From SEC v. Johnson, 2011 U.S. App. LEXIS 13123 (D.C. Cir. June 28, 2011):

Venue for a civil action under the securities laws lies "in the district wherein the defendant is found or is an inhabitant or transacts business," or "in the district wherein any act or transaction constituting the violation occurred." § 78aa. By the reference to "any act," the statute permits a plaintiff to bring suit in any district where any person has committed any act that "constitute[s]" the offense with which the defendant is charged.

The co-conspirator theory of venue is but a gloss upon and an extension of § 78aa. The question presented in this case is whether that extension is consistent with the terms of § 78aa. Benyo contends it is not, relying in particular upon Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 (1994), in which the Supreme Court held there was no private right of action for aiding and abetting securities fraud and strongly implied there could be no cause of action for any form of "secondary liability" for fraud that does not require proof of each of the elements of the primary violation, see id. at 180, 184. After Central Bank of Denver was decided, the Congress enacted § 78t(e) to give the SEC express authority to pursue a person who has aided and abetted a securities fraud. See Private Securities Litigation Reform Act of 1995, § 104, Pub. L. 104-67, 109 Stat. 737, 757 (1995); Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 158 (2008). Because § 78t(e) did not similarly authorize the SEC to sue for conspiracy to commit securities fraud, Benyo reasons, an allegation of conspiracy is not by itself — that is, without proof of his actual participation in a fraud — a sufficient basis for liability under Central Bank of Denver and therefore cannot be a sufficient basis for venue.

The SEC responds, "[f]irst, conspiracy liability is available to the Commission" because Central Bank of Denver concerned an implied private right of action and therefore "did not apply to" the SEC, and, second and "[m]ore fundamentally," the scope of venue does not turn upon the scope of liability. Indeed, we are told, the co-conspirator theory of venue "is often used" by the SEC, "serves important purposes," and has been adopted by "at least" three other circuits. All the circuit court decisions in question, however, pre-date Central Bank of Denver, see SIPC v. Vigman, 764 F.2d 1309, 1317 (9th Cir. 1985); Hilgeman v. Nat'l Ins. Co. of Am., 547 F.2d 298, 302 & n.12 (5th Cir. 1977); Wyndham Assocs. v. Bintliff, 398 F.2d 614, 620 (2d Cir. 1968), and hence the SEC's reliance upon them begs the question whether Central Bank of Denver precludes the co-conspiracy theory of venue.

We believe § 78aa by its terms forecloses use of the co-conspirator theory of venue; a suit simply may not be brought in a forum where there is no statutory basis for venue. We cannot countenance any so-called theory that "add[s] a gloss to the operative language of the statute quite different from its commonly accepted meaning." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976).

Benyo's case is paradigmatic: The SEC did not identify in the complaint or in its evidence at trial "any act or transaction" of Benyo's occurring in the District of Columbia and "constituting the violation" of § 78t(e), §78m(b)(5), Rule 13b2-1, or Rule 13b2-2 with which he was charged. Instead it argues the filing of a Form 10-Q with the SEC was an act in the District constituting "a securities fraud violation" by PurchasePro. That is not the violation attributed to Benyo, however, as § 78aa requires; the revenue item he allegedly falsified was not included in the Form 10-Q. If the only act allegedly done in this district is not linked to Benyo in any of the ways listed in § 78aa, then no "theory" can supply the deficiency. In other words, at least one statutory basis for venue, no matter how broadly or narrowly that particular requirement might be construed, must have occurred in the chosen forum.

We note the Supreme Court has rejected the co-conspirator theory as a basis for venue in a suit under the antitrust laws, which permit a plaintiff to sue only in a district wherein the defendant "resides or is found or has an agent." 15 U.S.C. § 15. In Bankers Life & Casualty Co. v. Holland, the Supreme Court condemned the theory as "a frivolous albeit ingenious attempt to expand the statute," 346 U.S. 379, 384 (1953) (dictum). That, as a practical matter, was the end of the co-conspirator theory of venue in antitrust. ***

After the Bankers Life decision and their own antitrust cases following it [but before Central Bank of Denver], the Second, Fifth, and Ninth Circuits again approved use of the co-conspirator theory under § 78aa. The Second and the Ninth Circuits did so based expressly upon "[t]he strong policy favoring the litigation of related claims in the same forum." Vigman, 764 F.2d at 1318; Wyndham Assocs., 398 F.2d at 617, 619 (similar); see generally Rhett Traband, The Case Against Applying the Co-Conspiracy Venue Theory in Private Securities Actions, 52 Rutgers L. Rev. 227, 246-47 (1999) ("the avoidance of duplicative litigation has been the chief policy argument invoked in favor of the [co-conspirator] Theory").

The Supreme Court has repeatedly made [it] clear [that] "[p]olicy considerations cannot override our interpretation of the text and structure of the [Exchange] Act." Central Bank of Denver, 511 U.S. at 188. Indeed, the Court has refused to consider policy arguments in the interpretation specifically of § 78aa.***

Accordingly, we hold the SEC failed to lay venue in the District of Columbia under "the straightforward language of [ § 78aa]." Leroy, 443 U.S. at 182 n.14.