## Facts

- Jerome M. Wenger published an investment newsletter and hosted a syndicated radio program promoting “penny stocks.”
- The SEC previously found Wenger’s earlier newsletter violated securities laws by failing to disclose issuer compensation; Wenger entered a consent decree requiring disclosure of the full value of any consideration received from issuers he covered.
- Wenger later operated *The Next SuperStock* newsletter and radio program, again promoting small-company stocks.
- Wenger promoted PanWorld Minerals International, Inc. while receiving compensation in stock from the company.
- Wenger publicized PanWorld without fully disclosing that he was compensated and without disclosing the amount or value of the compensation, as required by Securities Act § 17(b).
- Wenger sold his PanWorld shares for profits exceeding $100,000 while continuing to recommend the stock to his audience.
- Audience members testified they purchased PanWorld based on Wenger’s recommendations and would not have done so had they known about his compensation and sales.
- Wenger asserted he relied on advice of counsel concerning how to make disclosures, but evidence indicated counsel was not told about the prior SEC consent decree.

## Issues

1. Whether Securities Act § 17(b) violates the First Amendment by requiring disclosure when securities are publicized for issuer consideration.
2. Whether § 17(b) is unconstitutionally vague regarding what disclosures are required.
3. Whether the evidence was sufficient to prove willful violations of § 17(b) and Exchange Act § 10(b)/Rule 10b-5, including in light of an advice-of-counsel defense.
4. Whether admitting Wenger’s prior SEC consent decree was improper under the Federal Rules of Evidence.
5. Whether the district court erred by not sending the indictment into the jury room.

## Decision

- The Tenth Circuit affirmed Wenger’s convictions.
- The court held § 17(b) is constitutional under the First Amendment as a disclosure requirement aimed at preventing investor deception.
- The court held § 17(b) is not unconstitutionally vague, particularly as applied to Wenger given his prior SEC consent decree and experience.
- The court found sufficient evidence of willfulness and upheld the jury’s rejection of the advice-of-counsel defense.
- The court found no reversible error in admitting the SEC consent decree for limited purposes tied to knowledge and intent.
- The court held the indictment’s absence from the jury room did not warrant reversal because the jury was properly instructed and Wenger showed no prejudice.

## Legal Principles

- Securities Act § 17(b) permissibly requires a person who publicizes a security for issuer (or underwriter/dealer) consideration to disclose both the fact of compensation and its amount; this functions as an anti-deception disclosure rule rather than a ban on recommendations.
- Vagueness challenges are assessed as applied; clear statutory text and a defendant’s demonstrated awareness of disclosure obligations can defeat a vagueness claim.
- An advice-of-counsel defense requires full disclosure of material facts to counsel and good-faith reliance; incomplete disclosure to counsel supports a finding of willfulness.
- Prior regulatory orders or consent decrees may be admitted to prove knowledge, intent, and absence of mistake, subject to limiting purposes and Rule 403 balancing.
- There is no requirement that the indictment be provided to the jury during deliberations where the jury is properly instructed and no prejudice is shown.

## Conclusion

The court upheld Wenger’s securities-fraud convictions, rejecting constitutional and vagueness attacks on § 17(b), finding ample evidence of willful nondisclosure and deceptive trading, and concluding that the prior SEC consent decree and trial procedures did not warrant reversal.


United States v. Wenger, 427 F.3d 840 (10th Cir. 2005)