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How To Avoid The Constraints Of Rule 10b-5(B): A First Circuit Guide For Underwriters, Eric H. Franklin
How To Avoid The Constraints Of Rule 10b-5(B): A First Circuit Guide For Underwriters, Eric H. Franklin
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If an underwriter knows that a prospectus contains a material misrepresentation, may that underwriter use the prospectus to sell securities, or would that expose the underwriter to liability under Rule 10b-5(b)? The United States Court of Appeals for the First Circuit's surprising and rather disconcerting answer was delivered on March 10, 2010, in Securities and Exchange Commission v. Tambone. In Tambone, the First Circuit held that the Securities and Exchange Commission (SEC) could not hold underwriters liable for such misrepresentations if they did not draft the prospectus. Ostensibly, this holding is nothing more than a judicial check on the SEC's …