SEC Rejects “Selective Prosecution” Defense
The SEC rejected an investment banker’s claim of selective prosecution and barred him from the industry for sending misleading emails about a debenture offering. The respondent argued that he only sent the emails (which included false information about a proposed offering) to potential investors because his boss ordered him to send the emails, stating: “The guy owns the firm. He just asked me to send out an e-mail for him. I am going to tell him no?” The SEC rejected his defense of selective prosecution because he could not demonstrate that “he was unfairly singled out for prosecution based on improper considerations such as race, religion, or the desire to prevent the exercise of a constitutionally protected right.” The SEC explained that it exercised prosecutorial discretion, not selective prosecution. The SEC also used his argument to justify the industry bar, asserting that his attempt to displace blame was “an aggravating factor.” The SEC cited the Pasztor case for the proposition that a supervisor can be held liable for a registered representative’s violative conduct even though the firm’s owner overruled his objections.
OUR TAKE: When it comes to violations of the securities laws, there is no safety in numbers. Every individual has responsibility, and you cannot control who the SEC prosecutes.