Securities Regulation
Lorenzo v. Securities and Exchange Commission, 587 U.S. ___, 139 S. Ct. 1094 (2019)
Study notes for Lorenzo v. SEC: professor notes, cold call prep, exam angles, and memory aids.
A person who knowingly disseminates false or misleading statements can be held primarily liable under securities law, regardless of being the 'maker' of those statements.
In 'Lorenzo v. SEC', the Supreme Court addressed the scope of liability under securities law, especially regarding the essential elements of fraud. Professor emphasis would likely revolve around the Court's interpretation of Rule 10b-5, specifically how disseminating false or misleading statements can expose individuals to liability despite not being the originators. Lorenzo served as a crucial precedent reflecting that intent to defraud, along with affirmative actions to mislead, are sufficient to impose liability under securities regulations, expanding accountability beyond just the 'makers' of false statements. This case accentuates the importance of individual responsibility in the securities marketplace as well as the SEC's role in enforcing compliance.
Disseminate Determinants: If you spread deceit, you’re on the hook!
| Case | Distinction |
|---|---|
| Janus Capital Group v. First Derivative Traders | Janus defined a 'maker' as someone who has ultimate authority over a statement; Lorenzo clarified that liability can exist without being the 'maker.' |
| Basic Inc. v. Levinson | Basic focused on materiality of false statements; Lorenzo emphasized the conduct of dissemination and intent to defraud. |
| Ernst & Ernst v. Hochfelder | Ernst focused on intent in a different context of securities fraud, whereas Lorenzo dealt directly with dissemination of already misleading information. |
Holding individuals liable for mere dissemination protects investors from the spread of false information, maintaining market integrity and trust.
Imposing liability on those who are not the original sources of misinformation may discourage communication and outreach in the investment community, potentially limiting disclosures.
This case may appear on exams in the context of discussing liability for dissemination of false statements and the interpretation of Rule 10b-5, especially regarding the distinction between primary liability and secondary liability.