SEC v. O'Meally, No. 13-1116 (2d Cir. 2014)Annotate this Case
The SEC filed a civil enforcement action against defendant, alleging that defendant failed to follow directives issued by the mutual funds and his employer to cease his market timing, and that he used different "financial advisor numbers" when mutual funds blocked trading from the ones he customarily used. The jury found that defendant engaged in no intentional misconduct but that he violated Section 17 of the Securities Act of 1933, 15 U.S.C. 77q, which has no scienter element, with respect to six out of sixty mutual funds. The court concluded that the evidence established without contradiction that the funds were inconsistent in their proscriptions on market timing and that the employer supported defendant's practices - and the jury could not find negligence in these circumstances without evidence as to an appropriate standard of care. Accordingly, the court reversed and remanded for the district court to dismiss the complaint against defendant.