Yesterday I wrote here about the jury verdict reached this week in the SEC's trial against former Chicago Bears wide receiver Willie Gault. I wrote that "the jury found that Gault was not liable on any of the four fraud-related charges against him, but that he was liable on three less serious charges alleging violations of certification requirements and internal control rules." Indeed, Gault's counsel stated after the verdict that the Gault emerged from the trial with the "equivalent of a securities parking ticket."

However, it was subsequently pointed out to me that one of the three claims on which the jury found Gault liable was a claim that Gault violated Section 17(a)(3) of the Securities Act -- an antifraud provision. Under Section 17(a)(3), it is unlawful "to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser" in the offer or sale of any securities. 

While Section 17(a)(3) is an antifraud statute, it differs from Section 10(b) of the Securities Exchange Act in that it does not require the SEC to prove that the defendant acted with an intent to “deceive, manipulate or defraud.” Rather, as summarized in this Alert by law firm Latham & Watkins, Section 17(a)(3) only requires proof of negligence. This type of "negligent fraud" seems to fall somewhere below actual fraud but above a "securities parking ticket."