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False or Misleading Statements – Securities Exchange Act of 1934– Securities Act of 1933

By: Derek Hawkins//May 1, 2019//

False or Misleading Statements – Securities Exchange Act of 1934– Securities Act of 1933

By: Derek Hawkins//May 1, 2019//

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United States Supreme Court

Case Name: Francis V. Lorenzo v. Securities Exchange Commission

Case No.: 17-1077

Focus: False or Misleading Statements – Securities Exchange Act of 1934– Securities Act of 1933

Securities and Exchange Commission Rule 10b–5 makes it unlawful: “(a) To employ any device, scheme, or artifice to defraud, “(b) To make any untrue statement of a material fact . . . , or “(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit . . . in connection with the purchase or sale of any security.” 17 CFR §240.10b–5 (2018).

In Janus Capital Group, Inc. v. First Derivative Traders, 564 U. S. 135 (2011), we examined the second of these provisions, Rule 10b–5(b), which forbids the “making” of “any untrue statement of a material fact.” We held that the “maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.” Id., at 142 (emphasis added). We said that “without control, a person or entity can merely suggest what to say, not ‘make’ a statement in its own right.” Ibid. And we illustrated our holding with an analogy: “[W]hen a speechwriter drafts a speech, the content is entirely within the control of the person who delivers it. And it is the speaker who takes credit—or blame—for what is ultimately said.” Id., at 143. On the facts of Janus, this meant that an investment adviser who had merely “participated in the drafting of a false statement” “made” by another could not be held liable in a private action under subsection (b) of Rule 10b–5. Id., at 145.

In this case, we consider whether those who do not “make” statements (as Janus defined “make”), but who disseminate false or misleading statements to potential investors with the intent to defraud, can be found to have violated the other parts of Rule 10b–5, subsections (a) and (c), as well as related provisions of the securities laws, §10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, as amended, 15 U. S. C. §78j(b), and §17(a)(1) of the Securities Act of 1933, 48 Stat. 84–85, as amended, 15 U. S. C. §77q(a)(1). We believe that they can.

Affirmed

Dissenting: THOMAS, J., filed a dissenting opinion, in which GORSUCH, J., joined.

Concurring:

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.

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