Case 1:09-md-02058-PKC Document 585 Filed 06/03/12 Page 20 of 22 17 DC01:655356.5 reason of which the liability of the controlled person is alleged to exist.” 15 U.S.C. § 77o(a). The record conclusively establishes that this exception applies to plaintiffs’ Section 15 claim against Mr. Price.

Pursuant to 15 U.S.C. § 77o(a): Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under sections 77k or 77l of this title, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist. See 15 U.S.C. § 77o(a). To plead control-person liability, Plaintiffs must allege, and did, “that one person controlled another person or entity and that the controlled person or entity committed a primary violation of the securities laws.”

Opp. 112) that FHFA has not moved for summary judgment on the “control person” defense available to the Individual Defendants, NCCI, and Nomura Holding under Section 15, 15 U.S.C. § 77o, it is telling that Nomura does not make any similar argument relating to a parallel defense available to NCCI and Nomura Holding under the D.C. and Virginia Blue Sky laws. That is because the “control person” defense under these laws is substantively identical to the reasonable care defense under Section 12.

¶¶ 362-363; see also ¶ 64 (RMK organizational diagram).68 For the same reason, 67 Similarly, Section 15 of the Securities Act imposes liability on one who controls a person liable of a primary violation “by or through stock ownership, agency, or otherwise.” 15 U.S.C. § 77o; see also Sanders, 973 F.2d at 485-86. Notably, the Director Defendants, who alone are subject to both Section 15 and 20(a) claims, do not distinguish their arguments challenging these claims.

Section 15 of the Securities Act provides for joint and several liability on the part of one who controls a violator of Section 11. See 15 U.S.C. § 77o. To succeed on a claim under Section 15, Plaintiffs must prove that Downs controlled Tibet and that Tibet committed a primary violation of the securities laws.

Section 15 of the Securities Act provides for joint and several liability on the part of one who controls a violator of Section 11. See 15 U.S.C. § 77o. To succeed on a claim under Section 15, Plaintiffs must prove that Downs controlled Tibet and that Tibet committed a primary violation of the securities laws.

In order to plead that Cannava aided and abetted Wells Fargo’s violations, the Commission must allege that a primary violation existed and that Cannava was “generally aware that his role or conduct was part of an overall activity that was improper and . . . [that he] knowingly and substantially assisted in the primary violation.” Tambone, 550 F.3d at 144; 15 U.S.C. §77o(b) (“any person that knowingly or recklessly provides substantial assistance to another person in violation of a provision of this Act, or of any rule or regulation issued under this Act, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided”); §78t(e) (same, substituting “title” for “Act”). The Commission agrees that negligence alone does not satisfy the state of mind required for aiding and abetting liability and that aiding and abetting liability requires knowing or reckless conduct by Cannava.7 The Complaint meets that standard.

¶¶ 6 and 27. 15 U.S.C. § 77o has absolutely no bearing on Plaintiffs’ case. Finally, Plaintiffs’ claim that because the Arkansas Securities Act “tracks federal law” they are relieved of any obligation to properly allege violations of this statute is completely unfounded.

(ellipsis in original) (internal quotations omitted)) 35 Section 15 of the 1933 Act creates liability for “[e]very person” who “controls any person liable” under section 11 or 12. 15 U.S.C. § 77o(a). The D.C. and Virginia Codes adopt the same formulation of “control” as the federal law.

Section 15 allows for an affirmative defense that the defendant “had no knowledge of or reasonable ground to believe in the existence of the facts” by which the controlled person allegedly is liable. 15 U.S.C. § 77o. Here, as with the Section 11 claim, the Independent U.S. Directors’ affirmative defense that they had no knowledge at the time of the December Offering that Zhao had fraudulently transferred Puda’s ownership of Shanxi Coal from Puda is apparent from the face of the Complaint.