Not long after the U.S. Supreme Court limited securities fraud lawsuits against a mutual fund’s investment adviser in its June 5 – 4 opinion in Janus Capital Group v. First Derivative Traders, Howard A. Fischer wrote that the decision may have left another avenue open to pressing a securities fraud claim.
Fischer, a senior trial counsel in the New York Regional Office of the Securities and Exchange Commission (SEC), wrote for Thomson Reuters Accelus that the Janus opinion may have opened the door for actionable claims to be lodged pursuant to the Racketeer Influenced and Corrupt Organizations Act (RICO).”
The New York Law Journal reports, however, that at least one federal appeals circuit has “rebuffed” an attempt by investors harmed by the Bernard Madoff Ponzi scheme to use a RICO action to recover some of their loses.
The U.S. Court of Appeals for the Second Circuit, Mark Hamblett for the Journal reports, held that the “RICO claim was precluded by § 107 of the Private Securities Litigation Reform Act, 18 U.S.C. § 1964, as the court adopted a restrictive analysis on the bar against RICO actions in securities cases.”
The Journal notes that Circuit Judge Robert D. Sack “said the scope of that bar is unsettled in the circuit, so the question was whether it bars all RICO claims involving the purchase or sale of securities “or only RICO claims in cases where that plaintiff could have asserted a fraud claim against the named defendant.”