Opinion ID: 4182911
Heading Depth: 2
Heading Rank: 2

Heading: materiality of zprim’s newsletter statements

Text: Petitioners also challenge the Commission’s finding of materiality for the false claims of GIPS compliance in ZPRIM’s April and December 2009 newsletters. They argue that the two newsletters did not actually claim to be compliant with GIPS. We reject this argument with respect to the April 2009 newsletter. However, the record supports petitioners’ argument that the December 2009 newsletter sufficiently disclaimed GIPS compliance. The Commission’s finding of materiality for that publication cannot therefore stand. 17 Case: 16-15322 Date Filed: 06/30/2017 Page: 18 of 32
The April 2009 newsletter unmistakably asserted GIPS compliance. A footnote to a table listing ZPRIM’s investment returns said that ZPRIM’s “compliance with the Global Investment Performance Standards (GIPS®) has been verified firm-wide by Ashland Partners & Company LLP from December 31, 2000 through September 30, 2008.” The table listed investment returns for periods falling within this window of purported GIPS compliance, but omitted the GIPSrequired information. This false claim of GIPS compliance in the newsletter was material for the same reasons the false claims of GIPS compliance in the advertisements were material. Thus for the April 2009 newsletter as well, substantial evidence supported the Commission’s finding of materiality.
The December 2009 newsletter is different. On page three of the December 2009 newsletter, at the bottom of a list of ZPRIM’s investment returns, the newsletter said: “All numbers are GIPS compliant.” But on the next page, under a section titled “GIPS COMPLIANCE,” the newsletter said: “The investment report you are reading is not GIPS compliant. It was never intended to be nor can it be. . . . Our report remains not GIPS compliant.” Petitioners say these statements “disavowed a claim of GIPS compliance,” rendering the initial false claim immaterial. We agree. 18 Case: 16-15322 Date Filed: 06/30/2017 Page: 19 of 32 There is no question the newsletter’s initial statement—“[a]ll numbers are GIPS compliant”—was not true. But our rule is that when a misrepresentation is “accompanied by meaningful cautionary statements and specific warnings . . ., that language may be sufficient to render the alleged omissions or misrepresentations immaterial as a matter of law.” Saltzberg v. TM Sterling/Austin Assocs., Ltd., 45 F.3d 399, 400 (11th Cir. 1995) (per curiam); see also Merch. Capital, 483 F.3d at 767 (stating the “well-established principle that a statement or omission must be considered in context, [because] accompanying statements may render it immaterial as a matter of law” (quotation omitted)). While “general cautionary language” is not sufficient to render a misrepresentation immaterial, see Morgan Keegan, 678 F.3d at 1253, the disclaimer in the December 2009 newsletter did not use generic or vague language. It expressly and unequivocally said: “The investment report you are reading is not GIPS compliant.” This statement was then followed by two more that reiterated the point. And these statements were all below a bold, underlined header titled “GIPS COMPLIANCE,” which would have alerted reasonable investors that ZPRIM was calling attention to a GIPS compliance issue that investors should be aware of. Like the cautionary statements in Saltzberg, ZPRIM’s disclaimer was “no[t] boilerplate and was not buried among too many other things, but was explicit, repetitive and linked to the [statement] about which [the SEC] complain[s].” See 45 F.3d at 400. In light of the clear 19 Case: 16-15322 Date Filed: 06/30/2017 Page: 20 of 32 cautionary statements in the December 2009 newsletter, we conclude that the Commission’s finding of materiality for that newsletter is not supported by substantial evidence. We therefore reverse the Commission’s finding that ZPRIM and Mr. Zavanelli violated sections 206(1), (2), and (4), and sections 206(1) and (2), respectively, based on the December 2009 newsletter.