UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. GARY ALBERT COLLYARD; COLLYARD GROUP, LLC; PAUL D. CRAWFORD; CRAWFORD CAPITAL CORP.; RONALD MUSICH; JOSHUA J. SINGER; MICHAEL B. SPADINO; MARKETING CONCEPTS, INC.; CHRISTOPHER C. WEIDES
No. 16-1405
United States Court of Appeals, Eighth Circuit.
Submitted: November 16, 2016. Filed: June 29, 2017
861 F.3d 760
Conclusion
Because Markham‘s state-law claims are not completely preempted by
Counsel who presented argument on behalf of the appellant was Paul C. Engh, of Minneapolis, MN.
Counsel who presented argument on behalf of the appellee was Benjamin M. Vetter, of Washington, DC.
Before BENTON and SHEPHERD, Circuit Judges, and STRAND,1 District Judge.
BENTON, Circuit Judge.
The Securities and Exchange Commission sued Paul D. Crawford and Crawford Capital Corporation (collectively “Crawford“) for acting as unregistered brokers in violation of
I.
Paul D. Crawford has a long history of working in investment. He registered as a securities broker in 1969 and was associated with registered broker-dealers for decades. He founded Crawford Capital Corporation in 1990.2 Its business is helping raise capital for early-stage companies. In 1996, his license was suspended for selling unregistered securities. He never reinstated it.
In 2003, Crawford learned about a company called Bixby Energy Systems. He invested about $20,000 in Bixby. Starting around February 2004, Crawford agreed with a third party to refer investors to Bixby in exchange for a 3% commission on referred investments. At some point in 2004 or 2005, Crawford agreed directly with Bixby to refer investors in exchange for a 10% fee for referred investments. Crawford was never a Bixby employee.
Between February 2004 and November 2006, Crawford worked to connect investors with Bixby. He invited Crawford Capital clients to Bixby presentations, emailed them suggesting they invest in Bixby, predicted success for Bixby, advised clients on tax credits, helped at least one client complete a Bixby subscription agreement, told clients he could negotiate Bixby stock prices, and told at least one client he could arrange a Bixby-related credit-line deal. Crawford received $240,000 from Bixby, 10% of his referred investments.
In December 2011, the SEC sued Crawford and Crawford Capital, alleging violations of
II.
Crawford argues this action is time-barred: “Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued....”
According to the SEC‘s complaint, Crawford acted as an unregistered broker between February 2004 and November 2006. The SEC sued in December 2011, more than five years after November 2006. If
The district court found
A.
After this case was argued, the Supreme Court announced, “Disgorgement, as it is applied in SEC enforcement proceedings, operates as a penalty under
B.
The SEC maintains that
Kokesh explained the principles for whether a sanction is a “penalty“:
A “penalty” is a “punishment, whether corporal or pecuniary, imposed and enforced by the State, for a crime or offen[s]e against its laws.” Huntington v.
Attrill, 146 U.S. 657, 667, 13 S.Ct. 224, 36 L.Ed. 1123 (1892). This definition gives rise to two principles. First, whether a sanction represents a penalty turns in part on “whether the wrong sought to be redressed is a wrong to the public, or a wrong to the individual.” Id., at 668, 13 S.Ct. 224. Although statutes creating private causes of action against wrongdoers may appear—or even be labeled—penal, in many cases “neither the liability imposed nor the remedy given is strictly penal.” Id., at 667, 13 S.Ct. 224. This is because “[p]enal laws, strictly and properly, are those imposing punishment for an offense committed against the State.” Ibid. Second, a pecuniary sanction operates as a penalty only if it is sought “for the purpose of punishment, and to deter others from offending in like manner“—as opposed to compensating a victim for his loss. Id., at 668, 13 S.Ct. 224.
Kokesh, 137 S.Ct. at 1642 (alterations in original). “[T]he words ‘penalty or forfeiture’ in [the statute] refer to something imposed in a punitive way for an infraction of a public law.” Kokesh, 137 S.Ct. at 1643 (second alteration in original), quoting Meeker v. Lehigh Valley R.R. Co., 236 U.S. 412, 423, 35 S.Ct. 328, 59 L.Ed. 644 (1915).
The courts of appeals split over whether an injunction can be a
This court need not resolve whether an injunction can be a
True, in holding SEC disgorgement was a
C.
Crawford also argues that the concurrent remedies doctrine bars the SEC from seeking the injunction. The district court did not address this argument. The SEC contends that Crawford failed to raise it below, which Crawford does not dispute. “Ordinarily, this court will not consider an argument raised for the first time on appeal.” Gap, Inc. v. GK Dev., Inc., 843 F.3d 744, 748 (8th Cir. 2016) (internal quotation marks omitted). Crawford gives no reason for abandoning this general rule. See id. at 748-49. This court will not address Crawford‘s concurrent remedies argument.
The district court did not err in finding
III.
Crawford says he did not violate
A broker is “any person engaged in the business of effecting transactions in securities for the account of others.”
Crawford does not dispute he made use of “any means or instrumentality of interstate commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security,” or that he was unregistered. He argues only that the district court erred because it failed to recognize that he qualified for a “finder exception” or “finder defense” to the broker-registration requirement. It is not clear whether Crawford means (a) he is not a broker or (b) he is a broker, but can raise an affirmative “finder defense” to broker liability. This court will address two questions: First, did Crawford act as a broker? Second, if he did act as a broker, does he qualify for an exception or defense to unregistered-broker liability?
A.
As explained, a broker is “any person engaged in the business of effecting transactions in securities for the account of others.”
The district court found the following facts were not genuinely disputed: Crawford had once been a registered broker, but his license was suspended in the 1990s for selling unregistered securities. Crawford was not a Bixby employee. He entered into a consulting agreement with Bixby to receive a 10% commission on investments he referred to Bixby. He was paid $240,000 in fees. He encouraged his
The SEC presented undisputed evidence that Crawford satisfied five of the six George factors. He regularly participated in securities transactions, referring $2.4 million in transactions to Bixby, sometimes handling clients’ checks purchasing securities, and sometimes offering to negotiate Bixby stock prices. He was paid by commission. He had a history of selling others’ securities. He advised investors, predicting financial success for Bixby and offering tax advice. He actively recruited investors, inviting his client list to presentations and sending them emails. The only missing George factor is that he was not employed by Bixby. See George, 426 F.3d at 797.
Crawford does not directly dispute this George-factor analysis. Instead, he focuses on trying to show he is like the defendant in SEC v. Kramer, 778 F.Supp.2d 1320, 1336 (M.D. Fla. 2011). Kramer found an individual was not a broker but rather acted as a “finder“—he engaged in only “a narrow scope of activities” and therefore did not “trigger[] the broker/dealer registration requirements.” Id. at 1336 (collecting cases discussing “finders“); id. at 1337-41 (analyzing Kramer‘s activities). Even if Kramer‘s analysis were correct, it does not support denial of summary judgment. Kramer‘s activity was much more limited than Crawford‘s. Unlike Crawford, Kramer did not promote securities to clients, offer to negotiate prices, accept or deliver checks, fill out agreements, give tax advice, offer to arrange credit-line deals, or have a history of acting as a broker. See id. at 1340.
Crawford points to facts outside the George factors that he says create a genuine dispute of material fact. Several of these facts have no bearing on whether he was a broker—he received “legitimate” commissions, did not view himself as a “financial advisor” or “broker,” and invested his own money in Bixby. Crawford also points out that he received no additional compensation if investors bought additional shares at later dates, and possessed no authority over others’ accounts. But he offers no support (aside from a line in Kramer) that these facts show he was not “engaged in the business of effecting transactions in securities for the account of others.” Because the SEC presents undisputed evidence of Crawford‘s extensive broker activity—including payment by commission; participation in numerous transactions, and assisting in filling out at least one subscription agreement—there is no genuine issue of material fact whether he was a broker.
B.
Crawford argues there is a “finder exception” or “finder defense” to unregistered-broker liability. But he points to no statute creating either. He does identify
An individual or entity who is not certain whether a particular product, service, or action would constitute a viola-
tion of the federal securities law may request a ‘no-action’ letter from the SEC staff. Most no-action letters describe the request, analyze the particular facts and circumstances involved, discuss applicable laws and rules, and, if the staff grants the request for no action, concludes that the SEC staff would not recommend that the Commission take enforcement action against the requester based on the facts and representations described in the individual‘s or entity‘s request. The SEC staff sometimes responds in the form of an interpretive letter to requests for clarifications of certain rules and regulations. SEC, Fast Answers: No Action Letters, https://www.sec.gov/fast-answers/answersnoactionhtm.html (last modified March 23, 2017). See also
17 C.F.R. § 202.1(d) . See generally Donna M. Nagy, Judicial Reliance on Regulatory Interpretations in SEC No-Action Letters: Current Problems and a Proposed Framework, 83 Cornell L. Rev. 921, 936–44 (1998) (explaining no-action letters).
Assuming that the no-action letters are “rules” or “orders,” Crawford cites none exempting him or a class of finders. He cites two letters advising correspondents that SEC staff will not recommend enforcement against them based on specific facts—facts different from Crawford‘s. Victoria Bancroft, SEC No-Action Letter, 1987 WL 108454 (Aug. 9, 1987) (“At most Bancroft will describe to the potential purchaser the type of financial institution, the asking price, and the general location.“); Russell R. Miller & Co., Inc., SEC No-Action Letter, Fed. Sec. L. Rep. ¶ 81,324 (Aug. 15, 1977) (“Following identification of a potential buyer or seller, Miller does not deal substantively with the other party on behalf of its client with respect to any matter.“). Another says some people are not “brokers” and therefore not required to register. See Gary L. Pleger, Esq., SEC No-Action Letter, 1977 WL 15164, at *2 (Oct. 11, 1977) (“Individuals who do nothing more than bring merger or acquisition-minded persons or entities together and do not participate in negotiations or settlements probably do not fit the definition of a ‘broker’ or a ‘dealer’ and would not be required to register.“). None of these letters exempt Crawford from the broker-registration requirement.
Crawford says the courts have recognized a “finder defense.” The circuit court cases he cites merely describe finders; they do not analyze whether finders are “brokers” under the
The district court did not err in rejecting Crawford‘s “finder exception” or “finder defense.”
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The district court‘s disgorgement order is vacated. In all other respects, the judgment is affirmed.