Judge overturns SEC sanctions on adviser

Judge says barred broker was supplied false statements by boss, who had 'ultimate authority' over them.
OCT 03, 2017

SEC sanctions against a former broker who sent out emails misrepresenting features of a securities offering have been set aside by an appeals court in Washington. While agreeing with the Securities and Exchange Commission that statements in barred broker Francis Lorenzo's emails were misrepresentations, Judge Sri Srinivasan of the U.S. Court of Appeals for the District of Columbia Circuit said Mr. Lorenzo didn't "make" the misstatements to violate the 1934 Securities Exchange Act, which bars making materially false statements in connection with a securities transaction. Instead, Mr. Lorenzo's boss, who supplied the content of the false statements and had "ultimate authority" over them, violated the rule, Mr. Srinivasan said, according to a report by the Bloomberg Bureau of National Affairs. Because the SEC's sanctions were at least partly based on the "misimpression" that Mr. Lorenzo's conduct violated Rule 10b-5(b) of the Act, they must be set aside and the case remanded, Mr. Srinivasan wrote in a majority opinion, according to the report. Dissenting, Judge Brett Kavanaugh said the "good news" is that the court vacated Mr. Lorenzo's lifetime suspension imposed by the SEC. "The bad news," he said, is that the opinion "upholds much of the SEC's decision on liability. I would vacate the SEC's conclusions as to both sanctions and liability," the Mr. Kavanaugh said. In 2013, the SEC sued Mr. Lorenzo, his boss Gregg Lorenzo and the New York brokerage firm of Charles Vista for allegedly using false and unfounded statements to secure investments in Waste2Energy Holdings Inc. An SEC administrative law judge found Francis Lorenzo liable for sending investors emails that he knew contained false and misleading information. She fined him $15,000, ordered him to cease and desist from future misconduct, and barred him from the industry. The SEC affirmed and Mr. Lorenzo appealed the decision, according to the Bloomberg report.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.