United States Court of Appeals for the Tenth Circuit · 2019-08-13
15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)
Case and law context
Role: applied; posture: SEC administrative enforcement; substantial-evidence review of agency findings; sanctions affirmed; result: claimant-won; claim:
Uncertainty
None recorded
Misfit
Administrative factfinding affirmed for substantial evidence fits proved, although the basis cannot express both the agency trial burden and appellate review standard. SEC relief and Appointments Clause exhaustion are outside the law elements.
B · Case × element grid
Top-level elements follow claim order in panels of up to six elements. Case rows repeat across panels. Every recorded block retains its holding and basis; multiple blocks are not merged into a case-level verdict. ✓ satisfied · ✗ not satisfied · ○ not reached · · not addressed. Muted blocks are not counted. Sub-element evidence remains on case and element pages.
Elements 1–6 of 12
| Case | Statutory commerce, mails, or exchange facility | Section 78j(b) rulemaking hook | Materially false statement or misleading half-truth | Importance to a reasonable investor | Intent to deceive, manipulate, or defraud | Connection with a covered securities or swap transaction |
|---|---|---|---|---|---|---|
| Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)) | · not addressed | · not addressed | · not addressed | · not addressed | · not addressed |
Elements 7–12 of 12
| Case | Private plaintiff's purchaser or seller status | Private investor transaction causation | Actual economic loss in private damages action | Causal connection between fraud and economic loss | Fraudulent scheme or deceptive course of business | Additional criminal mental-state requirement |
|---|---|---|---|---|---|---|
| Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)) | · not addressed | · not addressed | · not addressed | · not addressed | · not addressed |
Instances and excluded annotation blocks
| Case | Element | Holding and scope | Pattern | Exact source quotations |
|---|---|---|---|---|
| Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 — satisfied · proved (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)) | Fraudulent scheme or deceptive course of business | satisfied Counted merits instance applied / merits basis: proved; party: Dennis Malouf; theory: Rule 10b-5(a) and (c); subject: party=Dennis Malouf; theory=Rule 10b-5(a) and (c) The agency found a deceptive course of conduct: directing trades to finance sale payments while leaving the firm's affirmative independence claims uncorrected. Non-maker status does not dispose of the (a)/(c) charge. | conflict-concealment/bond-routing-and-firm-misstatements | In 2007, Raymond James became concerned about the conflict of interest between (1) Mr. Malouf's role at its branch office and (2) his role at UASNM. These concerns led Raymond James to ask Mr. Malouf to choose between the two roles. Mr. Malouf opted to remain at UASNM and sold his Raymond James branch to Mr. Maurice Lamonde for roughly $1.1 million, to be paid in installments based on the Raymond James branch's collection of securities-related fees.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [1059:1512] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.To facilitate the installment payments, Mr. Malouf routed bond trades on behalf of his UASNM clients through the Raymond James branch. This way, Mr. Lamonde would receive enough in commissions to allow him to pay what he owed Mr. Malouf.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [1513:1750] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Mr. Malouf later acknowledged that his financial arrangement with Mr. Lamonde had created a conflict of interest that should have been disclosed. But Mr. Malouf did not disclose that arrangement to UASNM's chief compliance officer or the outside consultant. Because these individuals did not know the details of the Malouf-Lamonde arrangement, UASNM not only failed to disclose Mr. Malouf's conflict of interest but also boasted that (1) UASNM's employees were not receiving any commissions or fees from the Raymond James branch and (2) UASNM was providing impartial advice untainted by any conflicts of interest.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [2646:3259] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.While UASNM was boasting of its impartiality, Mr. Malouf was participating in deciding what UASNM would disclose. He acknowledged that he had reviewed some of the Forms ADV for what to disclose and had at least some familiarity with the contents of the website. But he took no steps to remedy UASNM's misstatements or to disclose his own conflict of interest.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [3260:3619] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.The Court expressly held that a person could incur liability under these provisions when the conduct involves another person's false or misleading statement.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [17408:17565] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Given these definitions, we conclude that the SEC did not err in finding a fraudulent device, scheme, or artifice to defraud.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [20900:21025] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221. |
| Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 — satisfied · proved (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)) | Intent to deceive, manipulate, or defraud | satisfied Counted merits instance applied / merits basis: proved; party: Dennis Malouf; subject: party=Dennis Malouf Knowledge, the consultant's testimony, review of misleading filings, and nine months of delay support the agency finding. The separate Investment Advisers Act willfulness discussion is not criminal section 78ff willfulness. | conflict-concealment/knowing-delay-and-resisted-disclosure | Mr. Malouf and Mr. Lamonde had a financial arrangement that resulted in payments to Mr. Malouf from bond trades that he had routed through the Raymond James branch. This arrangement gave an incentive to Mr. Malouf to route his clients' bond trades through the Raymond James branch, compromising the independence of UASNM and Mr. Malouf as investment advisers. The SEC reasonably concluded that Mr. Malouf was aware of the conflict and tried to exploit it, for UASNM's outside consultant testified that Mr. Malouf had lied and resisted disclosure of the financial arrangement with Mr. Lamonde.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [22043:22635] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Second, the evidence allowed the SEC to reasonably find that Mr. Malouf was familiar with the contents of UASNM's Forms ADV and its website. For example, Mr. Malouf admitted that he had periodically reviewed the Forms ADV and the website. Yet for several years, Mr. Malouf took no action to correct material misstatements on the forms or the website.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [23205:23555] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Third, the evidence suggests that Mr. Malouf dragged his feet even after being directed to disclose the conflict. This directive stemmed from the outside consultant's discovery that Mr. Malouf had been receiving installment payments from the buyer of the Raymond James branch. Upon this discovery, the consultant told Mr. Malouf and UASNM that the arrangement had created a conflict of interest that needed to be disclosed. But about nine months passed before UASNM disclosed the conflict. Mr. Malouf's contribution to that delay reasonably supports a finding of scienter.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [23556:24128] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Conduct is extremely reckless when the petitioner knows or must have known that the conduct created a danger of misleading investors.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [20424:20557] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.For three reasons, we reject Mr. Malouf's arguments and conclude that substantial evidence supports the SEC's finding of scienter.Source: docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [22839:22969] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221. |
Court interpretations recorded from this case
interpretation
The Court expressly held that a person could incur liability under these provisions when the conduct involves another person's false or misleading statement.
Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md))
The Court expressly held that a person could incur liability under these provisions when the conduct involves another person's false or misleading statement.Source:
docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [17408:17565] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Rule 10b-5(a)/(c) can reach a person who is not the maker of a statement; Lorenzo as applied in Malouf is an SEC scheme-liability holding. It does not create private aiding-and-abetting liability or dispense with the private plaintiff's separate reliance requirement. Insider misappropriation requires a duty/trust relationship and deceptive use of material nonpublic information, not possession alone.
interpretation
In addressing these provisions, Mr. Malouf challenges the sufficiency of the evidence on scienter, which is "a mental state embracing intent to deceive, manipulate, or defraud."
Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md))
In addressing these provisions, Mr. Malouf challenges the sufficiency of the evidence on scienter, which is "a mental state embracing intent to deceive, manipulate, or defraud."Source:
docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [20022:20199] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Judge-made mental-state requirement; civil circuit formulations include sufficiently severe/extreme recklessness, not ordinary negligence. SEC scienter under Rule 10b-5 must not be diluted by the different negligence standards for Securities Act §17(a)(2)/(3). Strong-inference PSLRA pleading is not an extra merits element.
interpretation
This mental state can include extreme recklessness.
Malouf v. Sec. & Exch. Comm'n — 933 F.3d 1248 (2019) · United States Court of Appeals for the Tenth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md))
This mental state can include extreme recklessness.Source:
docroot/ir/caselaw/f3d_933.jsonl#/f3d/933/1248-01; Unicode character offsets [20368:20419] (end exclusive); SHA-256 8307068e646fa9d05edcdf23da91535cb68d8d204fa5d736d8ace2c4bf10b221.Judge-made mental-state requirement; civil circuit formulations include sufficiently severe/extreme recklessness, not ordinary negligence. SEC scienter under Rule 10b-5 must not be diluted by the different negligence standards for Securities Act §17(a)(2)/(3). Strong-inference PSLRA pleading is not an extra merits element.