Lorenzo v. SEC

Dissemination of false or misleading statements with intent to defraud can fall within the scope of Rules 10b–5(a) and (c) of the Securities Exchange Act, as well as the relevant statutory provisions, even if the disseminator did not “make” the statements and consequently falls outside Rule 10b–5(b).

Rule 10(b)-5 makes unlawful (a) the employment of a “device, scheme or artifice to defraud,” (b) the making of any “untrue statements of material fact,” or (c) the engagement in fraudulent or deceitful “practice, act or course of business” in connection with the purchase and sale of securities. In Janus Capital Group, Inc. v. First Derivative Traders, 564 U. S. 135 (2011), the Supreme Court held that to be a statement maker, one must have ultimate authority over the content and delivery of the statement. Petitioner, a director of investment banking, sent emails to prospective investors describing a potential investment with assets confirmed at $10 million. Petitioner had knowledge that the company had recently disclosed assets of less than $400,000. The Commission found Petitioner violated Rule 10(b)-5 by sending misleading statements with the intent to defraud. The Court of Appeals found Petitioner not liable as a “maker” under the Janus rule. On appeal, the Supreme Court held that dissemination of false or misleading statements with intent to defraud can fall within the scope of Rules 10b–5(a) and (c), as well as the relevant statutory provisions, even if the disseminator did not “make” the statements and consequently falls outside Rule 10b–5(b). The Court found that the words of the rule are sufficiently broad to support the conclusion that by sending emails containing information he knew to be materially false, Petitioner violated subsections (a) and (c) of Rule 10(b).