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SEC v. ISBRANDTSEN

September 21, 1965

Securities and Exchange Commission
v.
Isbrandtsen


Herlands, District Judge.


The opinion of the court was delivered by: HERLANDS

HERLANDS, District Judge.

Jakob Isbrandtsen (hereinafter "the witness") has moved, pursuant to Fed. R. Civ. P. 30 and 45, for an order "to quash a subpoena served" on him and issued by the Securities and Exchange Commission (hereinafter "SEC") or, "in the alternative, to terminate" his examination by the SEC.

 The subpoena in question, dated August 26, 1965, was returnable on September 1, 1965 before the SEC's New York office. (Exh. 1, attached to the Leaman moving affidavit.)

 The inquiry in connection with which the subpoena was issued is a non-public investigation by the SEC "in the Matter of The Equity Corporation and Bell Intercontinental Corporation" pursuant to Section 42(a) of the Investment Company Act of 1940 (hereinafter "the 1940 Act") "to determine whether violations of Sections 7(a), 12(d), 15(a), 15(c), 17(a), 17(d), 20(a) and 30(f), of the said Act and Rules 17d-1, 20a-1, 20a-2 and 30f-1 thereunder have occurred or are about to occur, and to determine whether officers or directors of The Equity Corporation have been guilty of gross misconduct or gross abuse of trust in respect of The Equity Corporation." (Exh. 1, attached to the Leaman moving affidavit.)

 The SEC's orders dated February 20, 1964 and May 11, 1964, pursuant to which the investigation is being conducted, are annexed to the SEC's petition for an order compelling the witness to comply with the SEC's subpoena.

 In the course of said investigation, the witness has already been examined on four occasions to the total extent of 342 pages, as follows: June 1, 1964 (112 pages); June 22, 1964 (19 pages); June 17, 1965 (106 pages); and June 29, 1965 (105 pages).

 The transcript has been available to the witness's counsel for reading at the SEC's office; and he has, on several occasions, reviewed the transcript. He has also been given permission to purchase a copy of the transcript.

 Shortly after the August 26, 1965 subpoena was issued, the witness filed the instant motion to quash in order to obtain "judicial protection."

 The witness claims that he is being subjected to an "ad infinitum examination" on "the identical subject matter" which has " become unduly oppressive" and which constitutes "a perversion of the investigative process"; that he has "answered fully and completely all questions posed to him"; that the SEC "has had ample opportunity and has elicited all of the factual information known" by him; that the SEC is now attempting "to repetitively cross-examine" him by means of "various batteries of attorneys."

 The SEC sharply disputes the foregoing assertions; and, in addition, argues that this court "lacks jurisdiction to quash the subpoena." This jurisdictional contention is sound.

 The subpoena which the witness seeks to quash was issued pursuant to Section 42(b) of the 1940 Act (15 U.S.C. § 80a-41(b)). Neither this nor any other provision of the 1940 Act confers a right on the person subpoenaed to attack either the issuance or the substance of the subpoena prior to the return date thereof.

 The exclusive procedure for the interposition of good faith objections to the validity of an investigative subpoena issued under the 1940 Act is supplied by Section 42(c) of the 1940 Act (15 U.S.C. § 80a-41(c)).

 Section 42(c) provides, in substance, that, where a subpoenaed witness refuses to obey the subpoena, the SEC may apply to the appropriate district court for an order requiring the witness to comply with the subpoena; and, if the witness then fails to obey the court's order, he may be punished by such court as a contempt thereof. The witness may not properly move to quash the subpoena in advance of enforcement proceedings.

 This conclusion is required not only by the wording of Section 42(c) but also by the decisions interpreting cognate provisions in other federal regulatory statutes. See, e.g., Reisman v. Caplin, 375 U.S. 440, 444-447, 11 L. Ed. 2d 459, 84 S. Ct. 508 (1964); United States v. Kulukundis, 329 F.2d 197, 199 (2d Cir. 1964); Application of Howard, 325 F.2d 917, 919 (3d Cir. 1963); Guaranty Underwriters, Inc. v. Johnson, 133 F.2d 54, 56 (5th Cir. 1943); Lesser v. United ...


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