Scope of Rule 10b-5 Liability Expanded
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Scope of Rule 10b-5 Liability Expanded

The Securities and Exchange Commission (SEC) found an investment banker guilty of securities fraud for e-mailing potential investors about a pending debenture offering for a client, while omitting the wholesale devaluation of the client's intangible assets. On appeal, sparring ensued over the question of whether the investment banker could be charged with making false statements under SEC Rule 10b-5 even though he was not technically the maker of those statements, but only disseminating them on behalf of his superiors. Abrogating a Ninth Circuit decision, the Supreme Court held a person or entity who disseminates false or misleading statements with the intent to defraud can violate the anti-fraud provisions of federal securities law, even if the person or entity could not be liable for securities fraud as the maker of an untrue statement of material fact.

Lorenzo v Securities and Exchange Commission