Affiliated Ute Citizens of Utah v. United States

In Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), the Court recognized a private right of action where the claim for relief based on Rule 10b--5 arose from a stock rigging scheme. By fraudulently misstating the prevailing market price of Ute Distribution Corporation stock, the defendant bankers artificially depressed its purchase price. Once they bought the stock, the defendants then sold it at its higher, true market value. Finding this practice unlawful, the Court remarked on the scope of section 10(b) and Rule 10b--5: "These proscriptions, by statute and rule, are broad and, by repeated use of the word 'any,' are obviously meant to be inclusive. The Court has said that the 1934 Act and its companion legislative enactments embrace a 'fundamental purpose . . . to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry.' SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186 (84 S.Ct. 275, 11 L.Ed.2d 237) (1963). In the case just cited the Court noted that Congress intended securities legislation enacted for the purpose of avoiding frauds to be construed 'not technically and restrictively, but flexibly to effectuate its remedial purposes.' Id., at 195 (84 S.Ct. at 285.) This was recently said once again in Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 12 (92 S.Ct. 165, 169, 30 L.Ed.2d 128) (1971)." (406 U.S. at 151, 92 S.Ct. at 1471.)