Beyond Blue Chip: Issuer Standing to Seek Injunctive Relief Under Section 10(b) and Rule 10b-5 Without the Purchase or Sale of a Security

This Article explores whether a corporate issuer has standing to seek injunctive relief under section 10(b) and Rule 10b-5 without the purchase or sale of a security. Section 10(b) and Rule 10b-5 are catch-all provisions that are commonly used to remedy a wide variety of securities fraud. The purchase or sale of a security is viewed by many as an integral requirement for bringing an action under these provisions. This article discusses the validity of a lesser known method for a corporate issuer to defend against stock manipulation by seeking injunctive relief in cases in which the issuer neither purchased nor sold securities based on an alleged deception.The Supreme Court has never ruled on whether a corporate issuer can have standing to seek injunctive relief under section 10(b) and rule 10b-5 without a purchase or sale of a security. However, for a variety of reasons, the Supreme Court is unlikely to hold that such standing exists. An exception to the purchaser-seller requirement is justified for a corporate issuer seeking injunctive relief because of the nature of injunctive relief, the injury to the issuer, and the role of the issuer as best champion of its shareholders. However, the Court will likely deny the existence of such standing because of the Supreme Court's aversion to broadening standing under section 10(b) and Rule 10b-5, the possible misuse of issuer standing by directors and officers, and interpretation of section 10(b) and Rule 10b-5 in the context of the 1933 Act and the 1934 Act. The best solution may be for Congress to amend section 10(b) and Rule 10b-5 to allow an issuer standing to seek injunctive relief without the purchase or sale of a security. Based on previous attempts to amend the jurisdictional reach of section 10(b) and Rule 10b-5, however, Congress may be reluctant to alter either of these provisions.