S.E.C. v. American Bd. of Trade, Inc., 1588

• Decision Date: 08 August 1986
• Docket Number: No. 1588,D,1588
• Citation: 798 F.2d 45
• Parties: Fed. Sec. L. Rep. P 92,940 SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. The AMERICAN BOARD OF TRADE, INC., Arthur N. Economou, Phyllis H. Economou, and the American Board of Trade Service Corp., Defendants-Appellants. ocket 86-6100.
• Court: U.S. Court of Appeals — Second Circuit

Page 45

798 F.2d 45

Fed. Sec. L. Rep. P 92,940

SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. The AMERICAN BOARD OF TRADE, INC., Arthur N. Economou Phyllis H. Economou, and the American Board of Trade Service Corp., Defendants-Appellants.

No. 1588, Docket 86-6100.

United States Court of Appeals Second Circuit.

Argued July 17, 1986.

Decided Aug. 8, 1986.

Paul A. Batista, New York City, for defendants-appellants The American Bd. of Trade, Inc., Phyllis H. Economou, and The American Bd. of Trade Service Corp.

Arthur N. Economou, pro se.

Jacob H. Stillman, Associate Gen. Counsel, S.E.C., Washington, D.C. (Daniel L. Goelzer, Gen. Counsel, Eric Summergrad, Sr. Sp. Counsel, Sheila M. Barry, S.E.C., Washington, D.C., Paul Gonson, of counsel), for plaintiff-appellee.

Before WINTER and MAHONEY, Circuit Judges, and ZAMPANO, District Judge. ^*

PER CURIAM:

This appeal is a sequel to our decision in Securities and Exchange Commission v. American Board of Trade, Inc., 751 F.2d 529 (2d Cir.1984), familiarity with which is assumed. In that case we stayed the district court's injunction against further sales of commercial paper by appellants and remanded to give appellants the opportunity to register The American Board of Trade Service Corp.'s ("ABT Service's") commercial paper program with the Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933 (the "1933 Act").

After the remand to the district court the SEC and appellants engaged in several fruitless exchanges with regard to registration. After considerable time had passed, the district court, apparently concluding that a valid registration was simply not in the cards, appointed a Special Master to supervise the winding down of ABT Service's commercial paper program. The court also ordered that the stay of the injunction against the sale of commercial paper be lifted and that defendants cease sales or redemptions of notes issued by ABT Service.

ABT Service and the various other defendants appealed from the order enjoining sales and redemptions. On June 10, 1986, we stayed the injunction against sales or redemptions until the present appeal could be heard. We issued that stay over the vigorous arguments of the SEC that it would allow ABT Service to continue marketing unregistered commercial paper in circumstances in which ABT Service's insolvency would cause new investors to lose money. Subsequently, on June 26, 1986, we extended the stay to encompass further proceedings by the Special Master.

On June 30, 1986, the government secured a search warrant from Magistrate Gershon, the effect of which was to enable the government to seize all of ABT Service's records and thereby force it to cease doing business. Appellants moved us to extend the previous stays so as to compel the government to return the seized documents. We denied the motion.

ABT Service raises a host of technical and hypertechnical objections to the injunction against further sales and redemptions and to the failure of the SEC to accept its various attempts at registration. These baseless claims need not detain us. The crucial fact is that ABT Service has simply not made the certified financial information necessary for registration available. The issuer identified in the proffered registration statement is not ABT Service but rather a new corporation, The American Board of Trade National Market System Incorporated ("ABTNMS"). Because it has no financial track record, ABTNMS' financial statements are virtually irrelevant. However, since ABTNMS intends to take over ABT Service's commercial paper program and thus to assume the latter's liabilities, certified financial statements from ABT...