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US Supreme Court building U.S. Supreme Court building April 23, 2019. Photo: Diego M. Radzinschi/ALM

In March 2019, the Supreme Court delivered a major, and surprising, decision in Lorenzo v. Securities & Exchange Comm., 139 S. Ct. 1094 (2019). Since that decision, the lower federal courts have broadly expanded liability under Rule 10b5(a,c), first by expanding it for persons who “disseminate” false or misleading information and by breathing new life into claims based on “artifices or schemes” to defraud under Rule 10b5(a,c)

Prior Caselaw

In the decades prior to Lorenzo, the major decisions by the Supreme Court had largely served to limit the scope of claims under Rule 10b5. In Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U. S. 164 (1994), the court found that the private right of action under 10b5(b) extended only to “primary violators” and not “aiders and abettors.” Similarly, in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148 (2008), the court ruled that investors could not bring securities fraud actions whose allegedly deceptive acts were not known to investors at the time of the purchase or sale.

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