PART I SECURITIES EXCHANGE ACT OF 1934 BROKER-DEALER REGISTRATION Grounds for Revocation of Registration Where registered broker-dealer in connection with underwriting and sale of securities makes false or misleading material statements concerning, among other things, issuer's orders, production, financial prospects and dividends, and fails to exercise reasonable care in determining accuracy of such statements, held, willful violations of Section 17 (a) of the Securities Act of 1933 and Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act of 1934 and rules thereunder, requiring, in the public interest, denial of request for withdrawal from registration, and revocation of broker-dealer's registration * * * Page 33 Where former partner in registered broker-dealer firm engaged in fictitious commodity transactions which resulted in registrant's filing of false financial reports with Commission in violation of Section 17 (a) of Securities Exchange Act and Rule X-17A-5 thereunder, but such falsity was not known to other partners in firm, and it does not appear that they were guilty of such carelessness or indifference as to truth of information in reports as to warrant a finding of willfullness, held, requested withdrawal from registration permitted and revocation proceedings discontinued *** Page 57 Where broker-dealer has violated net capital rule, held, registration revoked and broker-dealer expelled from membership in national securities association *** Page 61 Where broker-dealer has been enjoined for fraudulent securities practices, held, registration revoked and registrant expelled from national securities association Page 82 Where registered broker-dealer sold to a customer, whose trust and confidence it had obtained, investment company shares in amounts slightly below breakpoints at which substantial savings to the customer were available, and sold overthe-counter securities, without effectively disclosing savings available to customers and nature and extent of broker-dealer's adverse interest, held, willful violations of Section 17 (a) of Securities Act of 1933 and of Sections 10 (b) and 15 (c) (1) of Securities Exchange Act by broker-dealer and certain of its officers and employees, requiring, in the public interest, revocation of broker-dealer's registration, the Commission further stating that no reregistration would be permitted for at least 6 months and that any new application for registration should be accompanied by a statement as to the methods planned to be used in selling securities to customers * * Page 84 Where application for broker-dealer registration concealed names of persons in control and fact, that they had been convicted of felony involving purchase and sale of securities, and where registrant effected transactions by fraud, held, registration revoked *** Page 141 35 S. 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Where salesman and general manager of registered dealer is found to have willfully violated anti-fraud provisions of Securities Act and Securities Exchange Act prior to employment, held, revocation of dealer's registration is required in public interests Page 163 Where in prior broker-dealer revocation proceedings Commission found that securities salesman willfully violated the anti-fraud provisions of the Securities Act and the Securities Exchange Act, and Commission institutes revocation proceedings against registered dealer presently employing such person as salesman and sales manager, held, prior findings of willful violations by such person are determinative of issue in second proceedings of whether such person wilfully violated Securities Act or Securities Exchange Act * * * Page 163 Where registered broker-dealer corporation, in anticipation of acting as underwriter for proposed offering of over-the-counter stock, through various of its officials, artificially raised the price of the outstanding stock by publishing bids at successively higher prices and effecting purchases at such prices, and subsequently sold the new stock to customers at the raised prices by means of false and misleading statements, held, willful violations of Section 17 (a) of Securities Act of 1933, and of Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act of 1934 and rules thereunder, by broker-dealer together with or aided and abetted by said officials, requiring, in the public interest, revocation of brokerdealer's registration and its expulsion from membership in registered securities association; further held that such officials are each a cause of revocation and expulsion *** Page 176 Where registered dealer is permanently enjoined from engaging in the securities business and willfully made false representations in application for registration and supplements thereto that no employee had been enjoined from engaging in any conduct or practice in connection with purchase or sale of securities when in fact general manager and salesman had been so enjoined, held violation of Section 15 (b) of Securities Exchange Act of 1934 requiring, in the public interest, revocation of registration and refusal to permit dealer's application for withdrawal from registration to become effective *** Page 303 Where registered broker and dealer traded in securities over the counter while it had a net capital deficit, made false entries in its books and records, failed to keep its books and records up to date, and failed to disclose person controlling registrant, held, willful violation of Sections 15 (b), 15 (c) (3) and 17 (a) of Securities Exchange Act of 1934 and rules thereunder requiring revocation of registration and finding that president of registrant and person controlling registrant were causes of such revocation *** Page 318 Where registered broker and dealer traded in securities over the counter while it had a net capital deficit as computed under Rule X-15C3-1 promulgated pursuant to Section 15 (c) (3) of Securities Exchange Act of 1934, and such deficit occurred frequently over extended period, held willful violations of said Section and Rule *** Page 586 Where broker-dealer sold shares as underwriter without disclosing that issuer's expenses had been several times as great as estimated in prospectus and included items incurred for broker-dealer's benefit and that the issuer's assets had been virtually exhausted, held willful violations of Section 17 (a) of the Securities Act of 1933 and Section 15 (c) (1) of the Securities Exchange Act of 1934 *** Page 663 Where broker-dealer sold shares of a company to the public on the basis of false representations that the sales price was the market price and omitted to 35 S. 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C. disclose that the sales price was far in excess of the market price, held willful violations of Section 17 (a) of the Securities Act of 1933 and Section 15 (c) (1) of the Securities Exchange Act of 1934 * ** Page 663 Excessive Trading Where alleged excessive trading activity in accounts of customers was not induced by registered broker's branch manager and customer's man who handled the accounts, held no violation of Section 17 (a) of Securities Act of 1933 and Section 10 (b) of Securities Exchange Act of 1934 and Rule X-10B-5 thereunder * * * Page 451 Extension of Credit Where securities were purchased for customer's cash account by registered broker's branch office when the account did not have funds sufficient for payment, but such purchases were effected in reliance upon implied agreement accepted by branch office in good faith that customer would make prompt payment and that he did not contemplate selling the securities prior to such payment, held, broker did not violate Section 7 (c) of Securities Exchange Act of 1934 and Section 4 (c) (1) (A) of Regulation T thereunder * * * Page 451 Where securities purchased for customer's cash account by registered broker were sold prior to receipt of payment therefor and, within 90 days after such purchase, broker effected additional purchases for the customer when funds sufficient for payment were not already held in the account, held, violation of Section 7 (c) of Securities Exchange Act of 1934 and Section 4 (c) (8) of Regulation T thereunder, but under all the circumstances such violation not willful *** Page 451 Falsification Where registered broker-dealer, in order to show compliance with capital requirements of national securities exchange, recorded purported sales of certain stock to fictitious account at price in excess of market price at which stock was carried in inventory, thereby overstating assets and net capital; filled with the Commission a report of financial condition reflecting such overstatement; and made other false entries in its books, held willful violations of Section 17 (a) of Securities Exchange Act of 1934 and Rules X-17A-3 and X-17A-5 thereunder*** Page 504 Where registered broker effected purchase of securities for customers and thereafter, without the customers' knowledge or consent, sold such securities and appropriated the proceeds thereof to his own use and benefit, and to conceal such unauthorized sales and to deceive the customers into believing that their securities were in his possession made fictitious interest payments to the customers, held, willful violation of Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act of 1934 and rules thereunder and revocation of registration required in the public interest *** Page 510 Allegation that broker-dealer, for purpose of evading obligations under an underwriting contract, caused lawsuit to be filed, held, without determining whether record established facts alleged, no violation of Section 17 (a) of Securities Act of 1933 or Sections 9 (a) (4), 15 (c) (1), or 10 (b) of the Securities Exchange Act of 1934 or Rule X-10B-5, where underwriting contract was illegal and unenforceable because of false statements in registration statement covering issue underwritten * * * Page 650 Allegation that underwriter, in anticipation of public offering, caused sales 35 S. 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C. by holders of outstanding stock being stabilized by issuer, with view to sellers' repurchasing stock from underwriter at lower public offering price, held, not supported by record * * * Page 650 Manipulative Activities Where registered broker-dealer, in connection with underwriting of new issue of additional shares, engaged in manipulative activities in the over-the-counter market, through its bidding and trading practices and through false and misleading statements, in order to raise and maintain the price of outstanding securities of the issuer and failed to disclose control and domination by broker-dealer of over-the-counter market in such securities, held, willful violations of Section 17 (a) of the Securities Act and Sections 10 (b) and 15 (c) (1) of the Securities Exchange Act and rules thereunder * * Page 191 Practice and Procedure Where order for proceedings informs respondent broker-dealer of general nature of alleged false statements and omissions made to customers, held, respondent not entitled to bill of particulars specifying persons by whom and to whom alleged false statements and omissions were made and language thereof since such matters are evidentiary * * Page 79 * Motion by registered broker-dealer to dismiss proceedings against its employees named as parties, on the grounds that they are not registered broker-dealers and their inclusion would be prejudicial to registrant, denied, because evidence of willful violation by "controlled persons" is relevant in revocation proceeding against registrant, and dismissal would prejudice those employees who may choose to continue as parties *** Page 110 Motion by certain employees of registered broker-dealer named as parties in revocation proceeding against employer to dismiss proceedings as to them, granted, but since employees received notice and opportunity to be heard such dismissal will not preclude findings that they committed willful violations and are causes of revocation, nor preclude subsequent proceedings under Section 15 (b) or 15A (b) (4) against them or their employers *** Page 110 Motion to incorporate into record in revocation proceedings testimony taken in investigation and court action and to limit questioning of witnesses to matters not covered by their previous testimony, denied, it appearing that previous efforts to stipulate portions of the prior testimony were unproductive and the motion if granted would unduly restrict the development of the facts*** Page 144 Where registered broker-dealer and its controlling person and a salesman engaged in manipulative activities and otherwise willfully violated provisions of the Securities Act and the Securities Exchange Act and rules thereunder, held, in public interest and appropriate for protection of investors that the registration of the broker-dealer be revoked and that it be expelled from membership in national securities exchange * ** Page 191 Public Interest In view of nature and non-willfulness of violation found, held not necessary or appropriate for the protection of investors that disciplinary action be taken against registered broker *** Page 451 Under all the circumstances, held necessary and appropriate in the public interest and for the protection of investors to revoke registration and to expel registrant from membership in national securities association and national securities exchanges *** Page 504 Where registered broker-dealer distributed as underwriter common stock for 35 S. 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