Investment banker does not have to draft fraudulent communication to be held liable for fraud, finds Supreme Court
Mar 30, 2019 01:25 PM EDT
The US Supreme Court ruled Wednesday that an investment banker may be held liable under 17 CFR § 240.10b-5 (Rule 10b-5) for sending fraudulent information about a potential investment even if the employee did not draft the correspondence and sent it at the behest of their boss.
In Lorenzo v. Securities and Exchange Commission the court considered of whether Lorenzo, then a director of investment banking at a brokerage firm, committed fraud when, at the request of his boss, he sent two emails to clients about an investment opportunity at a company with assets of $10 million. Lorenzo knew the real valuation of the company's assets was closer to $400,000. Lorenzo copied and pasted the information from his boss and sent the emails anyway.