Jones v. Securities and Exchange Commission

Decision Date06 April 1936
Docket NumberNo. 640,640
Citation56 S.Ct. 654,298 U.S. 1,80 L.Ed. 1015
CourtU.S. Supreme Court

[Syllabus from pages 1-3 intentionally omitted] Messrs. Harry O. Glasser, of Enid, Okl., and James M. Beck and H. I. Fischbach, both of New York City (Mr. J. N. Saye, of Longview, Tex., on the brief), for petitioner.

Messrs. Stanley F. Reed, Sol. Gen., and John J. Burns, both of Washington, D.C., for respondent.

[Argument of Counsel from pages 4-8 intentionally omitted] Mr. Justice SUTHERLAND delivered the opinion of the Court.

This case arises under the Securities Act of 1933, c. 38, 48 Stat. 74, as amended by Act of June 6, 1934, c. 404, 48 Stat. 881, U.S.C. title 15, § 77a et seq. (15 U.S.C.A. § 77a et seq.). Prior to the amendment, the act was administered by the Federal Trade Commission; but by Securities Exchange Act of 1934, § 210, 48 Stat. 908 (15 U.S.C.A. § 78ii), the administration was transferred to the respondent.

The act, section 2(4), 15 U.S.C.A. § 77b(4), defines the term 'issuer' as including every person who issues or proposes to issue any security, with certain exceptions. Section 6(a) of the act (15 U.S.C.A. § 77f(a) provides: 'Any security may be registered with the Commission under the terms and conditions hereinafter provided, by filing a registration statement in triplicate, at least one of which shall be signed by each issuer.' The filing of the registration statement must be accompanied by the payment to the commission of a fee measured by the maximum aggregate price at which the securities are to be offered. The information contained in the statement is to be made available to the public under such regulations as the commission may prescribe. The act prescribes in detail the character of information which is to be set out in the statement. Elaborate provisions are made in respect of liability on account of false registration statements, etc., and penalties are imposed for willful violations of any of the provisions of the act, or the rules and regulations promulgated by the commission under authority thereof, and for willfully untrue statements of material facts or omissions to state material facts. Section 5(a), 15 U.S.C.A. § 77e(a), provides that unless a registration statement is in effect as to a security, it shall be unlawful for any person directly or indirectly to make use of the instrumentalities of interstate commerce or of the mails to sell or offer to buy such security, etc., or to transport any such security for sale or for delivery after sale.

'Sec. 8(a) The effective date of a registration statement shall be the twentieth day after the filing thereof, except as hereinafter provided, * * *

'(d) If it appears to the Commission at any time that the registration statement includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may, after notice by personal service or the sending of confirmed telegraphic notice, and after opportunity for hearing (at a time fixed by the Commission) within fifteen days after such notice by personal service or the sending of such telegraphic notice, issue a stop order suspending the effectiveness of the registration statement. * * *

'(e) The Commission is hereby empowered to make an examination in any case in order to determine whether a stop order should issue under subsection (d). In making such examination the Commission or any officer or officers designated by it shall have access to and may demand the production of any books and papers of, and may administer oaths and affirmations to and examine, the issuer, underwriter, or any other person, in respect of any matter relevant to the examination, and may, in its discretion, require the production of a balance sheet exhibiting the assets and liabilities of the issuer, or its income statement, or both, to be certified to by a public or certified accountant approved by the Commission. If the issuer or underwriter shall fail to cooperate, or shall obstruct or refuse to permit the making of an examination, such conduct shall be p oper ground for the issuance of a stop order.' 15 U.S.C.A. § 77h(a, d, e).

Section 19(b), 15 U.S.C.A. § 77s(b), provides that for the purpose of all investigations which the commission think necessary and proper for the enforcement of the act, any member of the commission or any designated officer may administer oaths and affirmations, subpoena witnesses, take evidence, and require the production of books, papers, etc. Section 22(b), 15 U.S.C.A. § 77v(b), provides that in case of contumacy or refusal to obey a subpoena issued (by authority of the commission) to any person, the District Courts of the United States and others named, upon application by the commission, may issue to such person an order requiring him to appear before the commission or one of its examiners, and there produce documentary evidence and give evidence touching the matter in question.

May 4, 1935, petitioner filed with the commission a registration statement in pursuance of section 6(a) of the act, 15 U.S.C.A. § 77f(a), covering a proposed issue of participation trust certificates. This registration statement under the terms of the act was to become effective 20 days later. On the nineteenth day, however, the commission, having already directed that stop-order proceedings be instituted, pursuant to section 8(d), 15 U.S.C.A. § 77h(d), sent petitioner a telegraphic notice reciting that the registration statement appeared to contain untrue statements of material facts and to omit material facts required and necessary and fixing a hearing at the office of the commission for Thursday, June 6, 1935, 'at which time and place registrant may appear and show cause why a stop order should not be issued suspending the effectiveness of such registration statement.' The hearing was postponed until June 18th.

On June 13, a subpoena duces tecum was issued commanding petitioner to appear before an officer of the commission on the 18th to testify with respect to his registration statement and to bring with him designated books, records, and papers, listed as follows: General ledger, subsidiary ledgers, journal, cash book, books of account and financial statements of J. Edward Jones; general ledger, journal, cash book and books of account of J. Edward Jones relating to J. Edward Jones Royalty Trust, Series 'M'; all contracts, agreements and correspondence of J. Edward Jones relating to the distribution of Participation Trust Certificates in J. Edward Jones Royalty Trust, Series 'M'; all correspondence and communications of J. Edward Jones with any State authority relating to the distribution of Participation Trust Certificates in J. Edward Jones Royalty Trust, Series 'M."

June 18, in a written communication to the commission, petitioner formally withdrew his application for registration, assigning as a reason, among others, that the commission's action had been given widespread publicity and placed him in a situation to be severely damaged. The same day, his counsel appeared before the examiner for the commission and presented this written withdrawal, which was marked for identification, but excluded from consideration. On June 27, counsel for petitioner appeared again before the examiner, and filed a dismissal signed by petitioner dismissing 'his registration statement heretofore filed' and withdrawing 'all application for consideration thereof or action thereon.' At the same time, petitioner's counsel filed a motion to dismiss and for an order from the commission permitting the withdrawal of the registration statement and dismissing the registration proceeding and all matters pertaining thereto at petitioner's cost, and also a motion to quash the subpoena which had been issued and served on petitioner. The examiner acting for the commission denied the motions and refused to allow the withdrawal, no reason for his action being assigned. In so doing, the commission and its examiner assumed to act under and in conformity with a regulation of the commission which provides as follows: 'Any registration statement or any amendment thereto may be withdrawn upon the request of the registrant if the Commission consents thereto. The fee paid upon the filing of such registration statement shall not be returned to the registrant. The papers comprising the registration statement or amendment thereto shall not be removed from the files of the Commission but shall be plainly marked with the date of the giving of such consent and in the following manner: 'Withdrawn upon the Request of the Registrant, the Commission consenting thereto'. Such consent shall be given by the Commission with due regard to the public interest and the protection of investors.'

On June 28th, petitioner filed with the court below a petition asking for a review of the commission's rulings which that court dismissed for lack of jurisdiction. A petition for a writ of certiorari to review that action was denied by this court. 297 U.S. 699, 56 S.Ct. 497, 80 L.Ed. 988.

July 3, 1935, the commission filed an application in a Federal District Court for an order requiring petitioner to appear before the examiner to give evidence in the matter of petitioner's registration statement. Petitioner appeared and challenged, among other things, the validity of the orders of the commission denying petitioner's right to withdraw his registration statement, overruling his motions to withdraw and dismiss the proceedings and refusing to quash the subpoena which had been issued and served on petitioner. The District Court denied petitioner's contentions and entered an order directing him to appear before the commission at a time and place fixed, to testify in the matter of the registration statement and to answer all pertinent questions regarding the information and documents filed by him...

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