Lorenzo v. SEC

Supreme Court of the United States · 2019 · Corporations

587 U.S. 71 (2019)

Updated August 1, 2026

Corporationsdisseminationscheme liabilityRule 10b-5Rule 10b-5(a)Rule 10b-5(b)Rule 10b-5(c)Section 10(b)

Facts

Francis Lorenzo was director of investment banking at Charles Vista, whose only investment banking client at the time was Waste2Energy Holdings. After Waste2Energy disclosed that its intellectual property was worthless and that its total assets were about $370,552, Lorenzo sent two emails to prospective investors describing a debenture offering as having '3 layers of protection,' including $10 million in 'confirmed assets,' without disclosing the company's public write-off. Lorenzo testified that he sent the emails at his boss's direction using content his boss supplied and approved, and he signed the emails with his own name and title and invited recipients to call with questions. Lorenzo did not challenge the court of appeals' finding that he acted with intent to deceive, manipulate, or defraud.

Issue

Whether a person who is not the 'maker' of a false statement under Janus and Rule 10b-5(b) may nevertheless be primarily liable under Rule 10b-5(a) and (c), Exchange Act § 10(b), and Securities Act § 17(a)(1) for knowingly disseminating false or misleading statements to prospective investors with intent to defraud. Put differently, does fraudulent dissemination fall within the other antifraud provisions even when the conduct concerns a misstatement?

Rule

Dissemination of false or misleading statements to prospective investors with intent to defraud can fall within Rule 10b-5(a) and (c), Exchange Act § 10(b), and Securities Act § 17(a)(1), even when the disseminator did not 'make' the statements under Rule 10b-5(b). The securities antifraud provisions may overlap, and the specific false-statement provision in Rule 10b-5(b) does not make subsections (a) and (c) mutually exclusive or inapplicable to fraudulent dissemination.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Phoenix, Mira Solis works as a sales director for Desert Crest Securities, a fictional broker-dealer. Her supervisor writes an email falsely stating that a startup bond issuer has $18 million in audited assets; Mira knows the issuer disclosed the week before that most of those assets were worthless, but she sends the email under her own name to prospective investors and invites them to call her with questions.

In an SEC enforcement action, which is the strongest argument for primary liability against Mira?

Explanation. The majority held that a person who knowingly disseminates false or misleading statements to prospective investors with intent to defraud can be primarily liable under Rule 10b-5(a) and (c), § 10(b), and § 17(a)(1), even if that person is not the statement's maker under Rule 10b-5(b). Mira directly sent material falsehoods to investors, signed with her own identity, and invited follow-up, which fits the Court's reasoning.