Securities and Exchange Commission v. Okin, 135.
| Decision Date | 04 January 1943 |
| Docket Number | No. 135.,135. |
| Citation | 132 F.2d 784 |
| Parties | SECURITIES AND EXCHANGE COMMISSION v. OKIN. |
| Court | U.S. Court of Appeals — Second Circuit |
Milton V. Freeman, of Philadelphia, Pa., John F. Davis, Sol., and Charles B. Collins, Robert B. Healey, and Arnold R. Ginsburg, Attys. for Securities and Exchange Commission, all of Philadelphia, Pa. (Irving J. Galpeer, of New York City, of counsel), for appellant.
Samuel Okin, of New York City, appellee, pro se.
Before L. HAND, SWAN, and CHASE, Circuit Judges.
The Securities and Exchange Commission appeals from a judgment dismissing its complaint for insufficiency in law upon its face. The substance of the allegations was as follows. On September 16, 1942, the Electric Bond and Share Company, a corporation subject to the Commission's jurisdiction, filed with it "a notice, proxy statement and form of proxy in connection with an annual meeting of stockholders scheduled to be held on October 14, 1942"; and, on September 24, 1942, Okin, the defendant, filed copies of a letter to shareholders asking them not to sign any proxies for the company, and to revoke any which they might have already signed. This letter was "false and misleading" because in it the defendant declared that "the preferred dividend requirements" of the company had "already caused a deficit of approximately $1,250,000 this year and if the conditions remain this deficit will be approximately $2,500,000 by the end of this year." The fact was on the contrary that there was no deficit but a "net income" of $2,661,000 for the first six months of the year and an earned surplus of nearly $62,000,000. The letter further omitted to state facts "necessary to be stated in order to make the statements made therein not false or misleading." These omissions were four in number. The first was that, although in the letter the defendant said that he had succeeded in preventing a loss to the company which would have resulted from the attempted subordination of one of its claims against another company, he did not add that the question was still undecided and still sub judice. The second omission was that, although in the letter he said that he had brought suit against the company and its "management," he did not add that the suit had theretofore been unsuccessful, and that it would not add to its assets anyway, but would merely change the priority of claims against the company. The third omission was that, although in the letter he said that he owned 9000 shares, he did not add that he had bought them for $9,000. The fourth and last omission was that, although in the letter he told the shareholders not to sign proxies and to revoke any proxies they might have given, so as to prevent a quorum at the meeting of October 14, 1942, he did not add that if that meeting were adjourned, he meant to solicit proxies by means of which he should indirectly get himself elected an officer of the company. By using the mails to distribute copies of this letter the defendant violated the Commission's regulations and he should be enjoined. The judge dismissed the complaint because he thought that the letter was not a solicitation of proxies within § 12(e) of the Public Utility Holding Company Act of 1935, 15 U.S.C.A. § 79l(e), and that unless it was, it was not subject to regulation by the Commission.
Although § 12(e) subjects to the Commission's regulations the solicitation not only of a proxy, but of any "power of attorney, consent, or authorization regarding any security," it would be going far to say that the letter in controversy was a solicitation of any of these. If the complaint had not alleged that the defendant intended to follow it up by actually soliciting proxies, should the proposed meeting be adjourned, we should indeed have great doubt whether it stated a cause of action. But it does so allege; it says in substance that the letter was a step in a campaign whose purpose was to get himself elected an officer of the company; it was to pave the way for an out-and-out solicitation later. Therefore the complaint presents the question whether the power of the Commission under § 12(e) is limited to the regulation of a "proxy, power of attorney, consent, or authorization," strictly as such; or...
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