Nature of the Case
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Facts
Touche (D) audited the books of Weis Securities, a broker-dealer. Weis became insolvent in 1973, and there were criminal prosecutions of several of its officers. Both the SIPC and Redington, the trustee of the Weis firm, sued D seeking damages alleged to have been caused by the latter's improper audit and certification of Weis financial reports required to be filed under Section 17(a). Ps alleged that D's dereliction prevented the true problems at Weis from becoming known until it was too late to do anything about them. Redington sued for $51 million, and SIPC sued for its $14 million it paid. The complaint was dismissed by the district court. The Second Circuit reversed; section 17(a) imposed a duty upon accountants and breach of that duty gave rise to an implied private right of action for damages. Therefore, SIPC and Redington could assert an implied cause of action on behalf of Weis customers.
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