The U.S. Supreme Court recently agreed to hear an appeal stemming from an investment banker who was found liable for fraud. There are numerous cases each year, but this case stands out due to its peculiar circumstances. The banker was found liable due to the practice of copying and pasting his boss’s fraudulent emails into client-facing messages (Source: Law360, June 20, 2018).
Are employees responsible for passing on false information?
Legal observers expect the court to step in and draw a sharp line between primary and secondary liability in cases of securities fraud. If the court rules in favor of the plaintiff, investment banker Francis V. Lorenzo, it could prevent the Securities and Exchange Commission (SEC) from pursuing securities fraud actions against secondary players.
This is a case that employees in the banking and finance industry should watch closely during the court’s next term. A more broad ruling could potentially have implications for employees in other industries and shed light on whether “I was just doing my job” is a valid defense against fraud claims.
Will the new makeup of the Supreme Court further tighten the SEC’s leash?
Adding intrigue to SEC-related cases on their way to the Supreme Court is the recent nomination of D.C. Circuit Judge Brett Kavanaugh to fill the seat of retiring Associate Justice Anthony Kennedy.
Kavanaugh is known for being a skeptic of federal agencies that he views as reaching beyond their statutory boundaries. This could influence future cases involving the SEC, as Kavanaugh will be replacing a justice who often served as a swing vote on controversial issues (Source: Law360, July 10, 2018).
With a potentially bruising confirmation ahead, it may be premature to consider Kavanaugh’s effect on future SEC-related decisions but, make no mistake, those with a stake in such decisions are working furiously to build their case.