SEC Enforcement Actions Not Subject to Same Reliance Requirements as Private Actions


A Connecticut federal district court recently denied a motion for summary judgment by an individual, Gary Richetelli, seeking dismissal of claims brought in an enforcement action by the Securities and Exchange Commission. The SEC alleged that Richetelli carried out a fraudulent stock purchase scheme in violation of Section 10(b) of the Securities Exchange Act of 1934 by providing several New Haven Savings Bank depositors with the financing to obtain shares of newly-issued stock through the bank’s initial public offering (IPO) in exchange for repayment of the loans in full shortly after the IPO, as well as payment of the majority of the profits from the sale of those shares. The terms of the IPO prohibited such arrangements and each of the depositors executed stock order forms in which they declared under oath that they were “purchasing solely for [their] own account, and there is no agreement or understanding regarding the sale or transfer of the shares or the right to subscribe for the shares.”

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