Nassau Securities Service v. SECURITIES AND EXCHANGE COM'N, 426
| Decision Date | 28 June 1965 |
| Docket Number | No. 426,Docket 29346.,426 |
| Citation | 348 F.2d 133 |
| Parties | NASSAU SECURITIES SERVICE, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Second Circuit |
Irving Garber, pro se.
Edward B. Wagner, Sp. Counsel, Philip A. Loomis, Jr., General Counsel, David Ferber, Solicitor; Michael Joseph, Attorney, Securities and Exchange Commission, for respondent.
Before WATERMAN, FRIENDLY and ANDERSON, Circuit Judges.
Petitioner, a member of the National Association of Securities Dealers, Inc. (NASD), contracted to sell 100 shares of stock at $6.75 per share to James Anthony & Co., a fellow member of the NASD. When petitioner failed to deliver the shares at the proper time, Anthony purchased the stock at $10 per share from another dealer on petitioner's account, in accordance with Section 59 of the NASD Uniform Practice Code. Petitioner subsequently declined to pay Anthony the difference between the contract price and the "buy-in" price, a sum of $325.00.
Upon a complaint by Anthony and after notice and hearing, the District Business Conduct Committee of the NASD found petitioner guilty of violating Article III, Section 1 of the NASD Rules of Fair Practice, which requires NASD members to "observe high standards of commercial honor and just and equitable principles of trade." The Committee censured petitioner, fined it $1000, and assessed costs which ultimately totaled $256.67. This decision was affirmed in all respects by the Board of Governors of the NASD.
Upon a petition for review of the NASD order, the Securities and Exchange Commission dismissed the application, pursuant to 15 U.S.C. § 78o-3(h) (1), and held that petitioner's actions, as described above, constituted conduct "inconsistent with just and equitable principles of trade." Sec.Ex.Act.Rel. No. 7464, p. 4. It seems a bit odd that semi-public sanctions should be imposed for the breach of a private contract between professional traders. We cannot say, however, that the Commission exceeded its discretion in upholding this NASD policy. Cf. Berko v. S. E. C., 316 F.2d 137, 141-142 (2 Cir. 1963).
Petitioner argues that the case is governed by Southern Brokerage Co., Sec. Ex.Act.Rel. No. 7463 (1964), in which the Commission excused a breach of contract between NASD members because the defaulting dealer had an honest and reasonable belief that the subject matter of the contract was part of a fraudulent or manipulative scheme. Petitioner claims that this decision is particularly applicable here, because petitioner offered to put the $325 in escrow pending the outcome of an investigation by the Commission into possible manipulation of the stock being traded with Anthony.
The Commission found, however, that petitioner did not have a belief both honest and reasonable that there was a manipulative scheme afoot at the time of the contractual default. We hold, pursuant to 15 U.S.C. § 78y(a), that this finding was supported by substantial evidence. See R. H. Johnson & Co. v. S. E. C., 198 F.2d 690, 695 (2 Cir.), cert. denied, 344 U.S. 855, 73 S.Ct. 94, 97 L. Ed. 664 (1952). Furthermore, in the absence of such an honest and reasonable belief, petitioner was not entitled to withhold payment of the $325, even for the purpose of forcing what might have turned out to be a fruitful investigation.
Petitioner asks us to reverse the Commission on the ground that Section 59 of the NASD Uniform Practice Code has since been amended so as to permit the delay which occurred here in delivering the shares to Anthony. We shall assume, with the Commission, that the new provision has the effect ascribed to it by petitioner. Nevertheless, we know of no cases which hold that a relaxation of applicable regulations automatically abates administrative actions begun under prior and stricter standards, nor do we find any evidence that the NASD actually intended such a result in this particular instance. Compare Hamm v. City of Rock Hill, 379 U.S. 306, 85 S.Ct. 384, 13 L.Ed. 2d 300 (1964).
Petitioner claims that it was denied a fair hearing before...
To continue reading
Request your trial
-
WACO FIN. v. NATIONAL ASS'N OF SEC. DEALERS
...Cir. 1977); First Jersey Securities, Inc. v. Bergen, 605 F.2d 690 (3rd Cir. 1979) (claim of bias); Nassau Securities Service v. Securities & Exchange Comm., 348 F.2d 133 (2nd Cir. 1965) (composition of NASD tribunals); Allan v. Securities & Exchange Comm., 577 F.2d 388 (7th Cir. 1978) (SEC'......
-
Arthur Lipper Corp. v. S.E.C.
...418 F.2d 103, 107 (1969); Sinclair v. SEC, 444 F.2d 399, 402 (1971). See also Boruski v. SEC, 289 F.2d 738 (1961); Nassau Securities Service v. SEC, 348 F.2d 133, 136 (1965). 10 Compare Jacob Siegel Co. v. FTC, 327 U.S. 608, 612, 66 S.Ct. 728, 90 L.Ed. 888 (1946). Reviewability of sanctions......
-
8200 Realty Corp. v. Lindsay
...by city agencies which overlooks the association in this present case. In the same direction are Nassau Securities Serv. v. Securities & Exch. Comm., 348 F.2d 133, 136 (2d Cir.); Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388, 399, 60 S.Ct. 907, 84 L.Ed. 1263; Opp Cotton Mills v.......
-
Farra v. Stanley-Bostitch, Inc.
... ... Philadelphia Tramrail Co., 426 Pa.Super. 156, 626 A.2d 620, 625-26 (1993). 2 ... ...