Washington
How Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A. applies in Washington: state-specific rules, key cases, and bar exam notes for Securities Regulation.
In Washington, the principles from Central Bank of Denver have been interpreted to restrict liability for secondary actors in securities fraud cases. The state law aligns with the emphasis on direct involvement in the fraud to establish liability.
In Washington, only those who engage in direct participation in fraudulent activities related to securities are subject to liability under WSBA Guidelines. Mere facilitation or passive involvement does not constitute a sufficient legal basis for liability.
The court held that the investment advisers had no liability for the actions of the mutual funds unless they had actual knowledge of the fraud.
The court emphasized that without direct involvement or knowledge of deceptive practices, peripheral participants could not be held liable.
The court ruled that relying on third-party actions without substantial involvement in the transaction did not bring them within the state's securities fraud liability framework.
Washington's approach is consistent with federal securities law, particularly following the principles established by Central Bank that impose liability primarily on those making false statements. However, Washington courts may have a more stringent requirement for proving actual knowledge of fraud compared to some federal circuit courts.
This case is relevant for the Washington bar exam, particularly in the securities regulation section, where the focus is on the distinctions between primary and secondary liability.