Kentucky
How Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. applies in Kentucky: state-specific rules, key cases, and bar exam notes for Securities Law.
Kentucky courts generally follow the principle that aiding and abetting securities fraud requires a showing of knowledge and substantial assistance to the primary violator. This mirrors the principles established in Central Bank, which rejected the concept of aiding liability absent direct participation in the fraud.
In Kentucky, to prove liability for aiding and abetting securities fraud, the plaintiff must demonstrate that the defendant had knowledge of the fraud and provided substantial assistance in its commission.
The court held that mere presence or passive acquiescence is insufficient for aiding and abetting; active participation and knowledge of wrongdoing are necessary.
The court emphasized the need for clear evidence of substantial assistance and knowledge in securities violations.
This case reaffirmed that financial institutions can be held liable for aiding securities fraud only when they knowingly assist the fraud.
Kentucky's approach is consistent with federal securities law in that it requires both knowledge and substantial assistance for aiding and abetting claims. However, Kentucky courts emphasize a more fact-specific inquiry into the nature of knowledge and assistance than some federal courts may.
This topic is relevant for the Kentucky bar exam, particularly in the context of securities regulation and the distinction between primary liability and aiding/abetting liability.