Judge overturns SEC sanctions on adviser

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.