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Sep 13, 2018 by |

Supreme Court Considers Ex-Banker’s Case Challenging SEC’s Authority

Securities fraud is a major problem throughout the United States and there are many ways that financial professionals can violate laws designed to regulate financial markets and protect consumers.  If you are a victim of securities fraud, consult a California securities fraud lawyer at Evans Law Firm. We have extensive experience with this complex area of law and will fight to help you maximize the chances of recovering monetary compensation for any losses caused by the fraud you experienced.

The laws regulating securities fraud entitle victims to pursue a civil case to recover damages, and also allow the government to prosecute those who break the rules. Now, however, a former investment banker has argued that the government has overreached its authority and his case against the Securities and Exchange Commission (SEC) is being considered by the Supreme Court[1]. The outcome could narrow the ability of regulators to charge defendants with securities fraud offenses.

Ex-Banker Is Challenging the SEC’s Authority

The case challenging the SEC’s authority was brought by a former investment banker who was expelled from the business after the SEC sued him in 2013. The SEC indicated that, while acting as an investment banker, the man committed fraud because he sent misleading emails with the goal of increasing interest in a bond sale for a troubled company.  The emails t touted the assets of the troubled company and opined as to how the company was very successful at drawing in business. The emails failed to mention the deteriorating financial condition of the company, and therefore, according to the SEC, misled investors.

The banker is arguing that he sent out the misleading statements, but he did not write them– he was just disseminating information that was written by the owner of the brokerage firm where he worked.  The brokerage firm was described as a boiler room, which is a company that makes use of aggressive tactics in order to sell investments. The banker argues he was given the information by the company, which he simply passed on, and thus he cannot be guilty of securities fraud because he didn’t write the misleading words.

The SEC, however, claims that the banker should have been aware of the fact that the company was in financial trouble. The company had written down the value of its core technology to $0 just two weeks before the banker sent out emails touting the firm’s $10 million in assets and the SEC argues that by disseminating emails with this incorrect financial information, the banker’s conduct constituted fraud.

The issue of his liability is now before the Supreme Court.  The outcome of the case could impact how easy or difficult it is for the SEC to go after people who engage in fraud, because it could narrow the agency’s authority to pursue a case against someone who knowingly passes on misleading information.  This could potentially mean that there are more victims misled if more people start sending out inaccurate information without consequence simply because they did not write it.

If you were victimized by any type of securities fraud, it’s imperative you find out what options you have under federal and California law for trying to recover your losses. Contact Evans Law Firm online or call 415-441-8669 for a free initial consultation with an experienced California securities fraud lawyer.

[1] Evans Law Firm, Inc. is not involved in the case in any way.

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