Milton Garnatz (plaintiff) was an average investor, without expertise in the securities market. Garnatz attended investment seminars held by Stifel, Nicolaus & Company, Inc. (Stifel) (defendant). He also met personally with Stifel vice president Kingsley Wright (defendant). Based on those seminars and meetings, Garnatz enrolled in a special bond margin account program, under which Stifel purchased bonds on Garnatz’s behalf. Stifel told Garnatz that the program had no risk and made other assurances that turned out to be incorrect. Garnatz told Stifel he did not wish to invest in speculative markets. Despite this, most of the bonds that Stifel bought on Garnatz’s behalf were either low- or non-rated, and thus highly speculative. Garnatz’s bonds declined in value after purchase. Garnatz brought a private action against Stifel and Wright, based on Rule 10b-5 of the SEC’s regulations. The trial jury awarded Garnatz $45,000. The defendants appealed, arguing for calculation of damages based on the out-of-pocket rule.