An unidentified couple walks past the sign outside the offices of Janus Capital Group in east Denver. (AP Photo/David Zalubowski)
JANUS CAPITAL GROUP, INC. V. FIRST DERIVATIVE TRADERS (2011)
Janus Capital Group created a wholly owned subsidiary, Janus Investment Fund, which intentionally deceived investors by stating in a mutual fund prospectus that it was taking steps to curb “market time” transactions. When information emerged that this was not true, Janus Investment Fund’s stock plummeted and investors lost millions of dollars. Investors filed an action against the holding company, Janus Capital, under federal law, which states that a company cannot “make any untrue statement of a material fact.” The five-member conservative majority of the Court held that Janus Capital did not make the untrue statement because it was contained in a prospectus published by Janus Investment Fund. This convoluted interpretation of securities law gave corporate wrongdoers a blueprint for escaping liability by having subsidiaries take the fall.
