Opinion ID: 65373
Heading Depth: 3
Heading Rank: 2

Heading: Evidence of Scienter

Text: Gann's second argument is that, in contrast to the district court's finding, the evidence at trial demonstrated that he lacked the scienter necessary to violate Section 10(b) and Rule 10b-5. As with his material misrepresentation point of error, Gann's scienter argument is largely devoted to recounting his view of the facts; and the court's factual basis for finding that Gann made material misrepresentations and that he acted with scienter are very similar. Again, our standard of review is deferential and is here determinative. If the district court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that, had it been sitting as trier of fact, it would have weighed the evidence differently. [21] Gann's primary contention is that the SEC mischaracterized the fund companies' rules regarding market timing, making it seem as though they were blanket prohibitions on the trading strategy. Gann claims that, as a result of this, the district court incorrectly believed that any attempt to time the market would violate the funds' regulations and harm investors, and, thus must have been intended to deceive. [22] Gann rationalizes his attempts to fly below the funds' radar, as it were, by claiming this meant only that his trades would not attract the companies' attention because they were compliant. He asserts that the fund companies permitted market timing to an extent so such trades could be conducted without deception. From his perspective, the research that he and Fasciano undertook evidenced SWS's intent to comply with the funds' various rules, not to evade them. He advances that some fund companies expressly permitted market-timing activities within prescribed boundaries, and that others did so either tacitly or by agreement. Gann reasons that efforts by SWS to comply with the rules and determine how compliant market-timing trades could be placed  as well as some companies' agreements to permit such trades  confirm that the brokers had no intent to deceive. The SEC is essentially enforcing corporate regulations on behalf of the various mutual funds. Because market timing itself is not illegal, the SEC had to prove an intent to deceive to fit Gann's behavior within Section 10(b) and Rule 10b-5. This creates a dilemma for the courts, which are asked to determine whether the defendant's legal acts are made illegal by his compliance or non-compliance with corporate regulations that companies sometimes suspend or ignore, either tacitly or expressly, depending on the circumstances of that particular trade. AIM Funds, for example, reserves the right to reject trades that it deems harmful to its investors, and it limited SWS to 10 trades per account. In AIM Funds's block notice to SWS, it identified a client account number (an HCM account) that would no longer be permitted to trade. The Hartford, in contrast, issued a blanket block on all future trades by Gann until he could show compliance. The SEC's chief evidence of Gann's intent to deceive was his use of numerous account and registration numbers that actually represented his (and Fasciano's) work for HCM. The SEC contended that Gann's efforts were meant to circumvent the funds' regulations for his own gain and that of his customer. We perceive the evidence in this case to be in equipoise, making critical the question of credibility. The district court found Gann not credible and sided with the SEC. Based on this express finding, the district court adopted the SEC's version of the facts. Credibility is uniquely the province of the trier of fact, and we defer to it. [23] Gann has not made a factual showing that so outweighs the evidence offered by the SEC as to demonstrate that the district court clearly erred. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous. [24] Having no definite and firm conviction that a mistake has been committed, [25] we affirm.