United States Court of Appeals for the Ninth Circuit · 2019-08-23
15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)
Case and law context
Role: applied; posture: SEC civil enforcement; summary judgment for SEC affirmed on undisputed record; no jury factfinding; result: claimant-won; claim:
Uncertainty
None recorded
Misfit
The basis vocabulary lacks judgment-for-claimant-on-undisputed-evidence. Law records the court's summary-judgment legal conclusions, not a trial finding or merely triable claim. The opinion's broad 2019 fiduciary-omission wording predates Macquarie; no unrestricted modern pure-omission rule is asserted. Howey security status and broker registration are distinct cross-statute thresholds not added as invented element IDs.
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 |
|---|---|---|---|---|---|---|
| U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)) | · 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 |
|---|---|---|---|---|---|---|
| U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth 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 |
|---|---|---|---|---|
| U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 — satisfied · law (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md)) | Importance to a reasonable investor | satisfied Counted merits instance applied / merits basis: law; party: Hui Feng; theory: client commission disclosures; subject: party=Hui Feng; theory=client commission disclosures Materiality was resolved as a matter of law on established undisputed omissions and testimony. This is an SEC case; no private reliance or economic-loss finding is implied. | conflicted-compensation/eb5-commission-rebates | Feng also entered into marketing agreements with regional centers. Through these agreements, he reserved a number of the limited investor "spots" in certain EB-5 projects, which he then promoted on his website and tried to fill within a set time period. If one of Feng's clients made the required capital contribution to one of these regional centers, and if the USCIS approved the investor's I-526 petition, the regional center agreed to pay Feng commissions of $ 15,000 to $ 70,000. Although hundreds of regional centers participate in the EB-5 program, Feng procured investors only for ten centers, all of which agreed to pay commissions. Feng did not disclose to his clients the commissions he received from the regional centers unless they specifically asked about them.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [3455:4230] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.Here, the record includes statements of individual investors who said that if they had known about Feng's commissions, they would have attempted to negotiate their administrative fees.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [34445:34629] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.Generally, an omission is material "if there is 'a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.' "Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [34055:34300] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.We thus agree with the district court that Feng's failure to disclose his conflict of interest was material.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [34987:35095] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b. |
| U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 — satisfied · law (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: law; party: Hui Feng; count: fraud against regional centers; subject: party=Hui Feng; count=fraud against regional centers Foreign family nominees and the controlled Hong Kong entity concealed that the unregistered U.S. lawyer performed recruitment and received the commission. The appellate court upheld this scheme separately from client omissions. | commission-diversion/foreign-nominee-recruiters | When told by some regional centers that they could only pay commissions to overseas recruiters, Feng responded that he had referral partners in China who were finding investors. He entered into marketing agreements in which he promised to relay the commissions to those individuals. He also arranged agreements that were directly between the regional centers and the individuals. The referral partners included Feng's wife, mother, and mother-in-law. Feng described these individuals in his deposition testimony as his "nominees," whose role was to be "just a surrogate to receive the money." They did not do the work of recruiting investors-Feng did that himself. After the regional centers paid commissions to the individuals, they transferred the funds to Feng. Feng asserts that the regional centers only asked for a foreign contact to pay and did not "care" who it was.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [4809:5683] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.But, deceptive conduct that is not "inherently unlawful" may form the basis of a scheme to defraud.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [39055:39154] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.The district court addressed the fraud against the regional centers only as a scheme to defraud, not as a material omission.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [38539:38663] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.We accordingly affirm the district court's finding that Feng engaged in securities fraud in violation of Section 17(a) and Section 10(b).Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [39533:39670] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b. |
| U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 — satisfied · law (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: law; party: Hui Feng; count: fraud against clients; subject: party=Hui Feng; count=fraud against clients Affirmative concealment of the source of rebates is separately analyzed under (a)/(c). Mere existence of a discount is not the fraud. | commission-diversion/concealed-source-of-client-rebate | Approximately 20 percent of Feng's clients asked him to seek a reduced administrative fee from the regional centers. In those instances, Feng negotiated with regional centers and facilitated contracts between those regional centers and his clients for a rebate of a portion of the administrative fee. Feng did not disclose to these clients, however, that the administrative fees helped to fund his commissions, nor that the regional centers offset the clients' administrative fee rebate with a reduction in the commissions to which he was contractually entitled. Indeed, Feng asked the regional centers not to inform the clients about either fact. Feng explained in his deposition that he wanted to create the appearance to his clients that he was advocating on their behalf with the regional center and also to "keep as much of the marketing fee as possible"-that is, his commission-and to avoid further "haggl[ing]" with clients who might ask Feng to rebate more of the commission.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [8366:9349] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.The fraudulent conduct was his scheme to make the rebate appear to come from his advocacy on behalf of the client, while concealing the relationship between the reduction and his undisclosed commission.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [39330:39532] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b. |
| U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 — satisfied · law (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: law; party: Hui Feng; subject: party=Hui Feng The undisputed admission establishes intent as a matter of law in the summary-judgment posture; this does not substitute section 17(a)(2) negligence for Rule 10b-5 scienter. | conflict-concealment/admitted-business-choice | Feng stated that he did not want to tell clients about his commissions from the regional centers because it would be costly.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [35492:35616] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.Feng's brief similarly describes his choice not to disclose as a "business decision."Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [35617:35702] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.Although there are differences in the state of mind requirements for Rule 10b-5(b) and Section 17(a)(2), a showing of intentional or knowing conduct satisfies both.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [30219:30383] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.Finally, Feng's testimony establishes intent to deceive.Source: docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [35435:35491] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b. |
Court interpretations recorded from this case
interpretation
Generally, an omission is material "if there is 'a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.' "
U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md))
Generally, an omission is material "if there is 'a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the "total mix" of information made available.' "Source:
docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [34055:34300] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.Materiality is an objective total-mix inquiry, distinct from whether a particular plaintiff actually relied. Hui Feng involved deliberately undisclosed commissions; its investor-focused materiality analysis is used here without importing an unrestricted pure-omission theory after Macquarie.
interpretation
Although there are differences in the state of mind requirements for Rule 10b-5(b) and Section 17(a)(2), a showing of intentional or knowing conduct satisfies both.
U.S. Sec. & Exch. Comm'n v. Hui Feng — 935 F.3d 721 (2019) · United States Court of Appeals for the Ninth Circuit · 2019 (15usc78j: author: Astra2 · QA: PASS (QA2, neov2/qa/wave2-cases-QA2-crosscheck.md))
Although there are differences in the state of mind requirements for Rule 10b-5(b) and Section 17(a)(2), a showing of intentional or knowing conduct satisfies both.Source:
docroot/ir/caselaw/f3d_935.jsonl#/f3d/935/0721-01; Unicode character offsets [30219:30383] (end exclusive); SHA-256 b81c8876a5a14d5352088d7f264360b11de8f12772784fec962b58479a41f19b.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.