Whether “control” exists is a factual inquiry related to the magnitude of power one entity wields over another. 17 C.F.R. § 230.405; Howard, 228 F.3d at 1065. Most lawyers, accountants and other third parties who serve in “advisory” capacities simply do not have the same control over the other parties to an offering as the Rating Agencies had over the Depositor here.

Here, the Rating Agencies had the power to – and did – “cause the direction of the management and policies” of the Depositor “by contract or otherwise.” 17 C.F.R. § 230.405 (emphasis added); Vivendi Universal, 381 F. Supp. 2d 187-88. Specifically, the Offering Documents stated that the Depositor was forbidden from engaging in any business activities “other than securitizing mortgage assets and related activities.”

20 Galena significantly to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.” 17 C.F.R. § 230.405. 20 Despite Plaintiffs’ detailed allegations of control, contrary to Defendants’ arguments, at the motion to dismiss stage, general allegations concerning an individual defendant’s title and responsibilities are sufficient to establish control.

36 “‘Control’ is defined as ‘the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.’” P.R. Diamonds, Inc., 364 F.3d at 696-697 (quoting 17 C.F.R. § 230.405). Case 2:13-cv-02653-SHM-dkv Document 51 Filed 11/12/13 Page 49 of 52 PageID 1006 {02687399.

Azzolini, 2005 36 “‘Control’ is defined as ‘the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.’” P.R. Diamonds, Inc., 364 F.3d at 696-697 (quoting 17 C.F.R. § 230.405). Case 2:13-cv-02654-SHM-cgc Document 50 Filed 11/12/13 Page 43 of 47 PageID 1108 {02708562.

For purposes of Section 20(a), the Ninth Circuit has adopted the SEC’s definition of “control,” which requires “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract, or otherwise.” Howard, 228 F.3d at 1065 n.9 (quoting 17 C.F.R. § 230.405). Under that definition, an individual’s status as a control person involves “scrutiny of [his] participation in the day-to-day affairs of the corporation and [his] power to control corporate actions.”

Id. at 1162 (quoting 17 C.F.R. § 230.405). A plaintiff "must plead the circumstances of the control relationship with particularity."

See Cheung, 2012 WL 5834894, at * 11. Following the filing of the Complaint, Keyuan opted not to file a motion to dismiss the Private Placement claims against it, and has thus effectively conceded that a primary violation of the Exchange Act has been stated against Keyuan for the Private Placement. Thus, Li’s motion turns on the control element, that is, was she a control person from the time she joined Keyuan? Control includes the “possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person.” Howard, 228 F.3d 1057, n.9, (quoting 17 C.F.R. § 230.405). Control can also be shown through Case 2:11-cv-09495-PSG-JCG Document 81 Filed 04/01/13 Page 19 of 28 Page ID #:1292 1 2

Consistent with this practice, had the GSEs known Defendants’ representations were false, “the GSEs would not have purchased or acquired 4 Such offering materials are defined by the SEC as “any written communication … that constitutes an offer to sell or a solicitation of an offer to buy the securities relating to a registered offering that is used after the registration statement in respect of the offering is filed ….” 17 C.F.R. § 230.405. Case 1:11-cv-06192-DLC Document 89 Filed 09/07/12 Page 16 of 32 11 the Certificates as they ultimately did, because those representations and omissions were material to their decision to acquire the GSE Certificates.”

¶ 317) fails to support any plausible inference that they possessed “the power to direct or cause the direction of management and policies” as required by § 15 to establish control. 17 C.F.R. § 230.405; Merrill Lynch, 714 F. Supp. 2d at 485 (plaintiffs’ allegations merely constituted a “formulaic recitation of the elements” of § 15). Moreover, control person claims must be based on particularized allegations sufficient to support an “individualized determination of a defendant’s control of the primary violator as well as a defendant’s particular culpability.”