Opinion ID: 596754
Heading Depth: 1
Heading Rank: 1

Heading: Antifraud violations.

Text: 6 The uncontroverted facts support the granting of equitable relief. The antifraud provisions of the Securities and Exchange Acts make it unlawful to use fraudulent practices and misrepresentations or omissions in connection with the offer, sale, or purchase of any security. 15 U.S.C. §§ 77q(a), 78j(b). To establish a violation of these provisions, the SEC must show that a defendant made a material misrepresentation of fact in connection with the sale or purchase of a security which a reasonable investor would find significant. See Basic, Inc. v. Levinson, 485 U.S. 224 (1988). 1 7 Gotchey's actions occurred in connection with the sale offer or sale of a security. See Yoder v. Orthomolecular Nutrition Inst., Inc., 751 F.2d 555, 559 (2d Cir. 1985) (not crucial that actual purchase is performed); SEC v. National Sec., Inc., 393 U.S. 453, 465-66 (1969) (acts cover fraud in any part of the selling process). A reasonable investor would obviously have found much significance in Gotchey's assurances as to where the money would be invested. See Basic, 485 U.S. at 240. Finally, Gotchey acted with the requisite mental state embracing intent to deceive, manipulate, or defraud, Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976), because he admitted to knowing where the money would be invested while providing contrary assurances. See McDonald v. Alan Bush Brokerage Co., 863 F.2d 809 (11th Cir. 1989) (severe recklessness satisfies scienter requirement); Hackbart v. Holmes, 675 F.2d 1114 (10th Cir. 1982) (same); Sharp v. Coopers & Lybrand, 649 F.2d 175 (3d Cir. 1981) (same), cert. denied, 455 U.S. 938 (1982). 8 In this case, Gotchey promised one thing (investment in mortgagebacked securities), and consciously delivered another. Based on these uncontroverted facts, we find no abuse of discretion in the district court's granting equitable relief. See SEC v. Goldfield Deep Mines Co., 758 F.2d 459, 465 (9th Cir. 1985). 9