About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

89 U. Cin. L. Rev. 1 (2020-2021)

handle is hein.journals/ucinlr89 and id is 1 raw text is: LORENZO V. SEC: BLURRING THE LINE BETWEEN PRIMARY AND SECONDARY SECURITIES FRAUD LIABILITY Brian Elzweig * I. INTRODUCTION In 2019, the Supreme Court decided Lorenzo Securities v. Securities Exchange Commission.1 Lorenzo held that a person can be held primarily liable for securities fraud if they disseminate a material misstatement in connection with the sale or purchase of securities, even if they did not originally make the statement2 In doing so, the Court expanded its previous holding in Janus Capital Group v. First Derivative Traders, which held that a maker of a statement is the one who has ultimate authority over that statement.3 If all other elements of securities fraud are met, Lorenzo now allows for primary liability for making or disseminating a misrepresentation.4 This allows for primary liability for a secondary violation of the scheme liability provisions of the Securities Act of 1933 (Securities Act)5 and the Securities Exchange Act of 1934 (Exchange Act).6 Lorenzo 's impact on aiding and abetting claims under the securities laws will likely be decided in future cases. Aiding and abetting liability is limited to Securities and Exchange Commission (SEC) enforcement actions and not allowed in private lawsuits.7INK, Allowing for assignment of primary liability to secondary actors will aid private rights of action for fraud, because private rights of action are allowed for primary violations of securities fraud. Lorenzo 's expansion of primary liability blurs the line between primary liability and secondary liability in securities fraud cases. However, many questions as to the breadth of this expansion are left unanswered. The SEC will have expanded power in enforcement actions because it can charge more people as primary violators. Private rights of action for securities fraud will also be impacted. Private rights of action require more elements to make a prima facie case for fraud than does an SEC enforcement action. Two of these required elements-scienter and reliance-may be difficult to prove for private plaintiffs. This Article first examines the enactment * Associate Professor of Business Law and Research Fellow of the Reubin O'Donovan Askew Institute of Multidisciplinary Studies at the University of West Florida. 1. 139 S. Ct. 1094 (2019). 2. Id. at 1099. 3. 564 U.S. 135, 137 (2011). 4. Lorenzo, 139 S. Ct. at 1104. 5. 15 U.S.C. § 77 (2012). 6. 15 U.S.C. § 78 (2012). 7. Lorenzo, 139 S. Ct. at 1103. 1

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most