Dlugash v. Securities and Exchange Commission
Decision Date | 21 February 1967 |
Docket Number | No. 330,Docket 30891.,330 |
Citation | 373 F.2d 107 |
Parties | Regina DLUGASH, doing business as Douglas Enterprises and Jack Dlugash, Petitioners-Appellants, v. SECURITIES AND EXCHANGE COMMISSION, Respondent-Appellee. |
Court | U.S. Court of Appeals — Second Circuit |
Alan C. Levy, Brooklyn, N. Y. (Stetter & Levy, Brooklyn, N. Y. on the brief), for petitioners-appellants.
Walter P. North, Associate General Counsel, Securities and Exchange Commission (Philip A. Loomis, Jr., General Counsel, Jacob H. Stillman, and Theodore S. Kaplan, Attys., Securities and Exchange Commission, Washington, D. C., on the brief), for respondent-appellee.
Before LUMBARD, Chief Judge, and SMITH and ANDERSON, Circuit Judges.
Regina Dlugash, d/b/a Douglas Enterprises, and Jack Dlugash, individually, petition this court for review of an order of the Securities and Exchange Commission which revoked the broker-dealer registration of Douglas Enterprises, expelled Douglas from membership in the National Association of Securities Dealers, and found Jack Dlugash a "cause of the order." The order was based on the Commission's finding that petitioners had willfully violated the anti-fraud and anti-manipulation provisions of the Securities Act of 1933 and the Securities Exchange Act of 19341 in their marketing of the securities of Diversified Funding, Inc.
Douglas Enterprises sold some 3,000 shares of Diversified to the investing public; most of these shares were purchased by Douglas from F. S. Johns & Co., an organizer of Diversified. In effecting the sales, Douglas's salesmen showed their customers a "Special Research Report" which had been received from F. S. Johns and which contained grossly misleading statements about the prospects of Diversified. In addition, Douglas entered an arrangement with F. S. Johns whereby Douglas would enter bids and ask quotations for Diversified shares at prices supplied by F. S. Johns and in return F. S. Johns would repurchase at a profit to Douglas any shares which Douglas might be required to buy because of its bids. F. S. Johns made similar arrangements with other broker-dealers, and under this manipulative scheme the market price of Diversified shares more than doubled in less than six weeks. The Commission further found that Douglas, as a statutory underwriter of Diversified securities, had violated Rule 10b-6 which prohibits a distributor or underwriter from bidding for or purchasing shares prior to the completion of its participation in the distribution. F. S. Johns, as a distributor, also violated Rule 10b-6, and the Commission held that Douglas had aided and abetted F. S. Johns in that violation.
United States v. Benjamin, 328 F.2d 854, 862 (2 Cir. 1964). See...
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