Mathis v. United States Securities & Exchange Commission
671 F.3d 210
2d Cir.2012Background
- Mathis sought review of the SEC order affirming FINRA’s sanction and statutory disqualification for failing to disclose IRS tax liens.
- Mathis argued he was unaware of the duty to disclose liens on Form U-4 and to amend at relevant times.
- SEC affirmed FINRA’s finding that Mathis intentionally failed to disclose liens and that the liens were material.
- Forms U-4 required ongoing updates; amendments were due within 30 days of facts’ occurrence; noncompliance could trigger disqualification.
- IRS notices (1996–2002) disclosed five liens totaling $634,436; a colleague’s testimony corroborated Mathis’s knowledge of liens.
- Mathis ultimately amended Form U-4 after FINRA’s inquiry and paid the liens; SEC’s willfulness and materiality findings stood when reviewing the record.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether willfulness supports statutory disqualification | Mathis contends no willful violation; lacked awareness of reporting duty | SEC held willfulness shown by intentional misstatements on Forms U-4 | Yes; willfulness established under §3(a)(39)? |
| Materiality of the tax liens | Liens not material to investment activities or registration | Liens were material per TSC standard due to magnitude and duration | Yes; liens were material |
| Standard of review and substantial evidence | N/A | SEC findings supported by substantial evidence and de novo review | Affirmed SEC findings |
| Reliance on colleague’s advice as a defense | Mathis reasonably relied on a colleague's advice | SEC rejected reliance as reasonable; no corroboration from compliance department | Rejected; no reasonable reliance |
| Scope of sanctions and statutory disqualification | Disqualification excessive | Willful misrepresentation justifies statutory disqualification | Affirmed; stat. disqualification appropriate |
Key Cases Cited
- Tager v. SEC, 344 F.2d 5 (2d Cir. 1965) (willfulness meaning intentional act; not requiring awareness of rule)
- Wonsover v. SEC, 205 F.3d 408 (D.C. Cir. 2000) (willfulness requires only knowledge of action; not legal duty)
- Feins v. Am. Stock Exch., Inc., 81 F.3d 1215 (2d Cir. 1996) (statutory disqualification context for willful violations)
- VanCook v. SEC, 653 F.3d 130 (2d Cir. 2011) (substantial evidence standard in SEC review)
- Heath v. SEC, 586 F.3d 122 (2d Cir. 2009) (standard of review for SEC findings)