Lorenzo v. SEC — Supreme Court Issues Decision on “Scheme Liability” Under Rule 10b-5: U.S. Supreme Court Rules That Defendants Can Be Held Primarily Liable for Securities Scheme Fraud for Knowingly Disseminating the Misstatements of Others

Sullivan & Cromwell LLP - March 28, 2019
Read More

Yesterday, in a widely-watched securities case, the U.S. Supreme Court held in Lorenzo v. SEC that a defendant who merely disseminates the material misstatement of another—and thus cannot be liable under SEC Rule 10b-5(b) for “making” the statement—can nevertheless be liable under other provisions of the securities laws that proscribe “any device, scheme, or artifice to defraud” or “any act, practice or course of business which operates or would operate as a fraud or deceit.”  The Court’s decision may affect long-standing case law in various federal circuits—including those covering New York and California—which had held that alleged frauds solely involving material misstatements or omissions could not be pursued under provisions other than Rule 10b-5(b).