Supreme Court expands liability for false statements under the federal securities laws

On March 27, the Supreme Court issued its much-anticipated decision addressing whether someone who is not the "maker" of a misstatement can nonetheless be primarily liable for fraud under the federal securities laws, when the misstatement is the only deceptive conduct at issue. Lorenzo v. SEC, 2019 WL 1369839 (U.S. Mar. 27, 2019).

The Court held that liability for misstatements is not limited to "makers," instead ruling that those who "disseminate" false or misleading statements can also be primarily liable under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as well as under Section 17(a)(1) of the Securities Act, the primary antifraud provisions under the federal securities laws. By holding that liability exists for those who “disseminate” false statements, the Supreme Court potentially expanded the reach of the antifraud provisions well beyond the narrow confines of "maker" liability, which the Court had delineated in Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135 (2011).

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