Securities & Exchange Commission v. Richard L. Goble
2012 U.S. App. LEXIS 10813
| 11th Cir. | 2012Background
- Goble founded North American Clearing, controlled the firm, which cleared 40 firms and 10,000+ customer accounts.
- Goble directed a sham May 13, 2008 money-market purchase to falsely inflate the Reserve Account balance.
- FINRA conducted an on-site audit; Ward and others corrected earlier miscalculations but irregularities persisted.
- SEC filed suit alleging Customer Protection Rule and books/records violations, and §10(b) fraud; district court found Goble liable on several counts.
- Goble appeals narrowing 10(b) liability and seeks reversal of injunction provisions; court affirms aiding/abetting but reverses 10(b) liability and modifies injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the sham May 13 transaction violated §10(b) | Goble’s misrepresentation was 10(b) material | No §10(b) misrepresentation; not in connection with a sale/purchase | No 10(b) liability; not in connection with purchase/sale of securities |
| Aiding and abetting liability without a primary fraud | Aiding/abetting exists for Customer Protection Rule violations | Primary violation required for aiding/abetting | Aiding and abetting affirmed for Rule 15c3-3 and 17a-3 violations |
| Propriety of lifetime bar from securities business | SEC sought but did not demand lifetime bar in complaint | Discretion allows broader relief | Vacate lifetime bar; remand to consider on proper record |
| Whether the injunction’s 'obey-the-law' commands are valid | Injunctions may track statutes in securities cases | Obey-the-law language vague under Rule 65(d) | Vacate vague portions; require precise terms addressing specific conduct |
| Spoliation of evidence and adverse inference | Shredded documents show misconduct | No bad-faith spoliation proven | No abuse of discretion; spoliation claim rejected |
Key Cases Cited
- SEC v. Merch. Capital, LLC, 483 F.3d 747 (11th Cir. 2007) (materiality and §10(b) standards in enforcement actions)
- Morgan Keegan & Co., --- F.3d --- (11th Cir. 2012) (SEC enforcement action; reliance not required for §10(b) claims)
- Grippo v. Perazzo, 357 F.3d 1218 (11th Cir. 2004) (purchase/sale concept under §10(b) can apply without delivery)
- SEC v. Zandford, 535 U.S. 813 (U.S. 2002) (flexible construction of ‘in connection with’)
- Carriba Air, Inc., 681 F.2d 1318 (11th Cir. 1982) (authority to issue injunctions enforcing securities laws)
- McComb v. Jacksonville Paper Co., 336 U.S. 187 (U.S. 1949) (upholding broad injunctions when terms are specific)