quotation marks and citation omitted). By its literal terms, section 10(b) applies to conduct in violation of rules and regulations issued by the SEC. Its prohibitions were given effect almost a decade after its enactment with the SEC’s adoption of Rule 10b-5, among other rules. The Rule largely mimics the language of section 17(a) while applying to both the sale and purchase of any security: It shall be unlawful for any person, directly or indirectly ... (a) To employ any device, scheme, or artifice to defraud, (b) 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 (c) 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. 17 C.F.R. § 240.10b-5. The rule “encompasses only conduct already prohibited by § 10(b).” Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., — U.S.-, 128 S.Ct. 761, 768, 169 L.Ed.2d 627 (2008); see United States v. O’Hagan, 521 U.S. 642, 651, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997). Because of its broad scope and its availability to private plaintiffs, Rule 10b-5 “is the most commonly used basis for private suits charging fraud in connection with the purchase or sale of securities.” See 3 Thomas Lee Hazen, Treatise on the Law of Securities Regulation § 12.4[1] (5th ed.2005); see also Ernst & Ernst, 425 U.S. at 196, 96 S.Ct. 1375 (“During the 30-year period since a private cause of action was first implied under § 10(b) and Rule 10b-5, a substantial body of case law and commentary has developed as to its elements.”) (footnote omitted). Although the text of section 17(a) is nearly identical to the text of Rule 10b-5, as indeed section 17(a) served as the guide for Rule 10b-5, there are several key distinctions between the provisions. See generally 3 Hazen, supra, § 12.22; see also 15 U.S.C. § 77q; 17 C.F.R. § 240.10b-5. First, whereas section 17(a) applies only to brokers and dealers selling or offering to sell securities, Rule 10b-5 explicitly covers “any person” who commits a fraudulent act “in connection with the purchase or sale of any security.” See Exchange Act Release No. 3230, 7 Fed.Reg. 3804 (May 21, 1942) (Rule 10b-5 was intended to “close[ ] a loophole in the protections against fraud administered by the Commission by prohibiting individuals or companies from buying securities if they engage in fraud in their purchase.”) (emphasis added); see also 3 Hazen, supra, § 12.22. Moreover, section 10(b) and Rule 10b-5 reach only conduct that “coincides” with a securities transaction — a sale or purchase, see Merrill Lynch, 547 U.S. at 85,126 S.Ct. 1503— and not a fraudulent offer alone. In contrast, because section 17(a) applies to both sales and offers to sell securities, the SEC need not base its claim of liability on any completed transaction at all. See Blue Chip Stamps, 421 U.S. at 733-34, 95 S.Ct. 1917 (contrasting the text of section 10(b) with that of section 17(a)); Naftalin, 441 U.S. at 773, 99 S.Ct. 2077 (explaining that the statutory terms “offer” and “sale” are “expansive enough to encompass the entire selling process, including the seller/agent transaction”); see also 3 Hazen, supra, § 12.22. In addition, as stated above, although private plaintiffs can maintain a cause of action under Rule 10b-5, only the SEC may bring a claim to enforce the prohibitions of section 17(a). See Ernst & Ernst, 425 U.S. at 196, 96 S.Ct. 1375 (“Although § 10(b) does not by its terms create an express civil remedy for its violation, and there is no indication that Congress, or the Commission when adopting Rule 10b-5, contemplated such a remedy, the existence of a private cause of action for violations of the statute and the Rule is now well established.”) (footnote omitted); Maldonado v. Dominguez, 137 F.3d 1, 6-8 (1st Cir.1998) (joining a majority of circuits in rejecting a private right of action under section 17(a)). Finally, the degree of scienter required to establish a violation under Rule 10b-5 and section 17(a)(2) differs. To prove a claim under section 17(a)(2), the subsection pertaining to false statements or omissions, the SEC need show only that the defendants acted negligently. Under section 10(b) and Rule 10b-5, however, the SEC must prove that defendants acted with intent, knowledge or a high degree of recklessness. See Aaron v. SEC, 446 U.S. 680, 690-97,100 S.Ct. 1945, 64 L.Ed.2d 611 (1980); Maldonado, 137 F.3d at 7. This distinction follows closely from the text of the respective provisions. See Aaron, 446 U.S. at 690-97, 100 S.Ct. 1945. Deciding the state of mind requirements for section 10(b), the Court set forth in Ernst & Ernst, and confirmed in Aaron, that Congress’s inclusion of the terms “manipulative,” “device,” and “contrivance” in section 10(b) indicated that it sought to limit liability to acts that involved scienter. Ernst & Ernst, 425 U.S. at 197, 96 S.Ct. 1375 (“The words ‘manipulative or deceptive’ used in conjunction with ‘device or contrivance’ strongly suggest that § 10(b) was intended to proscribe knowing or intentional misconduct.”); see also Aaron, 446 U.S. at 690-91, 100 S.Ct. 1945. By contrast, the Court has noted that section 17(a)(2) “is devoid of any suggestion whatsoever of a scienter requirement.” Aaron, 446 U.S. at 696, 100 S.Ct. 1945. Nevertheless, the SEC did not rely on this distinction in its section 17(a)(2) claims against appellees, alleging in the complaint that they acted with intent, knowledge, or a high degree of recklessness. The SEC has also invoked two additional statutory provisions against the defendants. The 1934 Exchange Act includes an additional antifraud provision targeted specifically at brokers or dealers operating in the over-the-counter market. See 15 U.S.C. § 78o(c)(l)(A). Section 15(c)(1)(A) of the Act states: No broker or dealer shall make use of the mails or any means or instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security (other than [certain exempted securities]) ... by means of any manipulative, deceptive, or other fraudulent device or contrivance. Id. Finally, the Investment Advisers Act of 1940 “was enacted to deal with abuses that Congress had found to exist in the investment advisers industry.” Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 12-13, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979). Intended to “benefit the clients of investment advisers,” id. at 17, 100 S.Ct. 242, Section 206 of the Act “establishes federal fiduciary standards” enforceable by the SEC. Id. at 17, 24, 100 S.Ct. 242 (quotation marks and citation omitted). The statute reads: It shall be unlawful for any investment adviser, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly— (1) to employ any device, scheme, or artifice to defraud any client or prospective client; (2) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.... 15 U.S.C. § 80b — 6(1)—(2). B. The SEC’s Claims In its complaint, the SEC alleges primary and secondary violations of the securities laws by Tambone and Hussey. Primary violations refer to violations committed by Tambone and Hussey themselves; secondary violations, also known as aiding and abetting violations, refer to actions committed by the defendants that aided and abetted other actors who committed primary violations of the securities laws. The SEC alleges that Tambone and Hussey, officers of Columbia Distributors, the primary underwriter responsible for directing efforts to sell the Columbia Funds to investors, committed primary violations of section 17(a)(2) of the Securities Act by selling, and offering to sell, the Columbia securities with false prospectuses. As such, they are alleged to have “obtain[ed] money or property by means of [an] untrue statement of a material fact.” 15 U.S.C. § 77q(2)(a) (emphasis added). Additionally, the SEC alleges that Tam-bone and Hussey made untrue statements of material fact and hence also committed primary violations of section 10(b) of the Exchange Act and Rule 10b-5. See 17 C.F.R. § 240.10b-5(b). As officers of the primary underwriter for the Columbia Funds, appellees had a legal duty to review and confirm, to a reasonable degree, the accuracy and completeness of the prospectus statements they were responsible for distributing. The SEC argues that, by overseeing the distribution of prospectuses which they knew, or were reckless in not knowing, contained false and misleading statements, Tambone and Hussey adopted those statements as their own. The SEC also alleges that, in light of their duties as primary underwriters — securities professionals engaged in the offer and sale of securities — Tambone and Hussey impliedly made them own statements to potential investors that they “had a reasonable basis to believe that the key representations in the prospectuses were truthful and complete.” The SEC contends that, because the prospectus statements prohibiting market timing were inaccurate, this implied statement was false, a fact that defendants knew or were reckless in not knowing when they used the prospectuses to sell Columbia Funds. The same allegations of fraudulent conduct engaged in by Tambone and Hussey form the basis of the SEC’s claims of secondary liability under section 10(b), Rule 10b-5, section 206, and section 15(c) of the securities laws. Specifically, the Commission avers that the defendants substantially assisted Columbia Advisors and Columbia Distributor in committing acts of primary liability under the securities laws. By overseeing the distribution of fund prospectuses which they knew (or were reckless in not knowing) were false, the defendants assisted these entities in making false statements to the public in connection with the sale of Columbia securities. IV. A. The Scope of Liability under Section 17(a)(2) of the Securities Act Although the SEC’s complaint raises general allegations of fraud under sections 17(a)(l)-(3), the SEC only appeals the district court’s conclusions regarding section 17(a)(2), which addresses untrue statements. To state a claim under section 17(a)(2), which is intended to prohibit fraud by securities sellers, the SEC must allege that Tambone and Hussey have (1) directly or indirectly (2) obtained money or property (3) by means of any untrue statement of material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, such statement having been made (4) with negligence (5) in the offer or sale of any securities. See 15 U.S.C. § 77q; Aaron, 446 U.S. at 696, 100 S.Ct. 1945; see generally 3 Hazen, supra, § 12.22 (discussing the elements). The parties agree that the SEC has adequately alleged elements one, four, and five of the statute, but dispute the scope of conduct covered under elements two and three, and also whether the complaint adequately alleges these two elements. On the question of the scope of actionable conduct, the SEC asserts that section 17(a)(2) extends liability not only to securities sellers who have directly communicated their personal false or misleading statements to potential investors in the course of offering or selling securities to them, but also to sellers who have obtained money or property “by means of’ an untrue statement of material fact drafted or approved by another individual. Relying on the statute’s passive formulation and its focus on the conduct of securities sellers, the Commission argues that the scope of section 17(a)(2)’s prohibition is broader than that of section 10(b) and Rule 10b-5(b), which prohibit a securities actor from “mak[ing] any untrue statement.” The defendants contest this reading of section 17(a)(2). Specifically, they assert that the language “obtain money or property by means of any untrue statement of a material fact” is coterminous with the language of Rule 10b — 5(b), which prohibits a securities actor from “makfing] a statement.” In other words, to be liable under section 17(a)(2), a securities seller must make a false or misleading statement in the course of selling or offering to sell a security to an investor. To support this interpretation of section 17(a)(2), Tambone and Hussey cite several cases that equate the prohibitions of section 17(a) with those of section 10(b) and Rule 10b-5. See, e.g., SEC v. Monarch Funding Corp., 192 F.3d 295, 308 (2d Cir.l999)(“Essentially the same elements [as those required to show a violation of section 10(b) and Rule 10b — 5] are required under Section 17(a)(l)-(3) in connection with the offer or sale of a security. ...”); SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1467 (2d Cir.1996). Noting that the language of the provisions is nearly identical, and indeed, that section 17(a) served as the model for Rule 10b-5, the defendants assert that it defies logic and language to read section 17(a) as prohibiting a broader range of conduct than Rule 10b-5. The defendants also highlight the SEC’s own failure to cite any case law drawing the distinction that the SEC claims follows from the text of the provisions. Accordingly, the defendants urge us to read section 17(a) and section 10(b) as prohibiting the same range of conduct, and thereby conclude that in order for the SEC to state a claim of primary liability under section 17(a)(2), it must allege that the defendants have made a false or misleading statement. Without explicitly analyzing the text of section 17(a)(2), the district court adopted the defendants’ position, concluding that the provisions were identical for purposes of evaluating the SEC’s various claims in this case. Accordingly, the court grouped section 17(a) together with section 10(b) when undertaking its analysis. Citing Wright v. Ernst & Young LLP, 152 F.3d 169, 175 (2d Cir.1998), a decision applying the language of section 10(b) and Rule 10b-5 in a private securities action, the district court explained that “[i]n order to be liable for a primary violation of Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act, a defendant must have personally made either an allegedly untrue statement or a material omission.” Finding no false statement attributable to either Tambone or Hussey, the court rejected the SEC’s theory of liability under both section 17(a)(2) and section 10(b). When assessing the scope of a statute, we begin, and often end, with its text and structure. See, e.g., Ernst & Ernst, 425 U.S. at 197, 96 S.Ct. 1375 (‘“[T]he starting point in every case involving construction of a statute is the language itself.’ ” (quoting Blue Chip Stamps, 421 U.S. at 756, 95 S.Ct. 1917 (Powell, J., concurring))); Central Bank, 511 U.S. at 174, 114 S.Ct. 1439 (“Adherence to the text in defining the conduct covered by § 10(b) is consistent with our decisions interpreting other provisions of the securities Acts.”); see also Aaron, 446 U.S. at 695-97, 100 S.Ct. 1945 (parsing the language of section 17(a)(1)-(3) to determine whether scienter is required to establish a violation of each provision). In this context, we are guided by the Supreme Court’s oft-recited instruction that courts must construe the language of the securities laws “ ‘not technically and restrictively, but flexibly to effectuate [their] remedial purposes.’ ” Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) (quoting Capital Gains, 375 U.S. at 195, 84 S.Ct. 275). Additionally, in comparing the text of section 17(a) with that of section 10(b) and Rule 10b-5, the Supreme Court itself has found meaningful distinctions in small variations in language. See Aaron, 446 U.S. at 695-97, 100 S.Ct. 1945 (finding that the provisions, despite their common purpose and similar texts, require different levels of scienter for liability). We must display the same adherence to the importance of text. We do not read the case law cited by the defendants as foreclosing the Commission’s argument that section 17(a)(2) is broader than section 10(b) and Rule 10b-5(b). Although we have previously analyzed section 17(a) claims identically to those made under section 10(b) and Rule 10b-5 where the parties agreed that the analysis was the same, see SEC v. Rocklage, 470 F.3d 1, 4 n. 1 (1st Cir.2006), that treatment does not preclude our recognition here that the scope of actionable conduct under the two statutes may be different. Indeed, this is necessarily so because, as we have noted, the text of the statutes mandate different showings with respect to scienter. See Aaron, 446 U.S. at 695-97, 100 S.Ct. 1945. Nor are the SEC’s arguments foreclosed by Supreme Court precedent or decisions of this circuit. Cf Naftalin, 441 U.S. at 778, 99 S.Ct. 2077 (“[U]ndoubtedly[,] ... the [Securities Act and the Exchange Act] prohibit some of the same conduct.... But ‘[the] fact that there may well be some overlap is neither unusual nor unfortunate.’ ” (quoting SEC v. Nat’l Sec., Inc., 393 U.S. 453, 468, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969))). After carefully examining the respective texts at issue, we find the Commission’s argument regarding the scope of conduct prohibited by section 17(a)(2) persuasive. Because section 17(a)(2) was drafted to apply to broker-dealers, its prohibitory language focuses specifically on conduct engaged in by a seller. The statute prohibits an individual from “obtaining] money or property by means of any untrue statement.” It does not state, however, that the seller must himself make that untrue statement. Indeed, the text suggests that the opposite is true — that it is irrelevant for purposes of liability whether the seller uses his own false statement or one made by another individual. Liability attaches so long as the statement is used “to obtain money or property,” regardless of its source. In contrast to the “by means of any untrue statement” language of section 17(a)(2), Rule 10b-5(b) renders it unlawful “[t]o make any untrue statement of a material fact ... in connection with the purchase or sale of any security.” As the drafters intended, Rule 10b-5 expands liability to cover all segments of the securities industry, including drafters, auditors, accountants, and distributors. See Central Bank, 511 U.S. at 191, 114 S.Ct. 1439. As we stress below, any one of these actors who makes an untrue statement in connection with the purchase or sale of a security may be found primarily liable. See id. However, Rule 10b-5’s expansion of coverage beyond the seller of securities is accompanied by a more restrictive statement of the conduct that will suffice to establish liability. The “to obtain money or property by means of any untrue statement” language of section 17(a)(2) is replaced by the requirement in Rule 10b-5(b) that the actor “make” an “untrue statement of a material fact ... in connection with the purchase or sale of any security.” This reading of section 17(a)(2) (that it does not require the defendant to make the false statement at issue), is supported by Congress’s inclusion of the phrase “directly or indirectly” in the statutory text of section 17(a). The statute makes it “unlawful for any person ... directly or indirectly ... to obtain money or property by means of any untrue statement of a material fact.” That a seller may be liable for indirectly obtaining money by means of an untrue statement reinforces the conclusion that the untrue statement at issue need not have been made by the securities seller. Cf. Ballay v. Legg Mason Wood Walker, Inc., 925 F.2d 682, 691 (3d Cir.1991) (“These words — ‘directly or indirectly’ — convey a legislative intent to encompass all conduct meeting the other elements of a section 17(a) claim.”). Therefore, based on our reading of the text of section 17(a)(2), we conclude that this provision covers conduct that may not be prohibited by section 10(b) and Rule 10b-5. Specifically, primary liability may attach under section 17(a)(2) even when the defendant has not himself made a false statement in connection with the offer or sale of a security. B. Applying Section 17(a)(2) to the Conduct of Defendants Before we assess whether the SEC stated sufficient allegations to support claims of liability under section 17(a)(2) against Tambone and Hussey, we must describe generally the role of an underwriter in the mutual fund process. Our understanding of this role is central to our analysis both of this issue and liability under section 10(b). Principal underwriters, also commonly referred to as distributors, play an essential role in the securities industry, and specifically the mutual fund market. Section 2(a)(40) of the Investment Act defines an “underwriter” as someone who has “purchased from an issuer with a view to, or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking.” 15 U.S.C. § 80a-2(a)(40). Likewise, a “principal underwriter” of a mutual fund is [a]ny underwriter who as principal purchases from such company, or pursuant to contract has the right ... from time to time to purchase from such company, any such security for distribution, or who as agent for such company sells or has the right to sell any such security to a dealer or to the public or both. Id. § 80a-2(a)(29). Often affiliated with the mutual fund’s investment adviser, in this case Columbia Advisors, the underwriter is thus primarily responsible for the sale and distribution of specified funds. The underwriter enters into agreements with brokers, dealers, and other intermediaries for the sale of the fund’s shares or, alternatively, sells funds directly to the investing public. See United States v. Nat’l Assoc. of Sec. Dealers, Inc., 422 U.S. 694, 698-99, 95 S.Ct. 2427, 45 L.Ed.2d 486 (1975). Regardless of how the funds are distributed to the public, the underwriter is responsible for ensuring that the investors or potential investors receive prospectus statements. See 15 U.S.C. § 77e(b)(2) (requiring that a prospectus be provided prior to the public sale of shares); 17 C.F.R. § 240.15c2-8(h) (requiring a distributor to provide a broker-dealer participating in the distribution or trading of a security with sufficient quantities of the prospectus to ensure they reach the investors pursuant to section 5(b) of the Securities Act). Further, the underwriter is typically responsible for a number of other tasks, including (1) creating and distributing advertising materials and other disclosure documents for the traded securities; (2) ensuring compliance with state and federal offering requirements; (3) identifying potential investors and responding to inquiries; (4) executing purchase and redemption transactions; and (5) providing other services not provided by the fund administrator. Laurin Blumenthal Kleiman & Carla G. Teodoro, The ABCs of Mutual Funds 2007: Forming, Organizing and Operating a Mutual Fund: Legal and Practical Considerations, 1612 PLI/Corp 9, 31-32 (2007). The underwriter is required to register with the SEC under the Exchange Act of 1934, with the states in which it sells securities under the applicable state blue sky laws, and with the National Association of Securities Dealers (“NASD”). Id. Not surprisingly, the allegations in the complaint are consistent with this general description of the underwriter’s role in the mutual fund process. As executives of Columbia Distributor, the principal underwriter for the Columbia Funds, Tam-bone and Hussey were primarily responsible for distributing the fund prospectuses to potential investors and other broker-dealers. As the SEC states in its brief, “whether selling shares of the Columbia funds directly to investors, or indirectly through other broker-dealers, Columbia Distributor was required to offer and sell those shares through the use of the fund prospectuses.” The SEC alleges that to make these sales, defendants used prospectuses containing statements regarding market timing which they knew, or were reckless in not knowing, were false, and even specifically referred potential investors to those misleading prospectuses to answer any questions the investors might have. Further, both defendants’ compensation depended significantly on their sale of Columbia funds. “ Thus, assuming the allegations are correct, as we must, the defendants’ conduct falls squarely within the prohibitions established by section 17(a)(2) of the Securities Act. Tambone and Hussey, in offering and selling securities, obtained] money by means of an[] untrue statement of [ ] material fact.” The section 17(a)(2) claims should not have been dismissed by the district court. Y. A. The Scope of Liability under Rule 10b-5(b): Making a Statement Having concluded that the SEC has stated a claim of primary liability against the defendants under section 17(a)(2), we turn to the SEC’s allegations regarding section 10(b) and Rule 10b-5. Although the SEC’s complaint includes general allegations of fraud in violation of sub-sections (a) and (c) of Rule 10b-5, provisions that address the use of fraudulent practices, schemes, devices, or courses of business, the SEC has not pursued on appeal the district court’s dismissal of these claims. Therefore, we limit our discussion to Rule 10b — 5(b), which prohibits the making of false statements or omissions in connection with the purchase or sale of any security. To establish a claim of primary liability under Rule 10b~5(b), a private plaintiff must show (1) a material misrepresentation or omission made by the defendant; (2) a connection between the misrepresentation or omission and the purchase or sale of a security; (3) scienter, specifically that the defendant acted with intent, knowledge, or a high degree of recklessness; (4) reliance by the plaintiff upon the misrepresentation or omission; (5) economic loss; and (6) loss causation. See Stoneridge, 128 S.Ct. at 768; ACA Fin., 512 F.3d at 58. Because this is an SEC enforcement action rather than a private claim, the Commission need not allege any of the elements required to establish a direct link between a defendant’s misrepresentation and an investor’s injury — including reliance by the investor on an explicit misstatement, economic loss, and loss causation. See GFL Advantage Fund, Ltd. v. Colkitt, 272 F.3d 189, 206 n. 6 (3d Cir.2001); SEC v. Rana Research, Inc., 8 F.3d 1358, 1363-64 (9th Cir.1993); Schellenbach v. SEC, 989 F.2d 907, 913 (7th Cir.1993); SEC v. Blavin, 760 F.2d 706, 711 (6th Cir.1985); see also Stoneridge, 128 S.Ct. at 769 (“Reliance by the plaintiff ... is an essential element of the § 10(b) private cause of action.”) (emphasis added). As with the SEC’s claim under section 17(a)(2), the parties contest the legal standard applicable to the first element of the claim — that the defendant made a materially false or misleading statement' — • as well as whether elements one and three have been sufficiently alleged in the complaint. We first address the question of what it means to “make” a statement for the purposes of Rule 10b-5(b). The SEC urges us to conclude that the distr