Broker Not Banned but Still Liable for False Emails
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Broker Not Banned but Still Liable for False Emails

The Securities and Exchange Commission (SEC) found an investment broker sent email messages to investors containing misrepresentations about key features of a securities offering at the behest of his boss. The SEC concluded these emails were false or misleading and that the broker possessed the requisite intent to impose liability. Where the D.C. Court of Appeals took issue with the SEC was with its determination that the broker's conduct violated Rule 10b-5(b) barring the making of materially false statements in connection with the purchase or sale of securities. The court concluded the broker did not make the false statements at issue consistent with Rule 10b-5(b) because his boss, and not he, himself, retained “ultimate authority” over the statements. While the court maintained the broker’s conduct infringed the other securities fraud provisions he was charged with violating, it set aside the sanctions imposed and remanded for reassessment of the appropriate penalties.
 

Lorenzo v Securities and Exchange Commission