SEC v. Levin

The SEC filed suit against defendant, alleging violations of the registration provisions of the Securities Act, 15 U.S.C. 77a et seq., and fraud in the sale of securities in violation of the Securities and Exchange Act, 15 U.S.C. 78a et seq. The court awarded summary judgment to the SEC, finding no merit in defendant's affirmative defenses. A jury found defendant liable on the fraud claims. The court concluded that the district court erred in granting summary judgment to the SEC because it found the Banyon note offerings were not eligible for a Regulation D exemption from the registration requirements of Section 5 of the Securities Act. The court held that Rule 508(a) not only preserves the safe harbor for certain insignificant deviations in private actions, but it also preserves the safe harbor in SEC enforcement actions. In this case, the court reasoned that defendant established a genuine dispute of material fact whether the Banyon note offering, as a whole, falls under the safe harbor provision in Rule 508. The court also concluded that defendant failed to show serious prejudice to his case from the district court's denial of the motion for continuance; the district court properly based the disgorgement order upon defendant's gains and not the investors' losses; and the district court did not plainly err in questioning defendant and another witness during trial. Accordingly, the court affirmed in part, reversed in part, and remanded. View "SEC v. Levin" on Justia Law