Valenti Hanley PLLC

SEC ruling backed by Supreme Court

The Securities and Exchange Commission (SEC) leveled sanctions when an investment banker allegedly misled investors, making them think that a startup company was in a far better financial position than it really was. The case ended up before the U.S. Supreme Court, which backed the SEC by upholding those sanctions.

The crux of the case revolved around a pair of "deceptive emails." The banker, an employee of Charles Vista LLC at the time, said he did not write those emails. The argument was that he wasn't liable as a result. However, the Supreme Court justices said that he was involved with the scheme and was therefore liable, despite not typing those emails himself. The vote, according to reports, was 6-2.

In the past, a number of rulings at this level had gone against the SEC. This made it appear that the body did not have as much authority as some assumed. That limited its powers. This ruling sends the pendulum back in the other direction, reinforcing those powers and the authority of the Commission.

"Congress intended to root out all manner of fraud in the securities industry," one justice wrote in explaining the decision. "And it gave to the commission the tools to accomplish that job."

Not everyone agreed, of course, as the vote showed. The two justices who voted against the majority said that the banker "might have assisted in a scheme, but he did not himself plan, scheme, design or strategize." They felt that this gave him a bit of distance, though they claimed he could still have aided and abetted those who carried it out.

It is very important for those involved in these cases to understand their legal rights and how past rulings help to define those rights.

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