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IN RE CATANELLA & E. F. HUTTON & CO.

April 9, 1984

IN RE: CATANELLA AND E. F. HUTTON AND COMPANY, INC. SECURITIES LITIGATION


The opinion of the court was delivered by: GILES

 GILES, J.

 I. INTRODUCTION

 Before the court are motions to dismiss in five securities fraud cases, consolidated for purposes of pretrial proceedings by the Judicial Panel on Multidistrict Litigation. *fn1" Although the allegations contained in the complaints vary slightly, each involve the conduct of Kenneth G. Catanella ("Catanella"), a securities broker employed by defendant E.F. Hutton and Company, Inc. ("Hutton"). Catanella is accused of a continuing course of fraud in connection with his handling of plaintiffs' portfolios. The allegations run the gamut from churning to the purchase of unsuitable securities and the failure to disclose the risks inherent in certain transactions. In addition to misrepresentations and omissions directly impinging upon trading decisions, it is also averred that Catanella failed to disclose his role in a prior securities fraud action. Defendants Hutton and Granville are sued for failing to supervise Catanella adequately and under the related doctrine of respondeat superior. They are also characterized as "controlling persons" and aiders and abettors. Plaintiffs invoke sections 12(2), 15 and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77 l (2), 77o, 77q(a) (1976), sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a) (1976) and the Investment Advisers Act of 1940, 15 U.S.C. §§ 80b-1 -- 80b-17 (1976). Claims are also made pursuant to the Racketeer Influenced and Corrupt Organizations Act of 1970, ("RICO"), 18 U.S.C. §§ 1961-1968 (1976). Various counts based upon state law have been appended to the federal claims. In their motions to dismiss, defendants have assailed the legal sufficiency of virtually every cause of action. For the reasons which follow, the motions shall be granted in part and denied in part.

 II. THE COMPLAINTS

 When deciding a motion to dismiss, the court must take as true all well pled allegations and resolve all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party. See e.g., Miree v. DeKalb County, 433 U.S. 25, 27, 53 L. Ed. 2d 557, 97 S. Ct. 2490 n.2 (1977); Rogin v. Bensalem Township, 616 F.2d 680, 685 (3d Cir. 1980); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 444 (3d Cir. 1977). *fn2" Mindful of this standard, I shall summarize the rather complex allegations contained in the complaints. In the interest of brevity, I shall address issues jointly where possible.

 Each complaint begins by tracing the progress of Catanella's brokerage career. After spending eight months as a trainee, he embarked on that career at Paine, Webber, Jackson & Curtis, Inc. ("Paine, Webber") in 1969. Then, from December, 1972 until November, 1973, he was a registered representative and sales manager for Shearson, Hayden, Stone, Inc. ("Shearson"). Taraborelli Complaint at para. 16; Shulik Complaint at para. 8. *fn3" In April of 1974, Catanella's former customers from Paine, Webber and Shearson instituted suit against him and his former employers, claiming violations of a variety of federal and state securities laws. *fn4" After a bench trial, Catanella was found to have violated sections 10(b) and 15(c) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78o(c) (1976), various regulations and stock exchange rules. The trial court determined that Catanella had intentionally mishandled those plaintiffs' accounts, making unauthorized and unsuitable purchases, failing to disclose the risks inherent in short term trading and recommending securities without justification or investigation. Catanella also churned the accounts, disregarded specific instructions and breached a variety of fiduciary duties. Taraborelli Complaint at para. 19. Paine, Webber and Shearson were held liable for, inter alia, failing to supervise Catanella. Id. Judgment was entered against the defendants for eight hundred and thirteen thousand dollars ($813,000.00) and the case was later settled for an amount very close to that figure. Id. at P 20.

 The instant complaints also allege that Catanella had been terminated by Paine, Webber and Shearson, had been the subject of customer complaints and disciplinary proceedings, and had been previously fined for unauthorized trading. Catanella's commission record had been quite high, a potential indicia of churning. Id. at P 21. Despite this dubious employment history, Hutton hired Catanella as a registered representative. It is averred that Hutton either knew all of these facts before hiring him or was reckless in its failure to so learn. Not only was Catanella hired, but he was also named Portfolio Manager, made a member of Hutton's Director's Advisory Council and elected Vice-President. These titles added to Catanella's credibility, but were allegedly undeserved and misrepresented the level of his expertise. Id. at PP 23-24. In an attempt to launch Catanella's career at Hutton, a series of widely publicized seminars and lectures were sponsored by the firm. Famous market prognosticator, Joseph Granville was spotlighted at these lectures and Catanella was presented as a follower of the Granville method of investing. Gaugler Amended Complaint at para. 8. These seminars were directly or indirectly responsible for bringing plaintiffs and Catanella together.

 A. The Gaugler Complaint

 Edward Gaugler, a sixty two year old retired scientist, attended a Hutton seminar in Atlantic City. Both Granville and Catanella were in attendance, and the latter was dubbed the "Granville Oriented Broker in the Tri-State Area." Id. at P 9. During the seminar, Gaugler was given an informational card, which he filled out, entitling him to a free Granville Newsletter. This card also provided Catanella with the ability to contact and solicit him as a potential customer, which he did. Gaugler explained that his investments to date had been conservative, id. at P 11, and that he desired only a "businessman's risk." Id. at 22. It is alleged that Gaugler was unsophisticated in investments and this fact should have been clear to Catanella. Id. at PP 3, 11. Catanella attempted to convince Gaugler to follow the Granville market approach, making it appear that he was in constant contact with Granville and that Granville approved of his trading decisions. He also represented that Hutton's research facilities were utilized in reaching all trading decisions. Id. at PP 11-14.

 The complaint avers numerous wrongdoings by Catanella and Hutton, including their failure to disclose the cash position in Gaugler's account thereby enabling Hutton to use the idle cash for its own benefit, id. at P 17; failure to disclose that certain transactions were contrary to Granville's advice, id. at P 18; failure to disclose that Gaugler had not "gotten in" at the beginning of Granville's strategy for a certain period, id. at P 23, and failure to disclose that Hutton's research resources were rarely utilized in making trading decisions, id. at P 24. Defendants made unauthorized trades, purchasing securities that were far riskier than those desired by Gaugler. Catanella induced Gaugler to purchase options, representing himself to be experienced in that area. Gaugler was never apprised of the significant risks involved and after losing almost all of the capital invested, was told that Catanella had never before traded in options. Id. at PP 21-22. Contrary to their representations, when warranted by the situation, defendants did not place firm stop orders on behalf of Gaugler's account. Id. at P 25. Gaugler claims that Catanella engaged in churning, yielding a turnover ratio in excess of seven to one, id. at P 16, and failed to disclose that he was a defendant in the Brown suit. Hutton and Granville were aware of Catanella's complicity or were reckless in their failure to so learn. Id. at PP 25F, 25H. Finally, Granville is accused of reassuring Gaugler that all was going well while the other defendants were raping his portfolio. Id. at P 19.

 Gaugler sues under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a) (1976); section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a) (1976); section 206 of the Investment Advisers Act, 15 U.S.C. § 80b-6 (1976) and RICO. The complaint also contains state claims for breach of contract, breach of fiduciary duty, conversion, fraud, negligence, violation of the New Jersey Consumer Fraud Act, N.J. Stat. Ann. tit. 56 § 8-1 -- 8-20 (West Supp. 1983-1984), and the New Jersey Uniform Securities Law, N.J. Stat. Ann. tit. 49 § 3-47 -- 3-76 (West Supp. 1983-1984). The liability of Granville and Hutton is premised upon the "controlling persons" provision, id. at P 7; respondeat superior, id. at P 28; failure to adequately supervise Catanella, id. at P 20 and aiding and abetting. Id. at 27.

 In a separate motion, Granville moves to dismiss or for a more definite statement under Fed. R. Civ. P. 12(e). In addition to expressly joining the motion of Catanella and Hutton, Granville argues that the complaint does not support liability against him either as a controlling person or an aider and abettor.

 B. The Taraborelli Complaint

 David Taraborelli brings suit on behalf of himself and all other persons who purchased from or sold securities to, Catanella from April 1, 1979 to the present. Taraborelli Complaint at para. 9 *fn5" Like the Gaugler complaint, it traces Catanella's employment history and involvement in Brown. Again, Catanella is charged with churning, failing to disclose the risks of option and margin trading and engaging in unauthorized transactions, unsuited to the customer's needs or desires. It is generally averred that he disseminated material false or misleading information to his customers. Id. at PP 25, 26. Catanella and Hutton *fn6" are sued under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, RICO, common law fraud, misrepresentation, negligence and both the Pennsylvania and New Jersey securities statutes. In their motion to dismiss, defendants raise arguments similar to those made in Gaugler. With respect to section 10(b), defendants argue that the requisite material misrepresentations or omissions are absent, that their actions did not cause plaintiffs' losses, and were not "in connection with" the purchase or sale of a security. It is asserted that the fraud allegations were not pled with sufficient specificity and that the complaint fails to state a cause of action under RICO. Portions of the complaint are labeled scandalous and impertinent and defendants maintain that the failure of the section 10(b) claim would prove fatal to the section 20(a) claim. Finally, defendants contend that the complaint fails to state a cause of action under either the Pennsylvania or New Jersey statute, that causation is lacking and that all pendent claims should be dismissed if the federal claims are found wanting.

 C. The Shulik Complaint

 Saul and Teresa Shulik met Catanella at one of the Hutton-Granville seminars. They were also unsophisticated investors and specifically advised him of their interest in safe and conservative investments. Shulik complaint at para. 18. Although Catanella agreed to abide by their wishes, he indicated that as amateurs, they ought to rely upon him to handle their portfolio. Initially, Catanella did purchase blue chip quality stocks as requested. Id. at P 22. However, a variety of circumstances led to the sale of most, if not all, of this high quality stock. First, Catanella convinced the Shuliks to open a margin account to allow them greater purchasing power. In response to plaintiffs' inquiries about the high interest, risks involved and frequent transactions, Catanella assured the Shuliks that he was proceeding along the appropriate course. Id. at P 25. However, a large portion of the blue chip stock in the Shuliks' portfolio was sold in order to effectuate Granville's advice to "go short," id. at P 27, a decision which resulted in substantial losses. In an attempt to recoup some of these losses, Catanella began to purchase a large volume of shares in a company called Texas International. All blue chip securities, except holdings in Exxon and Smith, Kline were sold to purchase blocks of Texas International stock. Id. at P 30. When the price began to decline, the Shuliks requested that Catanella sell while they could still profit, but once again Catanella reminded them that they had no experience in the field and should "leave everything to him." Id. at P 32. Ultimately, the price dropped so low that virtually the entire portfolio was sold to satisfy margin calls. Id. at 33-35. In addition to losing their initial investment of seventy-two thousand dollars ($72,000), they paid eleven thousand dollars ($11,000) in brokerage commissions and over thirteen thousand dollars ($13,000) in interest on their margin account. Id. at P 36.

 The Shuliks accuse defendants of churning, manipulating their margin account to generate interest, failing to disclose the risks involved in margin trading and purchasing securities without reasonable investigation or justification, considering their stated investment goals. The Shuliks point out that they relied upon Hutton's reputation and Catanella's representations about his experience. Given their lack of sophistication, they followed Catanella's advice according him de facto control over their account. Id. at P 45. In deciding to trust and rely upon Catanella, plaintiffs did not know of his role in Brown. The complaint alleges violations of sections 10(b) and 20(a), RICO, the Investment Advisers Act and the Pennsylvania and New Jersey securities statutes. Claims are also included for fraud, conversion, negligence and breach of contract. The motion to dismiss in this case raises virtually identical arguments, contending that the complaint fails to state a claim under section 10(b), RICO, the Investment Advisers Act and the Pennsylvania and New Jersey securities statutes.

 D. The Singer Complaint

 Although Ronald Singer did not attend a Hutton-Granville lecture, he responded by telephone to a promotional advertisement and was subsequently contacted by Catanella. Singer Complaint at paras. 16-17. He explicitly informed Catanella of his interest in only safe investments. Catanella promised to invest ninety percent (90%) of his money in conservative high quality securities, using only ten percent (10%) for more speculative ventures. Id. at P 20. Catanella made a variety of representations about his experience and informational links, inducing Singer to open an account with him. Singer stated that he was investing the bulk of his assets, was unsophisticated, and was therefore relying on Catanella. He accorded the broker broad discretionary powers. Id. at P 21. Contrary to the investor's expectations, Catanella engaged in highly speculative maneuvering, selling short, on margin and purchasing options. He misrepresented the risks, failing to disclose, inter alia, that by trading on margin, Singer was actually gambling with more money on the table. He failed to explain how interest was computed, the extent to which Hutton benefitted from the margin account and the eventuality of margin calls. He also indicated that trading on margin was suitable for someone with Singer's investment objectives. Id. at P 26. However, the margin account was allegedly opened primarily to generate interest income for Hutton. Id. at P 27. Defendants also are accused of churning. Id. at P 37. When the value of Singer's portfolio began to decline, Catanella reassured him that he would handle everything and would "turn things around." Id. at P 30. To recoup, Catanella began purchasing only Texas International, an allegedly undervalued stock. The suitability of this volatile stock was misrepresented and, as mentioned above, its market price began to plummet. Margin calls led Singer to owe Hutton approximately twelve thousand dollars ($12,000). Id. at 35. Allegations with respect to Brown also find themselves in this complaint. Singer invokes sections 10(b), 12(2), 15 and 20(a); RICO and the Pennsylvania and New Jersey securities statutes. The full panoply of state common law claims are also included.

 Once again, the motions to dismiss attack the legal sufficiency of the securities and RICO claims. Defendants also contend that the churning allegations lack the specificity required under Fed. R. Civ. P. 9(b). Finally, defendants incorporate all arguments raised in the Taraborelli motion.

 E. The Rastelli Complaint

 The Rastelli complaint is a virtual carbon copy of Singer. Consequently, the motion to dismiss asserts the same arguments raised in the Singer motion.

 III. DISCUSSION

 A. Pleading Deficiencies

 In addition to more substantive attacks, defendants argue that all of the complaints suffer from fatal pleading flaws. The allegations are assailed under Rules 8 and 9(b) of the Federal Rules of Civil Procedure. Moreover, portions of the complaints are characterized as "immaterial, impertinent or scandalous," worthy of being stricken under Rules 11 and 12(f). I shall address these contentions seriatim.

 1. Specificity and Rule 9(b)

 Rule 9(b) of the Federal Rules of Civil Procedure requires allegations of fraud to be pled with particularity. *fn7" Defendants argue that plaintiffs' averments are conclusory, lacking the factual specificity necessary to formulate an intelligent response. They cite plaintiffs' failure to furnish the details typically required of newspaper reporters -- the who, what, where, when and how of the misrepresentations and omissions. The allegations of scienter are condemned as faulty as are the charges of churning. Defendants contend that the RICO counts are predicated upon vacuous and deficient allegations of securities fraud. As an alternative to dismissal, defendants seek a more definite statement under Fed. R. Civ. P. 12(e).

 Rule 9(b)'s particularity requirements prohibits reliance upon "unsubstantiated conclusory allegations." Juster v. Rothschild, Unterberg, Towbin, 554 F. Supp. 331, 332 (S.D.N.Y. 1983) (quoting Vetter v. Shearson Hayden Stone, Inc., 481 F. Supp. 64, 65 (S.D.N.Y. 1979). Accord Decker v. Massey-Ferguson, Ltd, 681 F.2d 111, 115 (2d Cir. 1982); Segal v. Gordon, 467 F.2d 602, 607 (2d Cir. 1972); Mauriber v. Shearson/American Express, Inc., 567 F. Supp. 1231, 1236 (S.D.N.Y. 1983); Kimmel v. Peterson, 565 F. Supp. 476, 481, (E.D. Pa. 1983); Merrill Lynch, Pierce, Fenner & Smith v. DelValle, 528 F. Supp. 147, 149 (S.D. Fla. 1981); Goodman v. Moyer, 523 F. Supp. 33, 35 (E.D. Pa. 1981). As the Second Circuit stated in Segal, "10b-5 violations will not pass scrutiny if they do not allege with some specificity the statements allegedly constituting fraud." 467 F.2d at 607. The purpose for this rule is two-fold. It protects parties from frivolous allegations of fraud. As Wright and Miller noted; "It is a serious matter to charge a person with fraud and hence no one is permitted to do so unless he is willing to put himself on record as to what the alleged fraud consists of specifically." 5 C. Wright & A. Miller, Federal Practice & Procedure, § 1298 at 413 (1969) (footnotes omitted). It also serves a notice function. To comply with the rule, a complaint must contain sufficient detail to apprise the defendants of the claims against them and allow them to formulate a meaningful response. See e.g., Gottreich v. San Francisco Investment Corp., 552 F.2d 866 (9th Cir. 1977); Kimmel, 565 F. Supp. at 481; Kaufman v. Magid, 539 F. Supp. 1088, 1092-93 (D. Mass. 1982); Baselski v. Paine, Webber, Jackson & Curtis, Inc., 514 F. Supp. 535, 540 (N.D. Ill. 1981); Zaretsky v. E.F. Hutton & Co., Inc., 509 F. Supp. 68, 74 n.27 (S.D.N.Y. 1981); Posner v. Coopers & Lybrand, 92 F.R.D. 765, 768 (S.D.N.Y. 1981), aff'd mem., 697 F.2d 296 (2d Cir. 1982). Although it is difficult to describe abstractly the quantum of specificity required, the rule is generally deemed satisfied where the complaint details the time, place, substance of the alleged misrepresentations, as well as the identity of the individual perpetrating the fraud. See e.g., Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir. 1982), aff'd en banc, 710 F.2d 1361 (8th Cir. 1983), cert. denied, 464 U.S. 1008, 104 S. Ct. 527, 78 L. Ed. 2d 710, 52 U.S.L.W. 3440 (1983); Kaufman, 539 F. Supp. at 1093; Baselski, 514 F. Supp. at 540; Troyer v. Karcagi, 476 F. Supp. 1142, 1149 (S.D.N.Y. 1979). However, as the Baselski court noted; "the sufficiency of a pleading under this rule also varies with the complexity of the transaction. When the transactions are numerous and take place over an extended period of time, less specificity is required." 514 F. Supp. at 540 (citations omitted). Furthermore, Rule 9(b) must be read in conjunction with Rule 8(a) which requires only a short and plain statement of the cause of action. *fn8" Therefore, the rule should not be applied with such draconian strictness as to undermine the liberal spirit of the Federal Rules of Civil Procedure.

 Considering the complaints in light of the standards articulated above, I conclude that dismissal is not warranted. The Gaugler complaint sets out the churning allegations in exacting detail, including the names of the securities allegedly churned, the commissions generated, the frequency of trades and the turnover ratio. *fn9" Gaugler Amended Complaint at para. 16i-x. In addition, various misrepresentations and omissions are described, accompanied by the substance of the statements, the identity of the speaker and why they are alleged to be fraudulent. The only thing missing is the exact date on which each incident occurred. However, there is more than sufficient information to apprise defendants of the claims against them and aid in formulating a response. The Gaugler complaint does not offend Rule 9(b) and neither dismissal nor a more definite statement is warranted.

 The Shulik, Rastelli and Singer complaints, while not as detailed as the amended complaint in Gaugler, still pass muster under Rule 9(b). They contain much more than the conclusory allegations of fraud that defendants portray. A course of fraudulent activity is chronicled, including a variety of misrepresentations and omissions, the substance of which is described in the complaints. The relative knowledge of the parties is outlined and the perpetrator of the fraud identified. The breadth of the allegations convinces me that the fraud aspects of these complaints are not "vexatious," brought only to tarnish the defendants' reputations. Although not paragons of specificity, I conclude that the allegations stated are sufficient to place defendants on notice and allow them to respond. As the court in Mauriber noted; "I find no greater merit in defendant's remaining scattershot contentions that the complaint omits various details. . . . The complaint is not deficient for failing to state every detail that might be a proper subject for interrogatories." 567 F. Supp. at 1236. I recognize, as did the court in Mauriber, that the actual shaping of issues in complex cases takes place during the discovery process. See also Christidis v. First Pennsylvania Mortgage Trust, 717 F.2d 96, 99-100 (3d Cir. 1983).

  However, I do note that the churning charges in these complaints are somewhat conclusory. The Shulik complaint states the amount of commissions paid to defendants. The Rastelli and Singer complaints assert only that plaintiffs' portfolios were churned to generate commissions and in direct contradiction to plaintiffs' investment instructions. Defendants argue that these allegations are insufficient under Rule 9(b) principally because they fail to identify those transactions alleged to be improper. Notwithstanding that some courts might, in their discretion, require more specificity to maintain a churning claim than is present here, see Russo v. Bache Halsey Stuart Shields, Inc., 554 F. Supp. 613, 617-18 (N.D. Ill. 1982); Vetter v. Shearson Hayden Stone, Inc., 481 F. Supp. 64, 66 (S.D.N.Y. 1979); Fein v. Shearson Hayden, Stone, Inc., 461 F. Supp. 137, 142-43 (S.D.N.Y. 1978), I will not dismiss these portions of the complaints. See e.g., Kaufman v. Magid, 539 F. Supp. 1088, 1095 (D. Mass. 1982) (general allegations of churning, tracking definition held sufficient). As the Baselski court noted, where the transactions are numerous and stretch over an extended period of time, less specificity is required. 514 F. Supp. at 540. Given the time frame involved in these complaints and the potentially large number of transactions involved, a requirement that plaintiff list each allegedly fraudulent purchase and sale would be unduly burdensome and undermine the liberal notice pleading embodied in the Federal Rules of Civil Procedure. *fn10" Accord Baselski, 514 F. Supp. at 541 n.2. Moreover, unless they have been diligent record keepers, plaintiffs may lack, pre-discovery, detailed information necessary to list all transactions or calculate turnover ratios. The records containing that information are most likely in the possession of defendants. Although I do not sanction conclusory pleading and would prefer more detail, I decline to impose requirements that may bar otherwise deserving plaintiffs from vindicating their claims. Even assuming that plaintiffs do possess the necessary information, dismissal or requiring a more definite statement would serve little practical utility. Defendants have been accused of churning and have sufficient facts to admit or deny that allegation. Amendments to the complaints would only delay what already appears to be a protracted suit. As this court noted; "only through discovery will both sides gain the information required to assert their respective claims and defenses." Kimmel, 565 F. Supp. at 482.

 The Taraborelli complaint is the least specific of the five. Although the pleading sets forth in great detail Catanella's involvement in Brown and the findings in that case, the other allegations of fraud are somewhat conclusory. The factual background is provided, including Hutton's role in launching Catanella's career with the aid of the Granville seminars. However, the ultimate allegations of fraud are sparse. *fn11" Plaintiffs' response concedes that the requisite particularity is lacking, but argues that his claim of fraud is predicated only upon Catanella's failure to disclose his role in Brown. See Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss the Complaint at 18. The other allegations of fraud, including churning and option and margin trading without disclosing the inherent risks, are said to support the claim of fraud, rather than constitute it. Id. Frankly, I am perplexed how an allegation of churning relates to the failure to disclose the existence of a previous action. It seems apparent that these are separate and distinct instances of fraudulent conduct. However, I shall accept plaintiffs' representation that the fraudulent behavior is limited to Brown. The averments surrounding Brown are pled with sufficient particularity under Rule 9(b). Given plaintiffs' position, I need not reach the specificity of the other allegations of fraud and shall deny the motion to dismiss. However, this issue may arise again if I am called upon to decide a class certification motion. Should plaintiff desire at that time to include other instances of fraud, he will be required to furnish additional factual allegations. *fn12" Defendants' motions to dismiss on specificity grounds are therefore denied. *fn13"

 2. Immaterial, Impertinent or Scandalous Matter

 Defendants move to strike portions of the complaints as "immaterial, impertinent or scandalous" under Fed. R. Civ. P. 12(f). The challenge focuses upon the RICO counts, which set out at length the details of the Brown action. *fn14" In particular, defendants attack the quotation of large excerpts from the court's findings in Brown. It is argued that Brown has nothing to do with this action, is not material and is extremely prejudicial. In addition, defendants characterize the averments as an attempt to prove that Catanella acted in conformity with his prior conduct, an impermissible inference under Rule 404(b) of the Federal Rules of Evidence.

 The standard for striking under Rule 12(f) is strict. One court has stated that "only allegations that are 'so unrelated to plaintiffs' claims as to be unworthy of any consideration as a defense' should be striken." EEOC v. Ford Motor Co., 529 F. Supp. 643, 644 (D. Col. 1982) (quoting C. Wright & A. Miller, Federal Practice and Procedure § 1380 at 784 (1969)). Similarly, immateriality under this rule has been defined as "any matter having no value in developing the issues of a case." Oaks v. City of Fairhope, Ala., 515 F. Supp. 1004, 1032 (S.D. Ala. 1981).

 Defendants' arguments overlook the fact that the Brown litigation is highly relevant in two major respects. Catanella's previous involvement in securities fraud may help establish the "pattern of racketeering" prong of RICO. *fn15" More importantly, the failure to disclose Catanella's role in Brown is one of the alleged acts of fraud. The details surrounding the suit become crucial. For example, the more outrageous the fraud in Brown, arguably the more material becomes the failure to disclose. The actual resolution of the suit may also be highly probative with respect to Hutton's level of knowledge. I do not interpret these allegations as an attempt to prove Catanella's present liability because of the marked similarity between the activities. Quoting ad nauseum from the court's findings might not have been necessary, however, the content of those findings is not "so unrelated to plaintiffs' claims" as to warrant striking them under Rule 12(f). By so holding, I do not rule on the legal sufficiency of a section 10(b) claim premised upon the failure to disclose Brown, an issue which shall be analyzed infra. I decide only that, as a matter of pleading, dismissal is not appropriate.

 3. Simplicity and Rule 8

 Defendants attack the RICO counts for their verbosity, arguing that Fed. R. Civ. P. 8 is thereby offended. Rule 8(a)(2) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief. . . ." This rule sets the liberal tone of the federal pleading requirements, in sharp contrast to the earlier formalistic code and writ pleading. Indeed, Rule 8(e)(1) states that "each averment of a pleading shall be simple, concise, and direct. No technical forms of pleading or motions are required." Fed. R. Civ. P. 8(e)(1) (emphasis added). However, the Rule must be applied with some logic and common sense. The length of a pleading will depend upon a number of factors, not the least of which is the complexity of the case. Accord Kaufman, 539 F. Supp. at 1092.

 The RICO counts, detailing the findings in Brown, are indeed prolix. However, as determined above, these allegations may be relevant, although very lengthy and redundant in spots. I shall not go through each count and determine which averments ought to remain and which are potentially extraneous. I agree with the sentiments expressed in Kaufman:

 
The plaintiffs in this action are alleging the violation of numerous provisions in the federal securities laws, which are complex in their application. This makes "concise" pleading difficult.
 
. . . .
 
What verbosity and repetition appears in the complaint does not, standing alone, justify dismissal under Rule 8.

 Kaufman, 539 F. Supp. at 1092 (emphasis added). Accordingly, the RICO counts shall not be dismissed pursuant to Fed. R. Civ. P. 8.

 In Gaugler and Shulik defendants also argue that the state law claims lack sufficient factual allegations to pass muster under Rule 8(a)(2). For example, the contract claim in Gaugler is faulted for failing to set forth when the contract was formed and the substance of its terms. Similarly, on the breach of fiduciary duty issue, plaintiffs allegedly fail to spell out the nature of the claimed duty. This argument misperceives the purpose of Rule 8. Striking complaints that fall short of perfection is the very practice which the Federal Rules sought to end. All that is required is a sufficient factual basis to place defendants on notice and allow them to frame a response. This has been satisfied here. The complaints detail the genesis and evolution of the parties' relationship. It does not require extraordinary perception to recognize that both the contract and fiduciary duty claimed arose from the brokerage-customer relationship. The remaining state law claims are also predicated upon sufficient factual bases and shall not be dismissed.

 1. Section 10(b)

 Section 10(b) *fn16" of the Securities Exchange Act of 1934 and its implementing rule, 10b-5 *fn17" broadly prohibit fraud in connection with the purchase and sale of securities. The fundamental purpose of the 1934 Act was "to substitute a philosophy of full disclosure for the philosophy of caveat emptor. . . ." Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 92 S. Ct. 1456, 31 L. Ed. 2d 741 (1972) (quoting SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186, 11 L. Ed. 2d 237, 84 S. Ct. 275 (1963)). The Act is to be applied "not technically and restrictively, but flexibly to effectuate its remedial purposes." Affiliated Ute, 406 U.S. at 151 (quoting SEC v. Capital Gains Research Bureau, 375 U.S. 180, 195, 11 L. Ed. 2d 237, 84 S. Ct. 275 (1963)). See also Superintendent of Insurance v. Bankers Life & Casualty Co., 404 U.S. 6, 12, 30 L. Ed. 2d 128, 92 S. Ct. 165 (1971). Although drafted as an SEC enforcement provision, a private right of action "has been consistently recognized for more than 35 years. The existence of this implied remedy is beyond peradventure." *fn18" Herman & Maclean v. Huddleston, 459 U.S. 375, 103 S. Ct. 683, 687, 74 L. Ed. 2d 548 (1983).

 Judicial limitations which have been placed upon a section 10(b) claim also serve to define the elements of the cause of action. For example, in order to have standing to sue, a plaintiff must have either purchased or sold securities. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 749, 44 L. Ed. 2d 539, 95 S. Ct. 1917 (1975). The fraudulent conduct alleged must take the form of a misstatement, omission, manipulation or deception. The mere breach of a fiduciary duty is not actionable. See Santa Fe Ind., Inc. v. Green, 430 U.S. 462, 477, 479-80, 97 S. Ct. 1292, 51 L. Ed. 2d 480 (1977). As the statutory language indicates, the fraud must be "in connection with" the purchase or sale. In misstatement and omission cases, the controverted fact must also be "material." The definition of materiality in section 10(b) cases has been borrowed from the section 14(a) context. Quoting from TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 48 L. Ed. 2d 757, 96 S. Ct. 2126 (1976), the Third Circuit describes materiality as "a substantial likelihood that, under all circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder." *fn19" Healey v. Catalyst Recovery of Pennsylvania, Inc., 616 F.2d 641, 647 (3d Cir. 1980).

 A plaintiff must also prove that the fraudulent conduct was accompanied by "scienter." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976). Although the Ernst court left the question open, this Circuit and others have held that reckless behavior is sufficient. *fn20" See e.g., Sirota v. Solitron Devices, Inc., 673 F.2d 566, 575 (2d Cir.), cert. denied, 459 U.S. 838, 103 S. Ct. 86, 74 L. Ed. 2d 80 (1982); McLean v. Alexander, 599 F.2d 1190, 1197-98 (3d Cir. 1979); Nelson v. Serwold, 576 F.2d 1332, 1337 (9th Cir.), cert. denied, 439 U.S. 970, 58 L. Ed. 2d 431, 99 S. Ct. 464 (1978); Rolf v. Blyth, Eastman Dillon & Co., Inc., 570 F.2d 38, 44-47 (2d Cir.), cert. denied, 439 U.S. 1039, 58 L. Ed. 2d 698, 99 S. Ct. 642 (1978); Coleco Industries, Inc. v. Berman, 567 F.2d 569, 574 (3d Cir. 1977), cert. denied, 439 U.S. 830, 58 L. Ed. 2d 124, 99 S. Ct. 106 (1978); First Virginia Bankshares v. Benson, 559 F.2d 1307, 1314 (5th Cir. 1977), cert. denied, sub nom., Heller & Co. v. First Virginia Bankshares, 435 U.S. 952, 55 L. Ed. 2d 802, 98 S. Ct. 1580 (1978); Sundstrand Corp. v. Sun Chemical Corp., 553 F.2d 1033, 1044-45 (7th Cir.), cert. denied, 434 U.S. 875, 98 S. Ct. 224, 54 L. Ed. 2d 155 (1977).

 The final two elements of a section 10b cause of action are reliance and causation. These related concepts have generated a good deal of uncertainty, see e.g., Sharp v. Coopers & Lybrand, 649 F.2d 175, 186-89 (3d Cir. 1981), cert. denied, 455 U.S. 938, 71 L. Ed. 2d 648, 102 S. Ct. 1427 (1982) (reliance); Huddleston v. Herman & MacLean, 640 F.2d 534, 547-50 (5th Cir. 1981), aff'd in part, rev'd in part, 459 U.S. 375, 103 S. Ct. 683, 74 L. Ed. 2d 548 (1983) (reliance and causation). In analyzing these concepts, I shall endeavor not to add to the existing confusion.

 Defendants' section 10(b) arguments can be broken down into four major categories. First, defendants make a general Santa Fe v. Green argument, portraying the allegations as little more than breaches of fiduciary duties, devoid of the requisite material misstatements or omissions. The churning claims are also attacked as insufficient to state a cause of action. However, the more interesting and problematic issues presented focus upon the causation and "in connection with" elements.

 (a) The Scope of Prohibited Conduct

 When minority shareholders challenged the Delaware statutory short form merger as a "device, scheme, or artifice to defraud," the Supreme Court decided that it was time to put a halt to the seemingly endless expansion of the scope of section 10(b). Therefore, in Santa Fe v. Green, 430 U.S. 462, 51 L. Ed. 2d 480, 97 S. Ct. 1292 (1977), the Court held that in the absence of some form of deception, misrepresentation or non-disclosure, a breach of a fiduciary duty is not actionable under section 10(b). Santa Fe, 430 U.S. at 475-77. No longer can the catch-all anti-fraud provision be used to redress claims of corporate mismanagement. Id. at 477. Defendants endeavor to characterize the complaints as Santa Fe pleadings which allege little more than breach of a fiduciary duty or the failure to disclose such a breach. *fn21" Indeed, plaintiffs are portrayed as poor losers -- investors who are now crying over bad advice. After reviewing the complaints, I cannot agree.

 Putting aside the churning allegations, I find allegations of material misrepresentations and omissions which elevate plaintiffs' complaints beyond the reach of Santa Fe. The complaints allege, explicitly or inferentially, knowledge or recklessness on the part of defendants -- thus fulfilling the scienter requirement. *fn22" See e.g., Gaugler Amended Complaint, paras. 25F, 25H, 29; Taraborelli Complaint, paras. 25, 26, 28; Shulik Complaint para. 40, 50; Singer Complaint, para. 39; Rastelli Complaint, para. 35.

 The failure to disclose Catanella's role in the Brown litigation is an omission which, if material, would fall within the scope of section 10(b). In Sutton v. Shearson Hayden Stone, Inc., 490 F. Supp. 98, (S.D.N.Y. 1980), a broker's failure to disclose that he had been the subject of previous customer complaints survived a motion to dismiss. Although the court seemed concerned about proof of materiality, there was no suggestion that this was simply a breach of fiduciary duty barred by Santa Fe. Id. at 101. Shearson Hayden paid $34,500 to satisfy irate and potentially litigious customers. Sutton, in turn, signed a promissory note for that amount. In contrast, the Brown litigation resulted in an $813,000 verdict. The court in Sutton found that disclosure of the customer complaints would serve the purpose of protecting investors -- the goal of section 10(b). Id. at 101-03. I agree. Moreover, the allegations here indicate that plaintiffs were not sophisticated and relied heavily upon Catanella. Thus, his track record of self-dealing, churning and mishandling of other portfolios would be highly material. *fn23" Catanella's affirmative misrepresentation of his expertise in option trading, which induced Gaugler to purchase options, presents a similar situation. After losing all of the funds so invested, Catanella admitted that he had never before traded in options. Misrepresentation of expertise has been held actionable under section 10(b). See Marbury Management, Inc. v. Kohn, 629 F.2d 705, 707-08 (2d Cir. 1980), cert. denied, sub. nom., Wood Walker & Co. v. Marbury Management, Inc., 449 U.S. 1011, 66 L. Ed. 2d 469, 101 S. Ct. 566 (1980) (trainee represented himself as "licensed registered representative" and "portfolio management specialist").

 Nor are the material omissions and misrepresentations limited to the Brown litigation. The Singer and Rastelli complaints contain detailed descriptions of all of the undisclosed risks and costs associated with margin trading. The mechanics of a margin account were not explained -- plaintiffs were not told that they were actually placing more money at risk. They were not informed about margin calls or the interest computation and were led to believe that margin trading was "prudent and cautious." Singer Complaint, para. 26; Rastelli Complaint, para. 26. The Shulik Complaint also contains averments of misrepresentations with respect to the risks of margin trading. Shulik Complaint, paras. 23, 25, 26. Misrepresentations or omissions with respect to the risks inherent in margin trading are within the scope of section 10(b). See e.g., Arrington v. Merrill Lynch, Pierce, Fenner & Smith, 651 F.2d 615, 619 (9th Cir. 1981); Yancoski v. E.F. Hutton & Co., Inc., 581 F. Supp. 88, slip op. at 7 (E.D. Pa. 1983). Catanella incorrectly advised Rastelli that the high volume of trading was appropriate, when in fact his account was being churned. This allegation also states a claim under section 10(b). Accord Yancoski, slip op. at 7. In all complaints, Catanella is accused of intentionally ignoring plaintiffs' conservative investment goals, plunging money into speculative, high risk securities. This is a material misrepresentation, rather than merely a breach of fiduciary duty. See Miley v. Oppenheimer & Co., Inc., 637 F.2d 318, 326 (5th Cir. 1981); Yancoski, slip op. at 7. See also Clark v. John Lamula Inv. Inc., 583 F.2d 594, 599-601 (2d Cir. 1978) (recommending unsuitable debentures violates section 10(b)). Finally, the complaints are replete with allegations of self-dealing and the general mishandling of plaintiffs' accounts. Defendants' goals were not to serve their customers, but rather to generate commissions and interest for themselves. Faced with a similar situation, the court in Troyer found material misrepresentations and omissions in defendant's failure to disclose his self-dealing and mishandling of plaintiffs' portfolio. 476 F. Supp. at 1146-47. I agree with the approach taken in Troyer. The various allegations, taken together, form a course of fraudulent and deceptive conduct, transcending Santa Fe v. Green and adequately stating a claim under section 10(b). *fn24"

 (b) Churning

 Churning is a term of art which is actually a "synonym for 'overtrading.'" Armstrong v. McAlpin, 699 F.2d 79, 90 (2d Cir. 1983) (citing Hazard & Christie, The Investment Business 68 (1964)). It occurs when a broker engages in excessive trading for the purpose of generating commissions, without regard to the customer's investment objectives. See e.g., Costello v. Oppenheimer & Co., Inc., 711 F.2d 1361, 1367 (7th Cir. 1983); Thompson v. Smith Barney, Harris Upham & Co., Inc., 709 F.2d 1413, 1416 (11th Cir. 1983); Armstrong, 699 F.2d at 90; Petrites v. J.C. Bradford, 646 F.2d 1033, 1035 (5th Cir. 1981); Miley v. Oppenheimer & Co., Inc., 637 F.2d 318, 324 (5th Cir. 1981); Mihara v. Dean Witter & Co., Inc., 619 F.2d 814, 820 (9th Cir. 1980); Williamsport Firemen Pension Boards I and II v. E.F. Hutton & Co., Inc., 567 F. Supp. 140, 144 (M.D. Pa. 1983). Invoking the talismanic Santa Fe decision, the Gaugler defendants argue that the churning claim represents simply another chapter in state fiduciary duty law. Similarly, they argue that churning itself is insufficient to state a section 10(b) claim. Rather, churning allegations must be accompanied by averments of specific misrepresentations, omissions or acts of deception. Defendants also attack all complaints for the lack of detail with respect to the allegedly improper transactions. For the most part, these arguments were raised and rejected in the section discussing specificity.

 It appears undisputed that churning does state a cause of action under section 10(b). See e.g., Costello v. Oppenheimer & Co., Inc., 711 F.2d 1361, 1368 (7th Cir. 1983); Thompson v. Smith Barney, Harris Upham & Co., Inc., 709 F.2d 1413, 1416-17 (11th Cir. 1983); Follansbee v. Davis, Skaggs & Co., Inc., 681 F.2d 673, 676 (9th Cir. 1982); Miley v. Oppenheimer, 637 F.2d 318, 324 (5th Cir. 1981); Mihara v. Dean Witter & Co., Inc., 619 F.2d 814, 820 (9th Cir. 1980); Carras v. Burns, 516 F.2d 251, 258 (4th Cir. 1975); Landry v. Hemphill, Noyes & Co., 473 F.2d 365, 368 n.1 (1st Cir.), cert. denied, 414 U.S. 1002, 38 L. Ed. 2d 237, 94 S. Ct. 356 (1973); Hecht v. Harris Upham & Co., 430 F.2d 1202, 1206-1207 (9th Cir. 1970); Mauriber v. Shearson/American Express, Inc., 567 F. Supp. 1231, 1237-38 (S.D.N.Y. 1983); Kaufman v. Magid, 539 F. Supp. 1088, 1095 (D. Mass. 1982); Kaufman v. Merrill Lynch, Pierce, Fenner & Smith, 464 F. Supp. 528, 534 (D. Md. 1978); Dandorph v. Fahnestock & Co., 462 F. Supp. 961, 963 (D. Conn. 1979); Kravitz v. Pressman, Frohlich & Frost, Inc., 447 F. Supp. 203, 211 (D. Mass. 1978); Powers v. Francis I. DuPont & Co., 344 F. Supp. 429, 431-32 (E.D. Pa. 1972); Lorenz v. Watson, 258 F. Supp. 724, 730 (E.D. Pa. 1966). As the court stated in Follansbee:

 
It is settled that when a broker, unfaithful to the trust of his customer, churns an account in the brokers control for the purpose of enhancing the broker's commission income and in disregard of the client's interest, there is a violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78a et seq., and Securities and Exchange Commission Rule 10b-5.

 681 F.2d at 676. In order to prove a churning claim, plaintiff must show that the broker exercised control over the account and that the trading was excessive. *fn25" See e.g., Costello, 711 F.2d at 1368; Thompson, 709 F.2d at 1416-17; Miley, 637 F.2d at 324; Mihara, 619 F.2d at 821; Kaufman, 539 F. Supp. at 1095; Zaretsky v. E.F. Hutton & Co., Inc., 509 F. Supp. 68, 74 (S.D.N.Y. 1981). Although courts seem to be in agreement with respect to these two elements, some have added the requirement that the broker act "with the intent to defraud or with willful and reckless disregard for the investor's interest." Thompson, 709 F.2d at 1417; Miley, 637 F.2d at 324; Mihara, 619 F.2d at 821. *fn26" However, this prong only appears to formalize the general scienter requirement necessary for all section 10(b) actions.

 Although the prohibition on churning can probably be traced to the fiduciary responsibility a broker owes to its customers, as the above cited cases demonstrate, churning does rise to the level of a section 10(b) violation. The act of churning itself is a deception. As the Costello court noted; "as a scheme, the essence of which is deception of a relying customer, churning, as a matter of law, is considered a violation of section 10(b) and Rule 10b-5." Costello, 711 F.2d at 1368 (citations omitted) (emphasis added). Similarly, the Ninth Circuit stated "the churning of a client's account is, in itself, a scheme or artifice to defraud within the meaning of Rule 10b-5." Mihara, 619 F.2d at 821. Accord Yancoski, slip op. at 5-6. In Armstrong v. McAlpin, 699 F.2d 79 (2d Cir. 1983), the district court had dismissed the churning claim for failing to allege an accompanying misrepresentation or omission. In reversing that decision, the court stated that "churning, in and of itself, may be a deceptive and manipulative device under section 10(b), the scienter required by section 10(b) being implicit in the nature of the conduct. The district court's reliance upon Santa Fe Industries v. Green, supra, 430 U.S. 462, was misplaced." Armstrong, 699 F.2d at 91 (citations omitted). I agree that the utilization of a customer's account to generate omissions, without regard to the customer's investment objectives, is "deceptive" within the meaning of section 10(b). To require a plaintiff to prove something in addition to the elements of control and excessiveness would be redundant and would contravene the overriding purpose behind the Securities and Exchange Act of 1934 -- the protection of the investing public.

 Defendants' other arguments with respect to churning are made in the guise of pleading deficiencies under Rule 9(b) of the Federal Rules of Civil Procedure. I have already rejected the suggestion that a plaintiff must list all allegedly tainted transactions and calculate the turnover ratio. Although not as detailed as defendants might wish, the complaints do contain allegations of broad discretionary control and excessive trading in light of conservative investment objectives. See e.g., Shulik Complaint, paras. 19, 39, 44, 45; Singer Complaint, paras. 21, 24; Rastelli Complaint, paras. 21, 24. Moreover, paragraph 16 of the Gaugler Complaint sets forth in unassailable detail the names of the securities churned, the frequency of trading, the commissions paid and the estimated turnover ratio. Therefore, I conclude that churning claims are sufficient to survive a motion to dismiss.

 (c) In Connection With

 Section 10(b) and Rule 10b-5 proscribe fraud "in connection with the purchase or sale of any security." 15 U.S.C. § 78j (1976); 17 C.F.R. § 240.10b-5 (1983). Defendants contend that many of plaintiffs' allegations do not arise "in connection with" an actual purchase or sale. Although the failure to disclose Brown is the focal point of this argument, defendants cite the failure to disclose the risks of margin trading, churning, unsuitable purchases and other averments falling into the general category of mishandling plaintiffs' accounts. *fn27" Defendants reason that these allegations reflect upon the choice of, or confidence in a broker, rather than the decision to buy or sell a particular stock. According to defendants, the latter satisfies the "connection" element, while the former does not. I do not agree.

 Despite voluminous caselaw in the section 10(b) area, the "in connection with" element has received little judicial attention. The concept does not lend itself to definition and its application has generated more than its share of confusion. The only Supreme Court precedent, Superintendent of Insurance of New York v. Bankers Life & Cas. Co., 404 U.S. 6, 30 L. Ed. 2d 128, 92 S. Ct. 165 (1971), provides little practical guidance. In Bankers Life, defendants essentially used the assets of a corporation, Manhattan Casualty Company, to acquire total ownership. Defendants purchased all of the stock of Manhattan using a check drawn at a financial institution. At the time the check was written, defendants had no funds on deposit there. After taking over Manhattan and installing a president, defendants induced the Board to sell some of its United States Treasury Bonds. The proceeds of the sale were used to cover the check with which the stock had been purchased. 404 U.S. at 7-8. Noting that "section 10(b) must be read flexibly, not technically and restrictively," id. at 12, the Court stated that "there was a 'sale' of a security and since fraud was used 'in connection with' it, there is a redress under § 10(b). . . ." Id. Although the Court did not explicitly define the "in connection with" element, it did explain that "Manhattan suffered an injury as a result of deceptive practices touching its sale of securities. . . ." Id. at 12-13. (emphasis added). Because of this phrase, Bankers Life is universally cited for the proposition that the connection requirement will be satisfied if the alleged fraud "touches" the purchase or sale. See e.g., Arrington v. Merrill Lynch, Pierce, Fenner & Smith, 651 F.2d 615, 619 (9th Cir. 1981); McGrath v. Zenith Radio Corp., 651 F.2d 458, 467 (7th Cir.), cert. denied, 454 U.S. 835, 70 L. Ed. 2d 114, 102 S. Ct. 136 (1981); Alley v. Miramon, 614 F.2d 1372, 1378 n.11 (5th Cir. 1980); Ketchum v. Green, 557 F.2d 1022, 1026 (3d Cir.) cert. denied, 434 U.S. 940, 54 L. Ed. 2d 300, 98 S. Ct. 431 (1977); Yancoski v. E.F. Hutton & Co., Inc., 581 F. Supp. 88, slip op. at 7 (E.D. Pa. 1983); Williamsport Firemen Pension Boards I and II v. E.F. Hutton & Co., Inc., 567 F. Supp. 140, 143 (M.D. Pa. 1983); Chemical Bank v. Arthur Andersen & Co., 552 F. Supp. 439, 451 (S.D.N.Y. 1982); Somogyi v. Butler, 518 F. Supp. 970, 985-86 (D.N.J. 1981).

 Bankers Life raises the question what constitutes "touching" a securities transaction. Although many courts have taken a broad view of this element, there exists a paucity of viable standards. The Fifth Circuit has noted that "the plaintiff . . . need not establish a direct or close relationship between the fraudulent transaction and the purchase or sale. . . ." Alley v. Miramon, 614 F.2d 1372, 1378 n.11 (5th Cir. 1980). Accord Brown v. Ivie, 661 F.2d 62, 65 (5th Cir. 1981), cert. denied, 455 U.S. 990, 71 L. Ed. 2d 850, 102 S. Ct. 1614 (1982). The Alley court went on to state that the requirement is "satisfied when the proscribed conduct and the sale are part of the same fraudulent scheme." 614 F.2d at 1378 n.11. In Chemical Bank v. Arthur Anderson & Co., the court explained that Bankers Life and its progeny "require a nexus, albeit not a direct or close relationship, between the allegedly fraudulent conduct and the sale of securities." 552 F. Supp. at 451. This Circuit has "attempted to etch more finely the contours of the 'in connection with' clause," noting that other courts "almost without exception . . . have found compliance . . . even where fraudulent conduct is implicated only tangentially in a securities ...


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