On March 27, 2019, in Lorenzo v. U.S. Securities and Exchange Commission, the U.S. Supreme Court clarified that the types of conduct that violate the three subsections of SEC Rule 10b-5 are not mutually exclusive. The court held that while a defendant who is not the “maker” of misstatements may not be found liable under 10b-5(b), such defendant who disseminates false statements can still be found to violate the other subsections of Rule 10b-5 that prohibit fraudulent schemes and acts that operate as a fraud.

Before Lorenzo, in cases alleging primary liability for securities fraud based on misleading statements to investors, courts’ threshold inquiry was whether a defendant “made” the statements at issue, as only the “makers” of such statements — those with ultimate authority over the statement, including its content and whether and how to communicate it — could be liable under Rule 10b-5(b), the federal anti-fraud provision that most directly addresses fraud based on false or misleading statements.

Originally published in Law360 on March 29, 2019.