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

No succession plan? No worries. Just practice in place
No succession plan? No worries. Just practice in place

While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.

Research highlights growing need for personalized retirement solutions as investors age
Research highlights growing need for personalized retirement solutions as investors age

New joint research by T. Rowe Price, MIT, and Stanford University finds more diverse asset allocations among older participants.

Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones
Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones

With its asset pipeline bursting past $13 billion, Farther is looking to build more momentum with three new managing directors.

Insured Retirement Institute urges Labor Department to retain annuity safe harbor
Insured Retirement Institute urges Labor Department to retain annuity safe harbor

A Department of Labor proposal to scrap a regulatory provision under ERISA could create uncertainty for fiduciaries, the trade association argues.

LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors
LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors

"We continue to feel confident about our ability to capture 90%," LPL CEO Rich Steinmeier told analysts during the firm's 2nd quarter earnings call.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.