UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


TEICHER, VICTOR

v.

SEC


98-1287a

D.C. Cir. 1999


*	*	*


Williams, Circuit Judge: Petitioners Victor Teicher and  Ross Frankel
were convicted of various charges of securities  fraud, conspiracy and
mail fraud for their participation in an  insider trading scheme. In a
later administrative proceeding,  the Securities and Exchange
Commission issued an order  barring both petitioners from various
branches of the securi- ties industry, including association with
registered and unreg- istered investment advisers. (Victor Teicher &
Co. was also  convicted and barred along with the individual; we refer
to  both simply as Teicher.) Both petitioners now challenge  portions
of the order as beyond the Commission's statutory  authority. Teicher
argues that the Commission's authority  under s 203(f) of the
Investment Advisers Act of 1940 (the  "Advisers Act"), 15 U.S.C. s
80b-3(f), did not include the  power to exclude him from association
with an unregistered  investment adviser; the language of the statute
is emphatical- ly against the claim, and Teicher presents nothing
adequate  to overcome that language, assuming anything could be ade-
quate. Frankel claims that s 15(b)(6) of the Securities Ex- change Act
of 1934 (the "Exchange Act"), 15 U.S.C.  s 78o(b)(6), which is
triggered by a person's past, present or  future association with a
broker-dealer, does not supply the  Commission with authority to
exclude persons from the in- vestment adviser industry; indeed, the
logic of the statutory  structure convinces us that Congress withheld


* * *


Section 203(f) of the Advisers Act provides in part:


The Commission, by order, shall censure or place limita- tions on the
activities of any person associated, seeking  to become associated,
or, at the time of the alleged  misconduct, associated or seeking to
become associated  with an investment adviser, or suspend for a period
not  exceeding twelve months or bar any such person from  being
associated with an investment adviser, if the Com- mission finds ...,
that such censure, placing of limita- tions, suspension, or bar is in
the public interest and that  such person [has been convicted of
specified offenses,  including those of which Teicher was


15 U.S.C. s 80b-3(f)(emphasis added).


Some but not all investment advisers are required by the  Act to
register with the Commission. Among the exempt  advisers, for example,
would be one with fewer than 15 clients  and not holding itself out to
the public as an investment  adviser nor acting as adviser to an
investment company under  the Investment Company Act of 1940. s
203(b), 15 U.S.C.  s 80b-3(b). The term "investment adviser" in s
203(f) is  unmodified, and the SEC read it to include any investment 
adviser, whether registered or not. Teicher says the term  covers only
a registered investment adviser. Since he was  not associated with a
registered investment adviser at the  time of his wrongdoing or at the
time of the Commission's  administrative proceeding, he says that s
203(f) afforded it no  authority to sanction him.


No language in the cited provision remotely suggests that  its
application is limited to "registered" investment advisers.  And the
Act explicitly defines an investment adviser as "any  person who, for
compensation, engages in the business of  advising others ... as to
the advisability of investing in,  purchasing, or selling securities."
s 202(a)(11) of the Invest- ment Advisers Act, 15 U.S.C. s
80b-2(a)(11). Again, no  mention of registration. As the Act in
various places speci- fies "registered" advisers, see, e.g., ss 203(d)
& 208, 15  U.S.C. ss 80b-3(d) & 80b-8, and in others those "exempt[ ] 
from registration," see ss 204 & 205, 15 U.S.C. ss 80b-4 & 


80b-5, there seems every reason to believe that when it uses  the term
unmodified, it means both.


Teicher claims that our decision in Wallach v. SEC, 202  F.2d 462 (D.C.
Cir. 1953), construed the phrase "any broker  or dealer" in an
analogous provision in the Exchange Act to  encompass only
"registered" brokers or dealers; thus, he  argues, s 203(f) in the
Advisers Act should be similarly  limited to "registered" investment
advisers. In reality Wal- lach is a good deal narrower. There the SEC
tried to force  the joinder of a broker-dealer's employee-salesman as
a party  in disciplinary proceedings against the broker-dealer. We 
rejected the Commission's argument that the statute, which  in terms
focused on brokers and dealers, would reach their  employees. The
Commission's theory was simply that such  an expanded proceeding would
be much more practical--its  findings would be res judicata as to the
salesman as well as  the firm, to be used against the salesman if he
ever sought  registration. See 202 F.2d at 109-10. The Commission did 
not argue that a salesman with a broker-dealer was an  "unregistered"
broker or dealer. (Such a theory seems un- likely to have been helpful
for the SEC's claim, as the statute  authorized only the denial or
revocation of registration as a  broker or dealer, and was thus
necessarily limited to a person  or firm seeking or already holding
such a license.)1 Here, the  Act establishes some rules applying to
unregistered invest- ment advisers, some applying to registered ones,
and some,  such as s 203(f), that give every appearance of applying to
 both. The Commission's reading honors that structure.


Teicher calls our attention to the fact that when originally  enacted
in 1940 s 203 applied only to registered investment  advisers--in the
sense that it provided only for the denial,  revocation or suspension
of a registration as an investment  adviser. See 15 U.S.C. s 80b-3(d)
(1940). But since 1940  Congress has amended the Act and expanded the
array of 




__________

n 1 By means of a later amendment Congress explicitly granted  the SEC
authority to discipline persons "associated" with a broker  or dealer.
See s 15(b)(6) of the Exchange Act, 15 U.S.C.  s 78o(b)(6).


sanctions far beyond the early focus on registration. Now  the SEC's
sanction power--even looking only at that granted  by s
203(f)--explicitly covers persons merely associated with  or seeking
association with investment advisers and ranges  from censure to an
outright ban on association with an  investment adviser.


Teicher quotes an item from the legislative history of the  1970
amendment that added s 203(f): "[The proposed amend- ments] would
strengthen existing disciplinary controls over  registered investment
advisers by making them more compa- rable to the provisions of Section
15(b) of the Securities  Exchange Act relating to broker-dealers in
securities."  S. Rep. No. 91-184, at 44 (1969) (emphasis added). But
such  a use of the adjective "registered" in a Senate report is not of
 much help, especially when the statute itself offers no appar- ent
ambiguity that the reference might help resolve. See  Ratzlaf v.
United States, 510 U.S. 135, 147-48 (1994). And  the SEC has pointed
to references in the same Senate Report  that describe the addition
with no mention of "registered."  See S. Rep. No. 91-184, at 46-47;
see also H.R. Rep. No.  91-1382, at 41 (1970) (same). Teicher points
to several other  items of legislative history, bits not even
associated with the  enactment of s 203, but they are even less
convincing. Re- viewing the Commission's statutory interpretation
under the  principles of Chevron U.S.A., Inc. v. Natural Resources De-
fense Council, 467 U.S. 836 (1984), we find that Teicher has  not
effectively challenged the Commission's reading of the  Act's


* * *


Frankel's claim rests on the scope of a phrase that could be  very
broad--out of context. It appears in the following  section, under
which he was sanctioned:


With respect to any person who is associated, who is  seeking to become
associated, or, at the time of the  alleged misconduct, who was
associated or was seeking to  become associated with a broker or
dealer ... the Com- mission, by order, shall censure, place


activities or functions of such person, or suspend for a  period not
exceeding 12 months, or bar such person from  being associated with a
broker or dealer, ... if the  Commission finds ... that such person
[has been convict- ed of securities fraud or enjoined against conduct
in  violation of the securities laws].


s 15(b)(6) of the Exchange Act, 15 U.S.C. s 78o(b)(6)(A)  (emphasis
added). The SEC's implicit reading is that this  section authorizes it
to "place," on any person guilty of the  specified substantive
violations, any "limitation[]" it chooses  on his participation in any
of the branches of the securities  industry for which it administers
an occupational licensing  regime.


Frankel focuses primarily on two objections to the SEC's  reading.
First, he points out that the word "limitation"  ordinarily has a
meaning quite distinct from that of "bar."  Second, the passage shows
a quite intentional progression of  penalty from mild to
severe--censure, limitation, suspension,  and finally bar; the SEC's
interpretation flouts this progres- sion, elevating "place
limitations" to a scope broader than the  climax penalty, "bar," which
is explicitly limited to association  with a broker-dealer.


We need not decide whether these arguments alone would  carry the day
for Frankel; the SEC's interpretation also  suffers fatal structural
difficulties. Clearly the "place limita- tions" language requires some
concept of the relevant do- main. Even the Commission doesn't suggest
that the phrase  allows it to bar one of the offending parties from
being a  retail shoe salesman, or to exclude him from the Borough of 
Manhattan.


In the opinion in which the Commission initiated its claim  to effect a
"collateral bar" under s 15(b)(6), i.e., a bar outside  the
broker-dealer branch of the securities industry, Meyer  Blinder, 65
CCH SEC Docket 1378, 1380-82 (1997), it relied  on a general principle
favoring "flexibl[e]" construction of the  securities laws to
effectuate their remedial purposes, id. at  1381 (citing Central Bank
of Denver, N.A. v. First Interstate  Bank, 511 U.S. 164, 185-86
(1994)), and three specific points 


that we address below--(1) that the "collateral bar" concept  enables
it to do in one proceeding what would otherwise  require two; (2) that
it prevents the risk of a regulatory  "gap" through which a miscreant
could for a time participate  in the securities market unbeknownst to
the Commission;  and (3) that legislative history of a later-enacted
provision  shows that the Commission's reading of the statute is in 
accord with congressional intent. See Blinder, 65 CCH SEC  Docket at
1381-83. Neither in its brief nor in Blinder did the  agency
articulate an explicit limiting principle other than the  idea of a
bar of the offender from engaging in "activities in  other securities
professions." See Blinder, 65 CCH SEC  Docket at 1383; Government Br.
at 45-46. But such a  reading, if lawful, would allow the Commission
to bar Frankel  from becoming a commercial banker or a mergers-and-
acquisitions attorney, activities linked to the securities indus- try
but not under the Commission's jurisdiction. Because of  the
Commission's regulatory "gap" claim, however, we infer  that it is
only seriously claiming that the "place limitations"  power enables it
to bar an offender from a branch of the  securities industry from
which it might later have explicit  authority to exclude him. Even
this claim, however, turns  out to contradict the way in which
Congress has structured  the relevant occupational license regimes and


The SEC administers three systems of occupational licens- ing. The
Advisers Act, as we saw when considering Teicher,  covers investment
advisers and associated persons. ss 203(e)  & (f), 15 U.S.C. ss
80b-3(e) & (f). The Exchange Act, under  which it acted against
Frankel, covers broker-dealers and  associated persons. ss 15(b)(4) &
(6), 15 U.S.C. ss 78o(b)(4)  & (6). And another section of the
Exchange Act covers  municipal securities dealers and associated
persons.  ss 15B(c)(2) & (4), 15 U.S.C. ss 78o-4(c)(2) & (4). In each 
regime, there is, as to associated persons, an almost identical- ly
worded threshold nexus requirement. Thus, recall that the  sentence


With respect to any person who is associated, who is  seeking to become
associated, or, at the time of the  alleged misconduct, who was
associated or was seeking to  become associated with a broker or
dealer ... the Com- mission, by order, shall....


s 15(b)(6) of the Exchange Act, 15 U.S.C. s 78o(b)(6)(A).  The one used
against Teicher also demands a nexus, but the  required link is to
investment advisers:


The Commission, by order shall censure or place limita- tions on the
activities of any person associated, seeking  to become associated,
or, at the time of the alleged  misconduct, associated or seeking to
become associated  with an investment adviser.... 


s 203(f), Advisers Act, 15 U.S.C. s 80b-3(f). The provision  for
municipal securities dealers follows precisely the structure  of the
investment adviser provision, replacing "investment  adviser" with
"municipal securities dealer." s 15B(c)(4), 15  U.S.C. s 78o-4(c)(4).
And each provision has the "place  limitations" language in dispute


The SEC believes that once the threshold requirement of  any of the
particular provisions has been satisfied, it should  be able to use
the "place limitations" language to move  seamlessly from one
licensing regime to another, imposing  unlimited sanctions throughout
all the branches of the indus- try within its bailiwick. Thus, once it
found Frankel met the  threshold requirement of being associated with
a broker or  dealer under the Exchange Act, it could bar him from
associ- ation with any investment adviser--a sanction that is only 
specifically available under the Advisers Act.


In a letter submitted after oral argument, the SEC says, in  response
to the suggestion that its reading of the provisions  virtually
eliminates the nexus requirement, that such a view  begs the
question--which is the meaning of the "place limita- tions" phrase. Of
course in a way that is true. But Con- gress's thrice repeated use of
a nexus requirement focused on  a single branch of the industry seems
to us to underscore a  congressional determination to create separate


tions, each triggered by an individual's satisfying the indus-
try-specific nexus.


The SEC objects that this forces it to do in two proceed- ings what it
would be more convenient to do in one. First we  note that as we read
the statutes, they simply do not permit  the Commission to impose
sanctions in any specific branch  until it can show the nexus matching
that branch. The  Commission's real objection is thus that it must
wait--per- haps indefinitely. But this does not seem especially
vexing.  Rather, it seems entirely consonant with Congress's having 
set up three separate systems for denying the benefits of 
"association" with licensed entities in the several systems.  The
provisions lead in the aggregate to a tailoring of sanc- tions fitted
either to a looming menace (the person's being in  or seeking to get
into a branch of the industry), or to a  malfeasance committed while


The Commission identifies one respect in which a branch- by-branch
reading of the statutes might create a risk to  investors. While the
Commission would get notice automati- cally if Frankel sought to
become associated with a registered  investment adviser, see Rule
204-1(b)(1), 17 CFR s 275.204- 1(b)(1), and thus could start a
proceeding under s 203(f), it  would get no such alert for his
association with an unregis- tered investment adviser. But assuming
the Commission  cannot remedy this by an equivalent notice provision
for such  advisers, that gap can only be because Congress withheld the
 authority--presumably for good reason, perhaps relating to  their
limited scale or regulation by other jurisdictions. A  congressional
discount of a peril is hardly the strongest  argument why we should


The SEC further points to the legislative history of the  1987
amendments, adding the "place limitations" language to  the sanction
provision for municipal security dealers, and thus  making it fully
parallel to that for investment advisers and  broker-dealers. The
Senate Report accompanying the  change says:


The Commission regards this as a desirable change in  the law because
the limitations authority is an important 


recognition by Congress of the need for flexibility to  fashion
sanctions that fit the offense and situation pre- sented. For example,
the Commission may use its "limi- tations" authority in the
broker-dealer area to suspend  the operation of a single branch
office, rather than an  entire firm, where misconduct was localized;
or to con- fine an offending employee to nonsupervisory positions 
where an outright bar or suspension is unnecessary; or  to bar persons
formerly associated with broker-dealers  from entering other
securities professions where they  might continue to perpetrate frauds


S. Rep. No. 100-105, at 25 (1987) (emphasis added). The  passage offers
several examples of options indisputably added  by insertion of the
"place limitations" phrase, but, as the SEC  argues, it appears to
presuppose the Commission's broad  understanding. And "post-enactment
legislative history,"  purporting to describe an earlier enactment
(or, as here,  language paralleling an earlier provision), may
sometimes be  relevant in establishing ambiguity in the phrase
commented  upon. See McCreary v. Offner, __ F.3d __, No. 98-5155, 1999
 WL 202475 at *6-*7 (D.C. Cir. Apr. 13, 1999). But cf. United  States
ex rel. Long v. SCS Business & Technical Institute,  Inc., Nos.
98-5133, 98-5149 and 98-5150, 1999 WL 178713 at  *6 (D.C. Cir. April
2, 1999) (declaring post-enactment legisla- tive history as having
"only marginal, if any, value."). At  most, then, all the legislative
history can do is to buttress the  Commission's claim that the "place
limitations" language is  ambiguous, and thus its interpretation is
entitled to Chevron  deference if it is reasonable and consistent with
the statutory  purpose. See Troy Corp. v. Browner, 120 F.3d 277, 285
(D.C.  Cir. 1997) (citing Chevron, 467 U.S. at 843). But even 
assuming ambiguity, we do not see the criterion of reason- ableness
satisfied here. "The meaning of statutory language,  plain or not,
depends on context." Bailey v. United States,  516 U.S. 137, 145
(1995) (citations omitted). The context--a  rather elaborate structure
of separate provisions with distinct  threshold requirements--suggests


SEC would make those threshold findings before administer- ing the
corresponding sanction.


* * *


We affirm the SEC's order barring Teicher from associat- ing with any
investment adviser, registered or unregistered,  but find the order in
excess of the Commission's powers  insofar as it purports to bar
Frankel from becoming associat- ed with an investment adviser.


So ordered.