316 F.2d 137 (2nd Cir. 1963), 204, Berko v. S.E.C.
|Docket Nº:||204, 27774.|
|Citation:||316 F.2d 137|
|Party Name:||Irwin BERKO, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent.|
|Case Date:||April 09, 1963|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued Jan. 8, 1963.
Robert J. Ward, New York City (Aranow, Brodsky, Bohlinger, Einhorn & Dann, New York City, on the brief), for petitioner.
Peter A. Dammann, Gen. Counsel, Securities and Exchange Commission, Washington, D.C. (David Ferber, Assoc. Gen. Counsel, George P. Michaely, Jr., Sp. Counsel, and Donald R. Jolliffe, Atty., Securities and Exchange Commission, Washington, D.C., on the brief), for respondent.
Before CLARK, FRIENDLY and MARSHALL, Circuit Judges.
MARSHALL, Circuit Judge.
This is a petition for review of an order of the Securities and Exchange Commission entered pursuant to a remand by this court of a former order of the Commission. Berko v. S.E.C., 297 F.2d 116 (2 Cir., 1961). The original petition sought review of a Commission order of February 6, 1961, which found that Irwin Berko, a salesman, was a cause of revocation of the broker and dealer registration of his employer, MacRobbins & Co., Inc.
The Commission's original order revoking the registration of MacRobbins & Co. and finding petitioner a cause thereof was entered pursuant to Sections 15(b) and 15A(b)(4) of the Securities Exchange Act of 1934, as amended. 15 U.S.C.A. §§ 78o(b) and 78o-3(b)(4). In its Findings and Opinion the Commission held, on the basis of the record, that MacRobbins & Co. and nine of its salesmen, including petitioner, had violated the antifraud provisions of Section 17(a) of the Securities Act of 1933, 15 U.S.C.A. § 77q(a); of Sections 10(b) and 15(c)(1) of the Securities Exchange Act of 1934, 15 U.S.C.A. §§ 78j(b) and 78o(c)(1); and of Rules 10b-5 and 15c1-2 thereunder, 17 C.F.R. 240.10b-5 and 15c1-2, in the offer and sale of the stock of Sports Arenas, Inc., a Delaware corporation.
On the original petition for review, we found that the Commission's findings and legal theory lacked 'that clarity and expression of purpose as derived through administrative experience necessary when issues not yet passed upon by any court are presented.' 297 F.2d at 118. Accordingly, we remanded the case to the Commission, requesting 'more complete findings and a clearer indication of the precise basis for its decision.' 1 Ibid.
Without holding further hearings, the Commission filed a new opinion in which it reaffirmed its previous finding that petitioner was a cause of revocation of his employer's broker-dealer registration. 2 This petition for review followed. 15 U.S.C.A. § 78y.
In its opinion on remand, the Commission review the applicable law and again emphasizes the evils inherent in 'boilier-room' operations. 3. There can be no question that MacRobbins was operating a 'boiler-room' in plain violation of the statute and that there was ample evidence to support that portion of the order revoking its broker-dealer registration; indeed, the registrant had entered into a stipulation consenting to the revocation. MacRobbins had set up the operation for the principal and specialized purpose of selling a single stock, that of Sports Arenas, Inc. At least two brochures, both of which were properly found to be deceptive and misleading, were widely distributed through the mails. Ten salesmen were employed to make telephone calls to and receive telephone calls from prospective customers and to urge the purchase of Sports Arenas stock. A result was that more than 100,000 shares were sold between October 1957 and November 1958. The operation of MacRobbins was also characterized by a lack of knowledge or failure to disclose the true financial condition of Sports Arenas. As we said in our earlier opinion, 'We applaud the efforts of the Commission in seeking better means of dealing with 'boiler room' operations. * * *' 297 F.2d at 117.
The question we face here, however, is a somewhat different one. It is whether there is sufficient evidence in the record to support the Commission's finding that the petitioner Berko was a 'cause' of the revocation of MacRobbins' registration within the meaning of Section 15A(b)(4) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78o-3(b)(4). We have examined the record carefully and concluded that the evidence is sufficient to support the Commission's order. The order is therefore affirmed.
An understanding of the relevant statutory background is necessary to decision in this case. Section 15(a) of the Securities Exchange Act of 1934 requires a 'broker or dealer' to be registered. 15 U.S.C.A. § 78o(a). Section 15(b) provides for denying or revoking such registration if, inter alia, the broker or dealer '(D) has willfully violated any provision of the Securities Act of 1933, or of this chapter, or of any rule or regulation thereunder,' and revocation is in the public interest. 15 U.S.C.A. § 78o(b). These provisions were the basis for the revocation of MacRobbins' registration. Since Berko was not a broker or dealer, there was no requirement that he be registered. Section 15(b) also provides that the Commission may deny or revoke the registration of a broker or dealer if 'any person directly or indirectly controlling or controlled by such broker or dealer, whether prior or subsequent to becoming such,' falls within subsection (D), quoted above, an issue that would not arise in the present case unless or until Berko seeks employment with a new broker or dealer. Moreover...
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