Source: https://1attorneys.net/lorenzo-francis-v-v-sec-decided-03-27-2019/
Timestamp: 2019-04-26 12:43:38+00:00

Document:
564 U. S. 135, this Court held that to be a “maker” of a statement under subsection (b) of that Rule, one must have “ultimate authority over the statement, including its content and whether and how to communicate it.” Id., at 142 (emphasis added). On the facts of Janus, this meant that an investment adviser who had merely “participat[ed] in the drafting of a false statement” “made” by another could not be held liable in a private action under subsection (b). Id., at 145.
446 U. S. 680, 686, and n. 5. Resort to the expansive dictionary definitions of “device,” “scheme,” and “artifice” in Rule 10b–5(a) and §17(a)(1), and of “act” and “practice” in Rule 10b–5(c), only strengthens this conclusion. Under the circumstances, it is difficult to see how Lorenzo’s actions could escape the reach of these provisions. Pp. 5–7.
15 U. S. C. §78t(e). But the line the Court adopts today is clear: Those who disseminate false statements with intent to defraud are primarily liable under Rules 10b–5(a) and (c), §10(b), and §17(a)(1), even if they are secondarily liable under Rule 10b–5(b). As for Lorenzo’s suggestion that those like him ought to be held secondarily liable, this offer will, too often, prove illusory. Where a “maker” of a false statement does not violate subsection (b) of the Rule (perhaps because he lacked the necessary intent), a disseminator of those statements, even one knowingly engaged in an egregious fraud, could not be held to have violated the “aiding and abetting” statute. And if, as Lorenzo claims, the disseminator has not primarily violated other parts of Rule 10b–5, then such a fraud, whatever its intent or consequences, might escape liability altogether. That anomalous result is not what Congress intended. Pp. 9–13.
15 U. S. C. §77q(a)(1). We believe that they can.
446 U. S. 680, 686, and n. 5 (1980). With one judge dissenting, the Court of Appeals panel rejected Lorenzo’s lack-of-intent argument. 872 F. 3d 578, 583 (CADC 2017). Lorenzo does not challenge the panel’s scienter finding. Reply Brief 17.
There are also two statutes at issue. Section 10(b) makes it unlawful to “use or employ . . . any manipulative or deceptive device or contrivance” in contravention of Commission rules and regulations.
15 U. S. C. §78j(b). By its authority under that section, the Commission promulgated Rule 10b–5. The second statutory provision is §17(a), which, like Rule 10b–5, is organized into three subsections.
406 U. S. 128, 152–153 (1972) (While “the second subparagraph of [Rule 10b–5] specifies the making of an untrue statement . . . [t]he first and third subparagraphs are not so restricted”). And since its earliest days, the Commission has not viewed these provisions as mutually exclusive. See, e.g., In re R. D. Bayly & Co., 19 S. E. C. 773 (1945) (finding violations of what would become Rules 10b–5(b) and (c) based on the same misrepresentations and omissions); In re Arthur Hays & Co., 5 S. E. C. 271 (1939) (finding violations of both §§17(a)(2) and (a)(3) based on false representations in stock sales).
328 U. S. 293, 299 (1946) (the securities laws were designed “to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits”).
Next, Lorenzo points to the statute’s “aiding and abetting” provision.
552 U. S. 148 (2008).
511 U. S. 164). The line we adopt today is just as administrable: Those who disseminate false statements with intent to defraud are primarily liable under Rules 10b–5(a) and (c), §10(b), and §17(a)(1), even if they are secondarily liable under Rule 10b–5(b). Lorenzo suggests that classifying dissemination as a primary violation would inappropriately subject peripheral players in fraud (including him, naturally) to substantial liability. We suspect the investors who received Lorenzo’s e-mails would not view the deception so favorably. And as Central Bank itself made clear, even a bit participant in the securities markets “may be liable as a primary violator under [Rule] 10b–5” so long as “all of the requirements for primary liability . . . are met.” Id.,at 191.
15 U. S. C. §78t(e). And the latter can be “deemed to be in violation” of the provision only “to the same extent as the person to whom such assistance is provided.” Ibid. In other words, if Acme Corp. could not be held liable under subsection (b) for a statement it made, then a knowing disseminator of those statements could not be held liable for aiding and abetting Acme under subsection (b). And if, as Lorenzo claims, the disseminator has not primarily violated other parts of Rule 10b–5, then such a fraud, whatever its intent or consequences, might escape liability altogether.
564 U. S. 135 (2011), we drew a clear line between primary and secondary liability in fraudulent-misstatement cases: A person does not “make” a fraudulent misstatement within the meaning of Securities and Exchange Commission (SEC) Rule 10b–5(b)—and thus is not primarily liable for the statement—if the person lacks “ultimate authority over the statement.” Id., at 142. Such a person could, however, be liable as an aider and abettor under principles of secondary liability.
425 U. S. 185, 212–214 (1976) (construing Rule 10b–5(b) to require scienter). The SEC ultimately concluded that, by “knowingly sen[ding] materially misleading language from his own email account to prospective investors,” App. to Pet. for Cert. 77, Lorenzo violated Rule 10b–5(b) and several other antifraud provisions of the securities laws. The SEC “barred [him] from serving in the securities industry” for life. Id., at 91.
15 U. S. C. §77q(a)(1).
430 U. S. 462, 473 (1977) (interpreting the term “manipulative” in §10(b)).
The remaining provision, Rule 10b–5(c), seems broader at first blush. But the scope of this conduct-basedprovision—and, for that matter, Rule 10b–5(a) and §17(a)(1)—must be understood in light of its codification alongside a prohibition specifically addressing primary liability for false statements. Rule 10b–5(b) imposes primary liability on the “make[r]” of a fraudulent misstatement. 17 CFR §240.10b–5(b); see Janus, 564 U. S., at 141–142. And §17(a)(2) imposes primary liability on a person who “obtain[s] money or property by means of” a false statement.
15 U. S. C. §77q(a)(2). The conduct-based provisions of Rules 10b–5(a) and (c) and §17(a)(1) must be interpreted in view of the specificity of these false-statement provisions, and therefore cannot be construed to encompass primary liability solely for false statements. This view is consistent with our previous recognition that “each subparagraph of §17(a) ‘proscribes a distinct category of misconduct’ ” and “ ‘is meant to cover additional kinds of illegalities.’ ” Aaron, supra, at 697 (quoting Naftalin, supra, at 774; emphasis added).
285 U. S. 204, 208 (1932)). I would therefore apply the “old and familiar rule ” that “the specific governs the general.” RadLAX, supra, at 645–646 (internal quotation marks omitted); see A. Scalia & B. Garner, Reading Law 51 (2012) (canon equally applicable to statutes and regulations). This canon of construction applies not only to resolve “contradiction[s]” between general and specific provisions, but also to avoid “the superfluity of a specific provision that is swallowed by the general one.” RadLAX, 566 U. S., at 645. Here, liability for false statements is “ ‘specifically dealt with’ ” in Rule 10b–5(b) and §17(a)(2). Id., at 646 (quoting D. Ginsberg & Sons, supra, at 208). But Rule 10b–5 and §17(a) also contain general prohibitions that, “ ‘in [their] most comprehensive sense, would include what is embraced in’ ” the more specific provisions. 566 U. S., at 646. I would hold that the provisions specifically addressing false statements “ ‘must be operative’ ” as to false-statement cases, and that the more general provisions should be read to apply “ ‘only [to] such cases within [their] general language as are not within the’ ” purview of the specific provisions on false statements. Ibid.
552 U. S. 148, 157 (2008); see Hochfelder, supra, at 212–214.
511 U. S. 164, 191 (1994). Here, however, the majority does precisely what we declined to do in Janus: impose broad liability for fraudulent misstatements in a way that makes the category of aiders and abettors in these cases “almost nonexistent.” 564 U. S., at 143. If Lorenzo’s conduct here qualifies for primary liability under §10(b) and Rule 10b–5(a) or (c), then virtually any person who assists with the making of a fraudulent misstatement will be primarily liable and thereby subject not only to SEC enforcement, but private lawsuits.
The Court correctly notes that it is not uncommon for the same conduct to be a primary violation with respectto one offense and aiding and abetting with respect to another—as, for example, when someone illegally sells a gun to help another person rob a bank. Ante, at 11. But this case does not involve two distinct crimes. The majority has interpreted certain provisions of an offense so broadly as to render superfluous the more stringent, on-point requirements of a narrower provision of the same offense. Criminal laws regularly and permissibly overlap with each other in a way that allows the same conduct to constitute different crimes with different punishments. That differs significantly from interpreting provisions in a law to completely eliminate specific limitations in a neighboring provision of that very same law. The majority’s overreading of Rules 10b–5(a) and (c) and §17(a)(1) is especially problematic because the heartland of these provisions is conduct-based fraud—“employ[ing] [a] device, scheme, or artifice to defraud” or “engag[ing] in any act, practice, or course of business”—not mere misstatements.
15 U. S. C. §77q(a)(1); 17 CFR §§240.10b–5(a), (c).

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