From SEC v. Tambone, 2008 U.S. App. LEXIS 24457 (1st Cir. Dec. 3, 2008) (2-1 decision):

[Pleading Standards for SEC in Enforcement Action.] Here ... we are evaluating a securities complaint filed by the SEC, not a private actor. Therefore, on its face, the requirements of the PSLRA do not apply. Additionally, the rationales we set forth for a more demanding standard in private securities actions do not apply to this SEC enforcement action. Whereas private parties have a financial incentive to initiate "strike" suits and drag deep-pocketed defendants into court on allegations of fraud in hopes of obtaining a lucrative settlement, the SEC's statutory task is to protect the investing public by policing the securities markets and preventing fraud. Moreover, as noted above, the SEC possesses the authority to investigate conduct prior to filing a complaint, thereby minimizing the concerns that may result from a lengthy and intense discovery process. See 15 U.S.C. § 78u(a)(1); cf. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 80-81, 126 S. Ct. 1503, 164 L. Ed. 2d 179 (2006) (noting that the standard for establishing a claim under section 10(b) is higher in the context of a private suit than in an SEC enforcement action because courts are rightly concerned with limiting the "vexatiousness" associated with private Rule 10b-5 suits). Therefore, the additional scrutiny applied to allegations of scienter in private securities fraud complaints is unwarranted in this case. See, e.g., SEC v. Lucent Techs., Inc., 363 F. Supp. 2d 708, 717 (D.N.J. 2005) ("[T]he heightened requirements for pleading scienter under the PSLRA do not apply to actions brought by the SEC."); SEC v. ICN Pharms., Inc., 84 F. Supp. 2d 1097, 1099 (C.D. Cal. 2000) ("[T]he 'more rigorous' pleading requirements under the PSLRA, which go beyond the Rule 9(b) requirements only apply to private securities fraud actions; they do not apply to a case . . . brought by the SEC."). Of course, the ordinary scienter requirements of Rule 9(b) apply. The SEC need only allege scienter generally. Fed. R. Civ. P. 9(b). ***

[Differences Between 17(a) and 10b-5.] Although the text of section 17(a) is nearly identical to the text of Rule 10b-5, as indeed section 17(a) served as the guide for Rule 10b-5, there are several key distinctions between the provisions. See generally 3 Hazen, supra, § 12.22; see also 15 U.S.C. § 77q; 17 C.F.R. § 240.10b-5. First, whereas section 17(a) applies only to brokers and dealers selling or offering to sell securities, Rule 10b-5 explicitly covers "any person" who commits a fraudulent act "in connection with the purchase or sale of any security." ... Moreover, section 10(b) and Rule 10b-5 reach only conduct that "coincides" with a securities transaction — a sale or purchase, see Merrill Lynch, 547 U.S. at 85 — and not a fraudulent offer alone. In contrast, because section 17(a) applies to both sales and offers to sell securities, the SEC need not base its claim of liability on any completed transaction at all. ***

In addition, ... although private plaintiffs can maintain a cause of action under Rule 10b-5, only the SEC may bring a claim to enforce the prohibitions of section 17(a). See ... Maldonado v. Dominguez, 137 F.3d 1, 6-8 (1st Cir. 1998) (joining a majority of circuits in rejecting a private right of action under section 17(a)).

Finally, the degree of scienter required to establish a violation under Rule 10b-5 and section 17(a)(2) differs. To prove a claim under section 17(a)(2), the subsection pertaining to false statements or omissions, the SEC need show only that the defendants acted negligently. Under section 10(b) and Rule 10b-5, however, the SEC must prove that defendants acted with intent, knowledge or a high degree of recklessness. ... This distinction follows closely from the text of the respective provisions.... Deciding the state of mind requirements for section 10(b), the Court set forth in Ernst & Ernst, and confirmed in Aaron, that Congress's inclusion of the terms "manipulative," "device," and "contrivance" in section 10(b) indicated that it sought to limit liability to acts that involved scienter.... By contrast, the Court has noted that section 17(a)(2) "is devoid of any suggestion whatsoever of a scienter requirement."... Nevertheless, the SEC did not rely on this distinction in its section 17(a)(2) claims against appellees, alleging in the complaint that they acted with intent, knowledge, or a high degree of recklessness. ***

[Breadth of 17(a) vs. 10b-5.] We do not read the case law cited by the defendants as foreclosing the Commission's argument that section 17(a)(2) is broader than section 10(b) and Rule 10b-5(b). Although we have previously analyzed section 17(a) claims identically to those made under section 10(b) and Rule 10b-5 where the parties agreed that the analysis was the same..., that treatment does not preclude our recognition here that the scope of actionable conduct under the two statutes may be different. Indeed, this is necessarily so because, as we have noted, the text of the statutes mandate different showings with respect to scienter. See Aaron, 446 U.S. at 695-97. Nor are the SEC's arguments foreclosed by Supreme Court precedent or decisions of this circuit. Cf. Naftalin, 441 U.S. at 778 ("[U]ndoubtedly[,] . . . the [Securities Act and the Exchange Act] prohibit some of the same conduct. . . . But '[the] fact that there may well be some overlap is neither unusual nor unfortunate.'" (quoting SEC v. Nat'l Sec., Inc., 393 U.S. 453, 468, 89 S. Ct. 564, 21 L. Ed. 2d 668 (1969))).

After carefully examining the respective texts at issue, we find the Commission's argument regarding the scope of conduct prohibited by section 17(a)(2) persuasive. Because section 17(a)(2) was drafted to apply to broker-dealers, its prohibitory language focuses specifically on conduct engaged in by a seller. The statute prohibits an individual from "obtain[ing] money or property by means of any untrue statement." It does not state, however, that the seller must himself make that untrue statement. Indeed, the text suggests that the opposite is true — that it is irrelevant for purposes of liability whether the seller uses his own false statement or one made by another individual. Liability attaches so long as the statement is used "to obtain money or property," regardless of its source.

In contrast to the "by means of any untrue statement" language of section 17(a)(2), Rule 10b-5(b) renders it unlawful "[t]o make any untrue statement of a material fact . . . in connection with the purchase or sale of any security." As the drafters intended, Rule 10b-5 expands liability to cover all segments of the securities industry, including drafters, auditors, accountants, and distributors. See Central Bank, 511 U.S. at 191.... [A]ny one of these actors who makes an untrue statement in connection with the purchase or sale of a security may be found primarily liable.... However, Rule 10b-5's expansion of coverage beyond the seller of securities is accompanied by a more restrictive statement of the conduct that will suffice to establish liability. The "to obtain money or property by means of any untrue statement" language of section 17(a)(2) is replaced by the requirement in Rule 10b-5(b) that the actor "make" an "untrue statement of a material fact . . . in connection with the purchase or sale of any security."

This reading of section 17(a)(2) (that it does not require the defendant to make the false statement at issue), is supported by Congress's inclusion of the phrase "directly or indirectly" in the statutory text of section 17(a). The statute makes it "unlawful for any person . . . directly or indirectly . . . to obtain money or property by means of any untrue statement of a material fact." That a seller may be liable for indirectly obtaining money by means of an untrue statement reinforces the conclusion that the untrue statement at issue need not have been made by the securities seller....Therefore, based on our reading of the text of section 17(a)(2), we conclude that this provision covers conduct that may not be prohibited by section 10(b) and Rule 10b-5. Specifically, primary liability may attach under section 17(a)(2) even when the defendant has not himself made a false statement in connection with the offer or sale of a security.