(Reuters) – US Supreme Court protected investor protection laws on Wednesday by refusing to further limit the scope of who can be held liable for securities fraud, and maintaining a lower court of law against a New York investment bank banned from industry by the Securities and Exchange Commission.
The judges, in a 6-2 judgment, confirmed a US court of appeal for the District of Columbia Circuit decision that joined the SEC. The DC circuit agreed with the SEC's findings that Francis Lorenzo was in charge of a fraud investor system by sending misleading e-mails about a financially unsettled company even though he did not personally write the fraudulent statements in the messages.
Writing on behalf of the Court, liberal justice Stephen Breyer said the perpetrators of securities fraud could escape liability if the law were narrowly interpreted.
"The Congress aimed at eradicating all forms of fraud in the securities industry. And that gave the Commission the task of executing the tools it did," wrote Justice Breyer.
Conservative justice Clarence Thomas and Neil Gorsuch abstained. Citizens Conservative Brett Kavanaugh did not participate because he was involved in the case of his former role as a court of appeal in Washington.
In his divergent opinion, Justice Thomas ruling said "misunderstands the securities laws and disappears our precedent in a way that is likely to have far-reaching consequences." of sanctions for just transferring a supervisor's email.
Mr. Lorenzo, who served as investment bank director at a broker retailer, called Charles Vista, sent the e-mails in 2009 to seek investors for a start-up debt portfolio despite its energy-from-waste technology failing.
Anti-fraud Provisions in US Securities Law prohibit false statements and other behavior categorized as documents, devices, methods or systems. The case concerned whether a person who did not personally make fraudulent statements but merely transferred them can be considered responsible for entering into a fraudulent system.
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SEC in 2015 found that Lorenzo made false statements and participated in a fraudulent system by sending the emails. The commission fined him $ 15,000 and prevented him from working in the industry for life.
Mr. Lorenzo, backed by the US Chamber of Commerce's trading group, argued that the SEC is trying to paint people who can be most responsible for helping and supporting fraudulent systems as the main offenders of securities law.