The opinion of the court was delivered by: TYLER
This is a motion by the Securities and Exchange Commission ("SEC") for an order pursuant to Section 209(c) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-9(c), requiring the respondent to appear and testify and to produce certain documents to be described hereinafter.
Since this motion raises interesting and troublesome questions concerning the comparatively broad powers of the SEC to investigate under the Investment Advisers Act of 1940, it is desirable that the background of the issuance of the subpoena in question, the arguments of the parties and the facts adduced for and against the motion be set forth in some detail.
The Order of Investigation and the Resultant Subpoena
Pursuant to the relevant provisions of the Act and in order to determine whether violations of the Act had occurred, the SEC on July 27, 1967 issued a formal order directing that an investigation be made into the matter of the Wall Street Transcript Corporation ("Transcript"). The order designated certain named agents and officers of the SEC to conduct the investigation and empowered them to "administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence and require the production of any books, papers, correspondence, memoranda, contracts, agreements, or other materials deemed relevant and material to the inquiry." Pursuant to this order, one of the officers of the SEC named therein, Richard V. Bandler, issued a subpoena duces tecum to the respondent on March 18, 1968 requiring respondent by its president, Holman, to appear in the Commission offices in New York on April 1, 1968.
A few days prior to the return date, counsel for respondent by correspondence and perhaps oral communications as well, endeavored to persuade the SEC to withdraw the subpoena and to drop the investigation. These efforts continued through the month of April and apparently into May and June of this year. Finally, the return date for the subpoena was rescheduled for July 29, 1968, on which day Holman appeared and refused to answer any questions or to give any information other than his name, business and home addresses and telephone numbers. Thereafter, the SEC, accepting that respondent effectively refused to honor the subpoena, brought on this motion which, as the statute makes clear, is permissible in order to invoke the contempt powers of this court.
Parenthetically, it should be noted that the formal order of the SEC heretofore mentioned recites that, according to the SEC's public official files, in September, 1958 a firm known as R.A. Holman & Co., Inc. was registered with the Commission as a broker and dealer, that Richard A. Holman, the same man who is president of the respondent here, was the president of Holman & Co. and that thereafter on December 15, 1965 the Commission revoked the registration of Holman & Co., expelled it from membership in the National Association of Securities Dealers, made permanent a temporary suspension of a Regulation A exemption and found that Holman, among others, was a cause for its order with respect to Holman & Co.
The Applicable Statutory Provisions
Section 209(b) of the Act provides:
"For the purposes of any investigation or any proceeding under this title, any member of the Commission or any officer thereunder designated by it is empowered to administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, contracts, agreements or other records which are relevant or material to the inquiry."
Section 209(a) of the Act further states:
"Whenever it shall appear to the Commission, either upon complaint or otherwise, that the provisions of this title or of any rule or regulation prescribed under the authority thereunder, have been or are about to be violated by any person it may in its discretion require, and in any event shall permit, such person to file with it a statement in writing, under oath or otherwise, as to all the facts and circumstances relevant to such violation, and may otherwise investigate all such facts and circumstances."
As previously stated in brief, Section 209(c) of the Act makes provision for the SEC to enforce its subpoenas by applying to a federal court:
"In case of contumacy by, or refusal to obey a subpoena issued to, any person, the Commission may invoke the aid of any court of the United States within the jurisdiction of which such investigation or proceeding is carried on, or where such person resides or carries on business, in requiring the attendance and testimony of witnesses and the production of . . . records. . . ."
This particular section goes on to provide that the court may issue an order requiring such person to appear, produce records and testify on the matter under investigation and that the failure to obey any such order of the ...