Securities & Exchange Commission v. Presto Telecommunications, Inc.

MEMORANDUM **

1. The SEC presented evidence to the district court that Vassallo sold unregistered securities in interstate commerce. Vassallo failed in the district court to meet his burden of showing entitlement to an exemption, and his argument on appeal that Presto qualified for an exemption is without merit. See SEC v. Murphy, 626 F.2d 633, 641 (9th Cir.1980); 17 C.F.R. §§ 230.502 , 230.504-506. The district court concluded correctly that Vassallo sold unregistered securities in violation of §§ 5(a) and 5(c) of the Securities Act. See 15 U.S.C. § 77e.

2. The SEC presented evidence to the district court that Vassallo violated Rule 10b-5, which prohibits the employment of manipulative and deceptive devices in the sale and exchange of securities. See 17 C.F.R. § 240 .10b-5. To prove a violation of Rule 10b-5, the SEC must show 1) material misrepresentations; 2) in connection with the purchase, offer, or sale of a security; 3) scienter; and 4) a nexus to interstate commerce. See SEC v. Rana Research, Inc., 8 F.3d 1358 , 1364 (9th Cir.1993). It is undisputed that Vassallo sold securities in interstate commerce.

Vassallo argues unpersuasively that the evidence the SEC presented…