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The Second Circuit Reiterates that – Even Post-Lorenzo – Misstatements and Omissions Alone Are Insufficient to State a Claim for Scheme Liability

Client memorandum | July 21, 2022

On July 15, 2022, the U.S. Court of Appeals for the Second Circuit issued a decision holding that Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005)—in which the court previously held that misstatements and omissions alone do not suffice for scheme liability under Rule 10b-5(a) and (c) of the federal securities laws—continues to retain its vitality after the Supreme Court’s decision in Lorenzo v. SEC, 139 S. Ct. 1094 (2019).  Some further conspiratorial-like act in furtherance of the “scheme” is required.  In Lorenzo, the Supreme Court had held that an individual who knowingly disseminated a false statement but did not create it could be found liable under subsections (a) and (c) of Rule 10b-5, which are often referred to as the “scheme liability” subsections of Rule 10b-5.

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