Whiteside and Co., Inc. v. S.E.C.
| Decision Date | 24 July 1989 |
| Docket Number | No. 88-4921,88-4921 |
| Parties | Fed. Sec. L. Rep. P 94,720 WHITESIDE AND CO., INC. and William H. Whiteside, Petitioners, v. SECURITIES AND EXCHANGE COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — Fifth Circuit |
William H. Whiteside (ProSe) Lubbock, Tex., for petitioners.
Richard A. Kirby, Daniel Goelzer, General Counsel, Thomas C. Riesenberg, Robert L. McCloskey, S.E.C. Washington, D.C., for respondent.
Petition for Review of an Order of the Securities and Exchange Commission.
Before GEE, WILLIAMS, and HIGGINBOTHAM, Circuit Judges.
Petitioner Whiteside & Company, a broker-dealer firm, and its president, petitioner William Whiteside, seek judicial review of a Securities and Exchange Commission order under 15 U.S.C. Sec. 78y(a)(1). The SEC, after de novo review, affirmed disciplinary sanctions imposed by the National Association of Securities Dealers, agreeing that petitioners had violated the SEC's net capital regulations on four dates in 1982, as well as violating certain reporting and recordkeeping requirements. The SEC's factual findings are conclusive in this court if supported by substantial evidence. Whiteside & Co. v. S.E.C., 557 F.2d 1118, 1120 (5th Cir.1977), cert. denied, 435 U.S. 942, 98 S.Ct. 1521, 55 L.Ed.2d 538 (1978); 15 U.S.C. Sec. 78y(a)(4).
Petitioners first contend that the net capital calculations relied on by the SEC were based on certain errors in the company's books which had not been corrected. The argument essentially admits that SEC made its calculations based on the company's books. Thus, there was substantial evidence for the SEC's findings even if petitioners offered an alternative version of the facts. Further, petitioners do not point us to the portions of the record which in their view show the SEC's error.
Petitioners next challenge the SEC's conclusion that certain transactions between Clarence Whiteside and the firm were shams. The SEC found that on two occasions the firm "parked" bonds in Clarence Whiteside's account to avoid taking "haircuts" which would have adversely affected the firm's net capital calculations. On June 11, the firm purported to sell certain bonds to Whiteside's account and then buy them back on the same day at the same price, with settlement to occur three days later. Both the purchase and sale of the bonds were transacted at a price well above the going market rate. In the second transaction, on August 3, Whiteside bought a substantial quantity of bonds from the firm. Over the next two weeks, he sold many of the bonds back to the firm at the same price, which then sold them to customers at a slight premium. Clarence Whiteside admitted that one reason for purchasing the second set of bonds on August 3 was to avoid having the firm take a haircut on them, though he offered other reasons for the transaction as well. We conclude there was substantial evidence to support the finding that the firm parked bonds in Clarence Whiteside's account on the two dates in question.
Petitioners complain that the NASD examiner who investigated them was biased, and sought to find anything he could construe as a violation. The violations asserted by the NASD examiner were reviewed by the NASD District Committee, the NASD Board of Governors and then reviewed de novo by the SEC. That the SEC was not biased appears from the fact that it threw out four of the net capital violations found by NASD for lack of evidence. The violations it sustained were based on evidence in the record before it. The SEC found no support in the record for the position that NASD was biased against petitioners. Further, we find no harm to petitioners even if the NASD examiner was biased, since the procedures were adequate to screen out the effects of any bias in the initial investigation.
The SEC found that petitioners violated the requirement that member firms give immediate notice of a net capital deficiency. 17 C.F.R. Sec. 240.17a-11(a). The Commission found that the duty to notify attached when NASD informed petitioners that it had found net capital...
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