Supreme Court Considers Applicability of Rule 10b-5(a) and (c) to an Individual Who Was Not the “Maker” of a Fraudulent Statement
The Supreme Court heard oral arguments in Lorenzo v. Securities and Exchange Commission, No. 17-1077, on Monday, December 3, 2018, to decide whether an individual who merely distributed a material misstatement or omission, and is thereby not the “maker” of the statement under the test set forth in Janus Capital Group, Inc. v. First Derivative Traders, can nonetheless be held liable under the “fraudulent scheme” provisions of Rule 10b-5(a) and (c). The circuit courts are split on this issue: The Second, Eighth, and Ninth Circuits have held that a misstatement cannot be the sole basis for a fraudulent scheme claim, while the D.C. Circuit and Eleventh Circuit have held that a misstatement standing alone can be the basis for such a claim.