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Sloan v. Securities and Exchange Commission

November 18, 1976.


Petitions for review of S.E.C. order revoking broker-dealer registration and barring petitioner from association with any broker or dealer (Case No. 75-4087), and for review of the validity of a series of S.E.C. orders suspending trading in the stock of a certain corporation (Case No. 76-4110). S.E.C. orders affirmed in Case No. 75-4087, and declared invalid, except for the first order, in Case No. 76-4110.

Medina, Anderson and Gurfein, Circuit Judges.

Author: Anderson

Anderson, Circuit Judge:

Case No. 75-4087

This is the appellant Samuel H. Sloan's latest maneuver in his long struggle to avoid compliance with the Securities and Exchange Act and disciplinary measures brought by the S.E.C.*fn1 He is now seeking a review of the order of the Commission, dated April 28, 1975, revoking the broker-dealer registration of Samuel H. Sloan d/b/a Samuel H. Sloan & Co., and barring him from associating with any broker or dealer.

He argues, inter alia, that his constitutional rights were violated when the SEC refused to let him withdraw his broker-dealer registration as Sloan & Co., which he attempted to do as soon as the SEC took the first steps to revoke the license. As authority for his right to do this he cites Jones v. SEC, 298 U.S. 1, 80 L. Ed. 1015, 56 S. Ct. 654 (1936). But that case dealt with the withdrawal as a matter of right, under the Securities Act of 1933, of a registration statement concerning securities. It had nothing whatever to do with a broker-dealer licensing registration.

The petitioner declares that § 15(b) of the Securities Exchange Act of 1934 is a criminal statute, which makes broker-dealers inherently suspect with respect to criminal activities. He, therefore, asserts that a statutory or regulatory provision which requires them to furnish information about activities which have been made criminal under some provision of the Act, in effect, compels them to testify against themselves. He equates his own case with Leary v. United States, 395 U.S. 6, 23 L. Ed. 2d 57, 89 S. Ct. 1532 (1969), and Marchetti v. United States, 390 U.S. 39, 47, 19 L. Ed. 2d 889, 88 S. Ct. 697 (1968), where respectively (a) disclosure of possession of marihuana or (b) wagering activities for tax purposes exposed the taxpayer to prosecution under state and federal laws. The argument, of course, has no bearing on the present case because the applicable statute with which the case is concerned is not criminal but clearly regulatory in nature. The Supreme Court carefully pointed up this distinction in Albertson v. Subversive Activities Control Board, 382 U.S. 70, 79, 15 L. Ed. 2d 165, 86 S. Ct. 194 (1965).

The petitioner also complains that his Fifth Amendment right to notice and a hearing and his Sixth Amendment right to be informed of the nature of the charges against him were violated. It appears from the record that the proceedings by the SEC against Sloan were commenced on April 25, 1972 by mailing to Sloan a three page order for public proceedings. Petitioner does not claim that he did not receive them, and he in fact appeared through his counsel. Although he received notice, he goes on to complain that the order did not give him a sufficiently full or definite statement of the "nature and the cause of the accusations against him." An examination of the Order for Public Proceedings, however, discloses that the allegations against Sloan were made with great particularity and in detail so that he was fully apprised of the claims made against him; he knew what the nature of the charges was, against which he had to defend himself.

He complains that the order was not signed or verified in accordance with Rule 11, F.R.C.P. and asserts that the S.E.C. was required to have specially pleaded allegations of fraud. But administrative proceedings are not bound to follow the Federal Rules of Civil Procedure.

Among other things the petitioner challenges the constitutionality of the Act itself, as he has done on numerous occasions in other actions. These former attacks*fn2 were characterized by this court as "frivolous," and we are of the opinion that the present claims are equally so.

The remaining points sought to be raised by the petitioner have no merit and call for no comment. Moreover, prior to the revocation of Sloan's license by the S.E.C., the United States District Court for the Southern District of New York had issued a preliminary injunction, which it subsequently made permanent, ordering Sloan to discontinue his violations of the S.E.C. rules relating to record keeping and net capital. This court dismissed an appeal from the granting of this injunction. S.E.C. v. Sloan, 538 F.2d 313 (2d Cir. 1976). Thereafter the same district court issued another preliminary injunction on January 17, 1975, prohibiting Sloan from submitting quotations of over-the-counter transactions to "the pink sheets." This court dismissed an appeal from this preliminary injunction on January 7, 1976. S.E.C. v. Sloan, supra. Each of these injunctions was in itself a sufficient ground to support the revocation of Sloan's broker-dealer license under § 15(b)5c of the 1934 Act.

The orders of the S.E.C. are affirmed.

Case No. 76-4110

In an appeal brought by the petitioner Sloan from a series of ten-day suspension orders imposed by the S.E.C. upon the stock of Canadian Javelin, Ltd. (CJL), a Canadian corporation, in which Sloan had extensive dealings (principally in selling the stock short), this court handed down a decision on October 15, 1975, Sloan v. Securities & Exchange Commission, 527 F.2d 11 (2 Cir. 1975), cert. denied 426 U.S. 935, 49 L. Ed. 2d 387, 96 S. Ct. 2649 (1976), in which it stated that the questions raised were frivolous except for the petitioner's allegation that the "'tacking' of ten-day summary suspension orders by the SEC for an indefinite period constitutes an abuse of that agency's authority and a deprivation of due process. Apparently this question has never been judicially considered and would seem not to be frivolous. . . ." 527 F.2d at 12. The pleadings in the case then on appeal concerned only the first of a series of ten-day suspension orders which ran from November 29, 1973 through January 26, 1975. At the time the appeal was actually heard, however, a second series of ten-day suspension orders was in progress which ran from April 29, 1975 through May 2, 1976. This court was of the opinion that in the absence of any record dealing with this second series of suspensions, it was not in a position to decide whether the second series was based on substantial evidence or if it constituted an abuse of ...

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