2006 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit

4-5-2006 

# S E C v . JW B a r cl a y C o

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al
D ocke t N o . 04-3536

F o l lo w thi s a nd a dd it ion al w ork s at : h tt p://d i g it alc ommon s .l a w . v i l l a no va . e du/thir dc ir c uit_2006

Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2006 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. F or mor e infor m at ion, p le as e c on t a ct Be n j a min

. C a rl s on@l a

w . v i l l a no va . e du

. Re c omme nde d C it at ion

" S E C v . J W B a r cl a

y C o " (2006). 2006 D e cisio n s . P ape r 1193. h tt p://d i g it alc ommon s .l a

w . v i l l a no va . e du/thir dc ir c uit_2006/1193PREC EDENTIAL

I N T HEUN I TE D ST AT ES C OU RT

O F A P P E A LS F O R T H E T H IRD C IR C U IT

________________ Case No: 04-3536
SECURI TI ES AND EXCHAN GE COMMI SSI ON

v.
J .W. BARCLAY & CO., I NC.; J OHN A. B RUNO

J ohn A. B runo, Appellant

________________ On Appea l from the United States

District Court for the D istrict of NewJ erse y (Civ No. 02-3164) Di stric t Judg e : Will iam H . Wa lls

________________ Argued De cembe r 14, 2005

Be fore : SMI TH, B ECKER, and GREENB ERG, Circuit Judges

(F iled: April 5, 2006 )2 ________________ J ohn A. B runo P.O. Box 3175 Sea B right, NJ 07760 Ap

pe lla nt, pro s e
Edwar d M. Posner (Ar gued) Drink e r, B idd le & Re ath 18 th &Che rr

y Str e e ts One L og an Square Philadelphia, PA 19103 Amicus curiae Mark R. Penning ton (Argued) Ang el Yang Securities and E x chang e Commi ssion 100 F Stree t, N.E. Washington, DC 20549 Counsel for appellee

_________________ OPI NI ONOF TH E CO UR T

_________________ SMI TH, Circuit Judge

. Th is a p p e a l ar i s e s o uto f

a d e f un c tb r o k e r - d e a l e r ’ s unp a id p en al ty fo r a s ec uri t i es l awv i o l at i o n
. T h e S ec uri t i es an d E x ch an ge Commi ssion (“SEC”) f

iled an applica

tion with the District Court
s ee k i n g ano rd er

d i re ct i n g th e b ro k er -d ea l er t o p ay th e p en al ty
. In addition, the SEC also sought a judgme nt that the former president ofS e c tio n 1 7 (a ) p ro v id e s in re lev a n t p a rt: 1 a) R ul es and r egul at i ons ( 1) E ver y nat i onal s ecur i t i es excha nge, m ember t hereof, broker or dealer w ho t ransact s a busi ness i n s ecur i t i es t hr ough t h e m edi um of anys uch
3 the c omp any

wa s jo int ly

and se ve ra lly lia

ble fo r thi s unp a id p e na lty
an d ano r d e r d i r e c t i n gh i m t o p ay th e p e n a l ty. F o l l o w i n gd i s c o v e r y, the District Court grante d the SEC’s unopposed motion for summary j u d g m e ntan d

o r d e r e d th e f o r m e r p r e s i d e ntt o p ay th e p e n a l ty. Be cause we hol d(1) that the Sec urities Ex chang e Ac t of 1934 (“Exchang e Ac t”) provide s for a control p er son’s joint and sever al lia bil ity to t he SEC fo r a

de bt i n th e amou

nt of an unp a id S EC p e na lty wh e n th at c ontr ol p e rs on

ind uc e d a nd wa s a c ulp a ble pa rt ic ipa nt i n the controlled pe rson’s fa ilure to pay the penal t y

and (2) that the District Court had jurisdi ction in this case to gr ant an or der dire cting such a c ontrol person to fulfill this obligation, w e will affirm the jud g me nt o f t

he Di stric t Co ur

t.

I.

J .W. Barc lay

& Co., Inc. (“Ba

rcla y”) was a securities brokerdeale r. Appellant J ohn Br uno (“B runo”) was one of the founde rs of Ba rcla y . Br uno o wn ed 6 8 perc ent of B arc lay , and he a cted a s Ba rcla y ’s P resident f

rom J uly of 1991 through at least F ebrua ry of 2003.

On Octobe r 20, 1998, the SEC i n s t i tuted administrative proce eding s ag ainst Ba

rcla y , alleg ing violations of § 17( a) of t he Exc ha ng e Ac t and

Rul e 17 -a -5 du e to B arc lay ’s fa ilure to t ime ly fi le 1 2m ember , r eg ist ere d sec u ri t i es as s oci at i on, r egi s t er ed br oker or deal er , r egi s t er ed m u n i ci pal
s ecuri ti es d ea ler, reg ist ere d sec u ri ti es in fo rm at i on pr oces s or , r egi s t er e d t r a n s f e ra g e n t , a n d r e gi s t er ed cl ear i ng agenc y and t he M uni ci pal Secur i t i es R ul emaki ng B oar d s hal l m ake a nd keep f or pr es cr i bed peri o ds s uch r ecor ds , fur ni s h s uch copi es th er eof, and make and di s s emi nat e s uch
r epor t s as t he C om m i s s i on, by r ul e, pr es cr i bes as nece s s ar y or appr opr i at e i n t he publ i c i nt er es t , for th e p ro tec tio n o f

in v e st o rs, o r o th e rw ise in f u rt h e ra n c e o f

th e p u rp o s e s o f

th is c h a p te r. . . . 1 5 U

. S

. C

. § 7 8 q (a).
R u le 1 7 -a -5 p ro v id e s f o r th e n a tu re a n d f

o rm o f re p o rts 2
re q u ir e d b y th e S E C f ro m b r o k e r - d e a le rs
. See 1 7 C .F .R . § 240. 17a- 5.
See 1 7 C

. F

. R

. § 2 4 0

. 1 7 a-5 (e)(5). 3

4 a F or m B D- Y2 K. F or

m B D- Y2 K re qu ir e d a br ok e r- de a le r to s up ply inf or matio n a bo ut t he br ok e r- de a le r’ s Y e ar 2 00 0 p repa re dn e ss. 3

In Fe bruar

y of 1999, an A dm i n i strative L aw Judge (“A L J ”) held a he aring on this matter

. On August 2, 1999, the AL J found that Ba rcla y had willfully v i o l at ed § 17(a) and Rule 17a -5 and or dere d Ba rcla y to pay a $50,000 civil pena lty . Ba rcla y appea led the AL J ’s decision and the SEC hea rd oral argument on J uly 18, 2 0 0 1

. On October 15, 2001, the S EC affir

med the AL J ’s findingthat Ba rcla y had willfully

violated § 17(a) and Rule 17a-5, but it reduced B arc lay ’s civil penalty

to $25,000 and directed B arc lay to make pay

ment on theB a rc lay w a s n o t, h o w e v e r, f o rm a lly d iss o lv e d o r p lac e d in to 4 b a n k r u p t c y.
5 penalty within thirty

day s (“Or der” ). The SEC sent copies o f the Or der to B arc lay ’s attorne y of
rec ord, and B arc lay ’s out side counsel notified B runo that B arc lay owed p ay ment of the $25,000 pe nalty to the SEC. Barc lay

did not
a pp e a l th e Or de r, but th e c omp any a lso did no t pay the pe na lty

wi thi n thirty day s, or at any

time therea fter.

In the meantime, Ba

rcla y had cea sed operation a s a br o k erdeale r o nDec ember

27, 2000, beca

use it was in violation of the SEC’s ne t cap i t al re quirements. At the e nd of 2000, B arc lay ’s liabiliti es we re gr eate r than its assets. During2001, while the AL J ’s 4 de c isi on wa s o n a

pp e a l to the SEC , B ru

no c a us e d Barcl ay

to
c on c e ntr ate its re ma ini ng a sse ts, a tot a l of mor e tha n $ 14 5, 00 0, int o Ba rcla y ’s bank a ccount. B runo then c aused Ba rcla y to issue a che ck to himself in the amount of $90,000 and a chec k to another e mploy ee fo r $ 43 ,7 00 . B ru

no then c ontin

ue d to c a us e B arc lay

to p la c e its de po sit s into t

hi s a c c ount a

nd to i ssu e c he c ks fr om t

his a c c ount, primarily to pay l egal fees. Eve n afte r the SEC issued the Orde r direc ting B arc lay

to pay the $25,000 penalty

within thirty

day s, Br uno did not cause B arc lay

to use any

of its funds to pay an y p ar t of the $ 2 5 , 0 0 0 p e n a l ty.
On J uly 1, 2002, the SEC f

iled an application with the District Court pursuant t o § 21(e) of the Exchang e Ac t, 15 U.S.C. § 78u(e)S ect i on 21 (e) provides: 5 U pon appl i cat ion of t he C om m i s s i on t he di s t r i ct
cour t s of t he U ni t ed St at es and t he U ni t ed St at es cour t s of anyt er r i t or y or ot her pl ace s ubj ectt o t he j ur i s di cti o n of t he U ni t ed St at es s hal l have j uri sdi ct i on to i ssue w ri t s of m and am us, i nj unct i ons , and or der s comm andi ng ( 1) any p e rso n to c o m p ly w ith th e p ro v isio n s o f th is ch ap ter, the ru les , reg u lat ion s, an d o rde rs t her eunder , t he r ul es of a nat i onal secur i t i es excha nge or r egi s t er ed s ecur i t i es as s oci at i o n of
w hi ch s uch per s on i s a mem ber or p erson as s oci at ed w i t h a mem ber , t h e r ul es of a
re g iste re d c lea rin g a g e n c y in w h ich su c h p e rso n is a par t i ci pant , t he r ul es of t he P u b li c C om pany A ccount i ng O ver s i ght B oar d, of w hi ch s uch p erso n is a reg ist ere d p u b li c acc o u n ti n g firm o r a per s on as s oci at ed w i t h s uch a fi r m , t he r ul es of t he M uni ci pal Secur i t i es R ul emaki ng B oar d, or anyun d er t aki ng cont ai ned i n a r egi s t r at i on s t at ement as pr ovi ded i n s ubs ect i on ( d) of s ect i on 7 8 o o f th is title

. . . . 1 5 U

. S

. C

. § 7 8 u (e).
6 (“A pplication”). In Count I of the Application, the SEC alleg ed that

5 Ba rc l ay had not paid its civil penalty as orde red by

the SEC and reque sted an orde r commanding Ba rcla y to pa y the penalty . In Count I I of th e Ap pli c atio n, the SEC a lle g e d th at B ru no ha d “ kn ow ing ly failed to c ause Ba

rcla y to c omply with the Commi ssio n ’s Or der,” argued t h at B runo wa s jointl y and seve rally

liable for B arc lay ’sS ect i on 20 (a) provides: 6 (a ) Jo in t an d s e v e ra l li a b ili ty ; g o o d f a ith d e f e n s e E v e r y p e r s o n w h o , d i r e c t l y o r i n d i r e c t l y, cont r ol s any per s on l i abl e under any pr ovi s i on of t hi s chapt er or of any r ul e or r egul at i on t her eunder
s hal l al s o be l i abl e j oi nt l y and s ever al l y w i t h and to th e sa m e e x ten t as su c h c o n tro lled p e rso n to
a n y p e rso n to w h o m su c h c o n tro lled p e rso n is l i abl e, unl es s t he cont r ol l i ng per s on act ed i n good fai t h and di d not di r ect l y or i ndi r ect l y i nduce t he actor act s co n st i t ut i ng t he vi ol at i on or caus e of act i on. 1 5 U

. S

. C

. § 7 8 t( a).
7 unpaid pena l ty

“by virtue of his status as a c ontrol person unde r Section 20(a) of th e E x chang e Ac t,” and re quested a n order 6
c o mm an d i n gB r

un o t o p ay th e p e n a l ty.

Ba rcla y did not make a

n appea ranc e bef ore the District Court
an d fi n al j udg ment by

defa ult was enter ed ag ainst Ba rcla y . On Se p te mb e r

9 , 2 0 0 2 , B r

un o f il e d a pro seans we r a

nd mot ion to dismiss , arguing that there was “no basis for bring ing t h i s action” ag ainst him because the Orde r was not issued ag ainst him, he was not named in the Order, and he wa s not a party in the proce edingbefor e the SEC in which the Orde r wa s issued. The SEC moved to strike Br uno’s answe r and B runo filed a response to this motion, which the Di stri ct Cour

t tr e ate d a s an ame nd e d a ns we r a nd mot ion to d ism iss under Rule 12(b)(6)

.
In h i s S ec ond Def

ense w ithin his response to the SEC’s
mo t i on to strike, Br

uno argued that he w as “not liable f or a debt incurre d by

Ba rcla y” and that to obtain an orde r ag ainst him the SEC “wo u l d have to bring a

separ ate a ction or proc eedingag ainst him.” I nhis Fourth De fense , Br uno argued that the SEC could not asser t
c ontrol per so n li a

bil ity a g a ins t hi m un de r § 20 (a) “ and ho ld h im8 responsible for

the civil penalty ag ainst Ba rcla y” bec ause B runo wa s not a par ty to the proceeding s befor e the SEC and no order w as issued
a g a ins t hi m.
The District Court then de nied the S E C ’s motion to strike. Th e Di stric t Co ur

t a lso he ld t

hat th e Ap pli c ation s tate d a c la im
a g a ins t B ru

no un de r § 20 (a) a

nd de nie d h is m oti on

to d ism iss

. After the completion of discovery , the SEC filed a motion for
summa ry jud g me nt whic h in c lud e d a state me nt of un dis pute d f a c ts. Br uno did not oppose this mot ion for summary judgme nt and itwas de c ide d w ith out or a l argume nt.

On J uly 28, 2004, the Dis trict Court grante d the SEC’s motion for summary

judgme nt. The District Court held that “[t] he fa cts set forth by the SEC in thi s unopposed motion for summary j udg ment
e sta bli she a c h o f t

he e le me nts re qu ir e d f

or the SEC to pr e va il o n it s Section 20(a) action ag ainst Br uno.” Specif

ically , the District Court decla red th at the undisputed fac ts established that: (1) B arc lay was subject to an SEC order requiring it to pay a $25,000 civil penalty ; (2) Ba rcla y had fa iled to pay

this penalty ; (3) Bruno ha d the authority and powe r to d ir e c t t

h e p ay me nt o f th is p e n a lt

y ; a n d ( 4 ) B r un o c a u s ed Ba rcla y to pay himself and anothe r employee f unds from B arc lay ’s ba nk a c c ou nt s in

20 01 , whic h in

tur n c a us e d B arc lay ’s fa ilure to
c omp ly wi th t he Or de r b e c a

us e it w a s le ft

wi th i ns uf

fi c ie nt f un ds

. Ap ply ing§ 2 0( a ) t o th e se un dis pute d f a cts , th e Di stric t Co ur

t he ld that “B runo both induced a nd culpab l y p articipated in Ba rcla y ’s failure to pay

the civil penalty

. Acc ording ly , Br uno, as a c ontrol person, is jointly

and seve rally

liable for B arc lay ’s fa ilure t o pay the civil penalty

order ed by

the SEC.”

B ru no ’s pro s eappea l of the D i s t ri ct C ourt’s orde r granting the SEC’s motion for summary judgme nt f

o l l o wed. On June 30, 2005, we a

ppointed Edwar d M. Posner of the law fi rmDrinker ,W e t hank M r
. Posne r for composi ng an i ll u m inat i ng br i ef 7 and appe ar i ng b ef

o re us t o ar gue t hi s m at t er
. W e fur t her
comm end M r
. Posne r for t h e ex cel l ent m anneri n w hi ch he
c o n d u c ted th e se se rv ice s f o r th e C o u rt.
9 B idd le & Re ath a s amicus curiae

. We asked the amicus to a dd re ss 7 the qu e sti on

of “ wh e the r t

he SEC ha s st and in g t o bri nga c la im ag ainst a control pe rson under Section 20(a) of the Exchang e Ac t, 15 U.S.C. § 78t, i n an enf

orce ment action filed pur suant to Section 21(e) of the Ex chang e Act, 15 U.S.C. § 78u(e) ,” citingthe circ uit spli t on this iss ue in SEC v. Coffey , 493 F.2d 1304 (6th Cir. 1974) , and SEC v. First Jerse

y Sec ., Inc. , 101 F.3d 1450 ( 2d Cir. 1996). The amicus identified a third case addre ssing this issue, SEC v. Stringer , No. Civ. 02-1341-ST, 2003 WL23538011 (D. Or . Sept. 3, 2003).

II.

A.

The District Court cla imed orig inal jurisdiction over the SEC’s count ag ainst Br

uno pursuant to 15 U.S.C. § 78u( e). We have jurisd ic tio n o ve r t

he fi na l ju dgme nt o f t

he Di stric t Co ur

t pu rs ua nt t o 28 U.S.C. § 1291. We reviewthe District Court’s grant of summar y judgm ent de novo

. See, e .g., A. M. v . Lu ze rn eCou nty

J uv e nileDe t. Ctr

. , 3 72 F .3 d 5 72 , 5 78 (3 d Ci r. 2004 ). Summary jud g me nt i s a pp ro pr iate if

“ the ple a din g s, de po sit ion s, ans we rs to i nte rr og atorie s, and admissions on file, tog ether with the aff idavits, if any , show that there is no ge nuine i ssue as to any materia l fac t and that the moving party is entitled to a judgment as a matter of l aw.” Fe d. R. Civ. P ro. 56 (c ). On c e the mov ingpa rt y me e ts t his ini tia l bu

rd e n, the a dv e rs e party “may not rest upon the m er e allegations or denials of the adver se party ’s pleading , but the adver se party ’s respo n s e, by
a ff ida vit s or a s oth e rw ise pr ov ide d in thi s ru le , mus t se t f or th s pe c if ic fac ts showing that ther e is a g enuine issue f or trial.” F ed. R. Civ. Pro. 56 (e ). “ I f t

he a dv e rs e pa

rt y do e s no t so re sp on d, summa ry jud g me nt,10 if appropriate, shall be e ntere d ag ainst the adve rse pa rty .” Id

.
B.

Th e Su p r e me Co urt h a s e xp la in e d th at t h e f e d e r a l s e c urities laws sho u l dbe “c onstrued ‘not tec hnically and re strictively , but flexibl y to effe ctuate its re medial purposes.’ ” E.g. , SE C v . Za nfo rd, 5 3 5 U. S

. 8 1 3 , 8 1 9 (2 0 0 2 ) ( ci t i n g Affili ated Ute Citize n s of Utah v. United States , 4 0 6 U. S

. 1 2 8 , 1 5 1 ( 1 9 7 2 ) ( qu o t i n g SEC v. Capital Gains Researc h Bureau, Inc

. , 375 U.S. 180, 186 (1963)))

. Nonethele ss, “[t] he broa d reme dial g oals of the [securities laws] are insufficient justification for i n t erpr etinga spec ific provision ‘more br oa dly tha n it s la ngua g e and

the statut or

y sc he me re a so na

bly permit.’” Pin ter v. Dahl , 4 8 6 U. S

. 6 2 2 , 6 5 3 (1 9 8 8 ) ( ci t i n g Touche Ross &Co. v. Redington , 4 4 2 U. S

. 5 6 0 , 5 7 8 (1 9 7 9 ) ( qu o t i n g SEC v. Sloan , 4 36 U. S. 1 03 , 1 16 (1 97 8) )) ; se eals o Aaron v. SEC, 4 46 U. S. 68 0, 69 5 ( 19 80 ); Ballay v. Legg Mason W ood W alker, Inc

. , 925 F.2d 682, 690 n.11 (3d Cir. 1991).

Ac co rd i n gl y , ci t i n g th e r e m ed i al p urp o s es o f th e E x ch an ge Act, the Supre me Court has found implied private cause s of ac tion arising under § 14(a) of the 1934 Ac t, see J .I. Case Co. v. Borak, 377 U.S. 426, 429 -34 (1964), and § 10(b) of the 1934 Ac t, see Superintendent of I

ns. v. Banke rs Lif

e &Cas. Co. , 404 U.S. 6, 13 n.9 (1971). The Court in Tou c heRo ss , howeve r, dec lined to find a g ener al implied private right of action for violations of the Act arising
out of § 2 7 o f t he 19 34 Ac t, whic h gra

nts to t he fe de ra l di stric t c ourt s exclusive jurisdiction over violations of the Act and suits to enf orce any liability or duty cre ated by

the Act or rules ther eunder

. See 442 U. S. at 57 6- 78 . T he Court re a so ne d th at “ [t]he so ur c e of pla int if fs ’ rights must be found, if at all, in the substantive provisions of the 1934 Act which the y s ee k t o enfor ce, not in the jurisdictional provision.” Id. at 577.

The Court also has he ld that “the sc ope of liability cre ated by11 a par ticular sec tion of the [securities laws] mustrest primarily on the languag e of that section.” Pinter , 48 6 U. S. at 65 3; see also Central Bank of De nver, N.A. v . First Interstate B ank of Denv er, N.A. , 511 U.S. 1 6 4 , 1 73-78 (1994) (holdingthat a private plaintiff could not bringan aidingand abe tting suit under § 10(b) beca use the text of § 10 (b ) d id n ot r e a c h a idi ngand a be tti ng ); Ballay , 925 F.2d at 687-89 (h old ingthat the te xt of

§ 1 2( 2) of

the 19 33 Ac t di d n ot c re ate a c a us e of ac t i on for a

n oral misrepr esentation in the secondar y marke t). Simi larly , the Court has looked primarily to the specific languag e of the re levant provisions when de rivingthe scie n t er require ments for actions arising unde r those provisions. See A aron , 446 U.S. at 689-97 (construing§ 17(a) (1), § 17(a)( 2), and § 17(a) (3) of the 1933 Act a

nd § 10(b) of the 19 34 Ac t) ; Ernst &Ernst v. Hochfe lder , 425 U.S. 185, 197-201 (1976) ( construing§ 10(b))

. No ne the le ss, the Cou rt ha s a lso cite d th e r e me d ia l p ur

p o s e s o f th e s e c ur it ie s la

w s wh e nd e f

ining specific terms. Se ege ne ra lly Lan dre th T im be r Co. v . La nd

re th , 471 U.S. 681 (1985) (c onstruing the term “se curity” under the 1933 and 19 34 Ac ts) ; TSC Indus., Inc

. v. Northway, Inc. , 426 U.S. 438, 444-49 (1976) ( construingthe term “ materia l fac t” under Rule 14a-9)

.
F in a lly , citing the reme dial purposes of the securities laws, the Court has held that the e x istence of an express private action under one provision of the se curities laws doe s not preclud e t he existence of an ove rlappingimpl i ed private ca use of a ction under a

nother provision where the two provisions addre ss “d i fferent ty pes of wrong doing.” See Herman & MacLean v . Huddleston , 459 U.S. 375, 381-87 (1983) (holdingthat an ex p re s s reme dy under § 11 of

the 1933 Act for

misleadingreg istration statements did not pr eclude an overla pping implied private ca use of a ction for f

raudule nt mis repr e se ntatio n und e r § 10 (b ) o f t he 19 34 Ac t) . T he Court in Huddleston rea soned that this “cumulative c ons t ru ction of the
securities laws . . . furthers t h ei r broad reme dial purposes.” Id. at 386. The Court also noted that if de fra uded purc haser s of sec urities
c ou ld r e ly on ly on § 1 1, the y

wo uld have no re c ours e a g a ins t c e rt a in individuals who co u l dnot be re ache d under § 11, “ even if theI n addi t i on, B r uno m us t have c ont r ol l ed B ar cl ayw i t hi n t he 8

m e a n in g o f

§ 2 0 (a ). S e e 1 5 U

. S. C

. § 78t ( a)

. Fur t her , B r uno m u st h a v e d ire c tl y o r in d ire c tlyin d u c e d th e a c t o r a c ts
cons t i t ut i ng t he vi ol at i on or cause of ac t i on gi vi ng r i s e t o t he
c o n tr o lle d p e rs o n ’s lia b ility. S e e id

. Fi nal l y , B r uno m us t have been a “cul pabl e par t i ci pant ” i n t he “a ct or act s cons t i t ut i ng t he vi ol at i on or caus e of a ct i on. ” See R ochez B r os

. v. R hoades , 527 F. 2d 880, 889- 90 ( 3d C i r
. 1975)

. T hes e i s s ues ar e not befor e us on t hi s appea l , but w e not e t hat t he undi s put ed fa ct s s et for t h by t he SE C i n i t s unoppos ed mot i on for s um m ar y j udgm ent
es t abl i s hed t hat B r uno had t h e aut hor i t y and abi l i t y t o di r ect B arc layto p ay the p en alt y
. A cc o rdin g ly , th e D ist ri ct C o u rt
cor r ect l y hel d t hat B r uno cont r ol l ed B ar cl ay w i t hi n t he meani ng of § 20( a)

. Si m i larl y , the undi s put ed fa ct s es t abl i s hed t hat B r uno’ s t r ans ferof B ar cl ay ’ s as s et s t o hi m s el f and a no ther
12 e xclu de d p art ie s e ng a g e d in fr a ud ule nt c on du c t whil e pa

rt ic ipatin gin the reg istration statement.” Id

. at 386 n.22. Acc ording ly , the Court observe d that without a cumulative construct i o nof § 10(b) , “[t] he exempted indivi du als would be immune fr om fede ral liability for fra udulent conduct even though Section 10(b) extends to ‘any person’ who eng ag es in fra

ud in connec tion with a purcha se or sa le of
securities.” Se eid

.
III

. The p l ai n languag e of § 20( a) suppor ts our holding that the SEC ha d a

c la im f or p ay men t f ro m B ru no un de r § 20 (a) b e c a

us e Br uno was jointly

and seve rally l i ab l e to the SEC for a debt in the
amou nt o f B arc lay ’s un

pa id p e na lty . In o rd e r f

or B ru no to b e joi ntl y and seve rally

liable to the SEC under § 20(a): (1) the SEC has to be a per son; (2) t o whom the controlled person, Bar clay , was liable; (3)
as a r esult of some ac t or ac ts constituti nga violation or ca use of action under

any provision of the Exchang e Ac t or any rule or regulation thereunde r. See15 U.S.C. § 78t(a). 8e m p lo y e e c a u se d B a rc lay’s in a b ili tya n d su b se q u e n t f a ilu re to p ay t he penalt y , and t herefore t he D i st ri ct C ou rt corr ect l y h e ld th a t B ru n o b o th in d u c e d a n d w a s a c u lp a b le p a rticip a n t in B a r c l a y’ s f

a i l u r e t o p a y t h e p e n a l t y.
S ect i on 20 (b) provides: 9 ( b) U nl aw ful act i vi t y t hr ough or by m eans of any ot her per s on I t s hal l be unl aw ful for anyperson, di r ect l y or in d ir e c tly , to d o a n y a c t o r th in g w h ich it w o u ld be unl aw fu l for s uch per s on t o do under t he pr ovi s i ons of t hi s chapt er or anyr ul e or r egul at i on t her eu nder t hr ough or by m eans of anyot her per s on. 1 5 U

. S

. C

. § 7 8 t( b ).
13 A. We j oin the Se c on d Ci rc uit

and ho ld th at th e SEC is a “per s o n ” within the meaningof § 20(a). See F irst Jersey , 101 F.3d at 1 4 7 2. We theref

ore de cline to join the Six th Circuit’s contrar y holding that the S EC is not a “person” unde r § 20(a). See Coffey , 493 F.2d at 1318.

The Six th Circuit in Coffeyrea soned that bec ause § 20(b) of the Exchang e Ac t “sets for th the standard of lawfulne ss to which a 9 controllingperson must confor m, on penalty

of liability

in injunction to t he SEC or

c ri min a l pr os e c uti on ,” § 2 0( a) wa s me ant o nly “ to sp e c if y the lia bil ity of c ontr oll ing pe rs on s to priv ate pe rs on s su ingto vindicate their interests.” Id . Acc ording ly , the Six th Circuit held that th e SE C w a s “ n o t a p e r s o n un d e r s e c ti o n 2 0 ( a ) ” an d th at the SEC
c ou ld n ot r e ly

on § 2 0( a ) whe n see kin g pe rs on a l injunc tio ns a g a ins t
corporate officia ls for a c orporation’s alleg ed violations of the
securities laws. Id

.Subse quent l egi s l at i ve hi s t or y confi r m s our cons t r uct i on of 10 § 2 0 (a) i n l i ght of t he Exchange A ct ’ s s t atut or y defi ni t i on of

“ p e rso n .” In th e In sid e r T ra d in g S a n c tio n A c t o f 1 9 8 4 , 9 8 S tat. 1264, C ongr es s aut hor i zed t he S E C t o col l ect ci vi l penal t i es for in sid e r-tra d in g v io latio n s, b u t als o sp e c if ica llye x e m p ted th is
n e w p ro v is io n f

ro m th e o p e ra tio n o f

§ 2 0 (a ). See i d. ( “Sect i on 20( a) of t hi s t i t l e .
. . s hal l not appl y t o an ac t i on br ought under t hi s par agr aph. ”)

. T he H ous e R epor t s t at ed t hat t hi s l egi s l at i on n o n e th e les s “ w o u ld n o t ch a n g e e x istin g law w ith re sp e c t to
o th e r C om m i ssi on rem edies t hat m ay be u sed aga i nst t hese cl as s es of l aw vi ol at or s
. . . . U nder cur r ent l aw , t he C om m i s s i on coul d i m pos e l i abi l i t y on a cont r ol l i ng per s on under Sect i on 2 0 (a ) o f th e E x c h a n g e A c t. .

. . T h e b ill d o e s n o t alte r th is
s i t uat i on i n anyw ay
. ” 1983 H ous e R ep o rt , H

. R

. R ep. N o. 98- 3 5 5 , 9 8 C o n g
. 1 st Se ss. 10 (S ep t. 1 5 , 1 9 8 3 ), r e p r in tedin 1984 U

. S. C

. C

. A

. N

. 2274. A ccor di ngl y , al t hough t hi s le gi s l at i ve
14 Re g ard le ss o f t

he me ri ts o f thi s re a so nin g in 197 4, the Sixth Circuit’s concl usion that the SEC i s not a person unde r § 20(a) wa s s ev er el y un d erm i n edi n 1 9 7 5 , wh en anam en dm en tt o th e E x ch an ge Act modified the E x chang e Ac t’s definition of “pe rson.” See 15 U. S

. C

. § 7 8 c( a) (9 ) (1 9 7 5 Am en dm en t s ). As o f 1 9 7 4 , th e E x ch an ge Act had de fined a

“per son” as “ an individual, a cor poration, a partne rship, an association, a joint st ock compa ny , a business trust, or an unincor

p o rated org anization.” The 1975 amendment, howeve r, expli citly expanded the scope of the Exchang e Ac t’ s definition of a

“ pe rs on ” so a s to inc lu de g ov e rn me nts and

g ov e rnme nt a g e nc ie s, chang ing it to “a

natura l person, compa

ny , g overnme nt, or political subdivision, age ncy , or instrumentality of a g overnme nt.” Id

.
Acc ording ly , while the Six th Circuit’s limi tation of § 20(a) claims to “private persons” may have been supported by the Ex chang e Ac t’s statutory definition of “pe rson” a s of 1974, the Exc ha ng e Ac t’ s c ur

re nt s tatut or

y de fi nit ion

of “ pe rs on ” e xplic itl y includes g overnme nt a g encie s such as the SEC. Consequently , we 10his t ory do es n ot descri be i n detai l ho w t he S E C cou l d m ake u se of § 20( a) , t he 1984 C ongr es s appar ent l y cons t rue d § 20( a) as pot ent i al l y pr ovi di ng s t andi ng t o t he SE C i n ci vi l penal t y cas es s uch t h a t Con g r e s s d e e me d i t n e c e s s a r y t o s p e c i f i c a l l y e x e m pt this ne w p en alt y p rov isi o n fro m the o p era ti o n o f § 2 0 (a).
T h e E x ch an g e A ct p rov ides that it s statutory d ef init ion s are 11 t o be u sed “unl es s t he cont ext ot her w i s e r equi r es
. ” See 15 U .S .C

. § 7 8 c (a ). A s d is c u s s e d i n P a r t I II .D , i nfr a , our cons t r uct i on of § 20( a) serve s t he r emedi al pur pos es of t he E x c h a n g e A c t , a n d s o w e h o l d t h a t t h e c o n t e x t s u p p l i e d b y § 20( a) does not r equ i r e us t o us e a mor e l i m i t ed def i ni t i on of

“ p e rs o n .”
15 a gre e wi th t

he Se c on d Ci rc uit

tha t th e pla in l angua g e of

15 U. S.C. 78 c (a)( 9) , a s ame nd e d in 19 75 , re qu ir e s our ho ldi ng that the SEC is
a “ p e r s o n ” wh o ma

y b r in g a c la im un d e r § 20(a)

. S ee First Jersey , 101 F.3d at 1472. 11

B.

We f urther hold that in the circumstanc es of this ca se, B arc lay
wa s li a ble to the SEC fo r a

de bt i n th e amou

nt o f t he un pa id p e na lty wi thi n th e me anin gof

§ 20 (a). We b e g in w iththe ob se rv atio n th at § 20(a) expli citly

provi des for

a contr ol person’s joint and seve ral liability . “A liability is joint and sever al when ‘ the cr editor may sue one or more of the pa

rties to such liability

separ ately , or all of them toge ther, at his [ or her ] opt ion.’” United States v. Gre gg , 226 F.3d 253, 260 (3d Cir

. 2 0 00) (c itation omit ted). Ac cording ly , “an a ssertion
o f j o i nt an d s e v e r a l l i a

b i l i ty i s an a s s e rt ionthat each de fe nd ant i s liable for the entire a

mount, although the pla i ntiff only rec overs the
en t i re am ount once.” Golden v. G olden , 382 F.3d 348, 355 n.5 ( 3d Cir . 2 00 5) (e mph a sis in orig ina l) . Joint and se ve ra l li a

bil ity c an a ri se in ma ny differ ent contexts. See , e.g. , id. (v ari ou s to rt s) ; Gregg , 226 F.3d at 260 (s t at u tory

damag es for

violations of the Fr eedom ofFor t he purpos es of § 2 0( a) , t he fi nanci al obl i gat i on of t he 12 cont r ol l ed per s on t o t he cr edi t or m us t ar i s e undert he Exchange A c t o r a n y ru le o r r e g u la tio n th e re u n d e r. See 1 5 U

. S

. C

. § 7 8 t( a).
T he SE C conce ded i n i ts b ri efs t hat : ( 1) B ar cl ayw as not 13 liab le to th e S E C f

o r th e u n p a id p e n a lt y u n til B a rc lay fa iled to p a y t h e p e n a ltyo rd e r; (2 ) B a rc lay’s f a ilu re to p a y th e p e n a lty
or der di d not occurunt i l t hi r t y day s after the admi ni s t r at i ve pr ocee di ngs concl uded; and ( 3) B r uno’ s joi nt and s ever al
16 Ac c e ss t o C li ni c Entr anc e s A c t) ; Janney Montgomery

Scott, Inc. v

. Shepard N

i l es , Inc. , 11 F.3d 399, 406 ( 3d Cir. 1993) (co- obligor s under a contra ct).

In this case, the rele vant liability of the controlled pe rson for the purp os e of de fi nin g the c ontr ol pe rs on ’s joi nt a nd se ve ra l li a

bil ity
un de r § 20 (a) i s th e c ontrol ledpe rs on ’s ob lig atio n to pa y so me amount t o a creditor whe n that claim for pa y ment arises unde r the
se c uriti e s la

ws
. Gi ve n th e un con tes tedfa c ts o f t his c a se , w e ho ld 12 that Ba rcla y was li able to the SEC within the meaningof § 20(a ) for a debt in the a

mount of the unpaid pena lt y
. On t h i s issue, we take note of the de finit i o n s o f “debt” and “debtor” in the F eder al Debt Collection Procedure s Act, 28 U.S.C. § 3001 et seq . That Ac t defines
a “ debt” to t

he Un ite d St ate s in

pa rt a s “an amo un t th at is ow ingto the United States on ac count of a . . . penalty

. . . . ” 28 U.S.C . § 3002(3)( B)

. A “debtor” in turn is a “person who is l iable for a debt or ag ainst whom there is a claim for a

debt.” 28 U.S.C. § 3002(4).

Al tho ugh th e se de fi nit ion s d o n ot a pp e ar i n th e Exc ha

ng e Ac t,
we fi nd the m in str

uc tiv e on the g e ne ra l re la tio ns hip be tw e e n unp a id pe na lti e s and the lia

bil ity of pe rs on s to the Un ite d State s and its ag en c ie s
. In a c c o r d an c e w it h th e s e d e f

in it io n s , w e h o ld th at when Ba rcla y failed to pa

y its pe nalty within thirty day s afte r t h e S EC issued its Order a

nd the administrati v e p roce eding s conclude d, Ba rcla y beca me a de btor to the SEC. Ba rcla y thus was liable for

a 13liab ili ty u n d e r § 2 0 (a ) fo r t h e a m o u n t o f th e u n p a id p e n a ltyd id not ar i s e u n ti l tha t dat e. C ons equent l y , w e al s o hol d t hat B ru n o ’s jo in t an d se v e ra l liab ili ty f o r t h is de b t u n d e r § 2 0 (a ) d id not ar i s e unt i l t hat t i m e.
B ecause o f t he li m i t ed n at ure of the SE C ’s cl ai m i n this 14
cas e, w e nee d not r eac h t he i s s ue of w het her t he SE C coul d have
us ed § 20( a) t o i m pos e j oi nt and s ever al li abi l i t y on B r uno i ns ofaras he m ay have i nduced a nd been a cul pabl e par t i ci pant i n B ar cl ay ’ s vi ol at i on s o f § 1 7( a) and R ul e 17- a- 5, r at her t han inso fa r as h e ind u ce d an d w as a cu lpab le pa rt ici p an t i n B arc lay ’s fai l ur e t o payt he pe nal t y
. N onet hel es s , w e not e t hat s uch a cl ai m w oul d have s ought t o i m pos e der i vat i ve l egal l i abi l i t y on Br u n o f o r Ba r c l a y ’ s v i o l a t i o n s o f t h e E x c h a n g e Ac t , a n d we agr ee w i t h t he Si xt h C i r cui t i n C of f ey that § 2 0 (b), no t § 2 0 (a), defi nes t he gene r al “s t andar d of l aw fu l nes s t o w hi ch a
co nt r ol l i ng per s on m us t confor m
. ” See 4 9 3 F

. 2 d a t 1 3 1 8

. We al s o agr ee w i t h t he U ni t ed S t at es D i s t r i ct C our t for t he D i s t r i ct of O r egon, w hi ch re as oned t hat w hi l e a c ont r ol per s on coul d be hel d li ab le i n an SE C enfor cement act i on under § 20( b) for
ce r t a i n v i o l a t i o n s c o mmi t t e d b y a c o n t r o l l e d p e r s o n , i n s uch a
cas e t he SE C i t s el f w oul d not be an “ i njur ed par t y , ” and t he d e f e n d a n ts in su c h a n e n f

o rc e m e n t ac tio n w o u ld n o t b e “ liab le to th e S E C th e w a y th a t [ th e y] w o u ld b e liab le to a p riv a te pl ai nt i ff. ” St r i nger , W L 2 3 5 3 8 0 1 1 at * 6

. In o u r ca se, ho w ev er, th e S E C is n o t c laim in g th a t B a rc lay is liab le to th e S E C f o r its
v io latio n s o f

§ 1 7 (a ) a n d R u le 1 7 -a -5 , b u t ra th e r th a t B a rc lay i s l i a b l e t o t h e S E C f

o r a d e b t i n t h e a m o u n t o f i t s u n p a i d p e n a l t y. B ar cl ayi n t hat s ens e i s l i abl e t o t he SE C for t hi s debt j us t as any debt or w oul d be l i abl e t o a p ri v at e cr edi t or beca us e of t he d e b t o r ’ s u n p a i d f

i n a n c i a l o b l i g a t i o n t o t h e c l a i m a n t

. S i m i l a r l y, B r uno i s i ndi vi dual l y l i abl e t o t he SE C for t hi s debt j us t as any jo in tlya n d se v e ra llyliab le p a rty w o u ld b e in d iv id u a llyliab le to
17 debt to the SEC in the amount of this unpa id pe nalty as of that date

. 14a pr i vat e cr edi t or beca us e of t he debt or ’ s unpai d fi nanci al
o b li g ati o n to tha t cred it o r.
W e n o te ag ain th a t th e re leva n t act w as n o t B arc lay ’s 15
o r i g i n a l v i o l a t i o n o f

§ 1 7 ( a ) a n d Rul e 1 7

- a - 5 , a n d t h a t t h e SEC has not s ought t o i m pos e cont r ol per s on l i abi l i t y on B runo for th a t ac t. R a th e r, th e o n ly r e le v a n t ac t w a s B a rc lay’s f a ilu re to
c o m p lyw ith th e O rd e r b y f a ili n g to p a y its p e n a ltyw ith in th irty day s
. T he contr o l per s on, how ever , need nothave i nduced a vi ol at i on of t he E xchange A ct i n or der t o have j oi nt and s ever al l i abi l i t y under § 20( a)

. T he pl ai n l anguage of § 20( a) pr ovi des th a t th e c o n tro l p e r s o n m u st h a v e in d u c e d “ th e a c t o r a c ts
cons t i t ut i ng t he vi ol at i on orcaus e of act i on
. ” See 1 5 U .S .C . § 78 t (a) (em ph asi s add ed). T he di sj un ct i ve “or” i n t his c lau se i m pl i es t hat j oi nt and s ever al l i abi l i t y for cont r ol per s ons can a rise u n d e r § 2 0 (a ) w h e re th e c o n tro l p e rso n h a s in d u c e d a c ts
w hi ch cons t it u te a c aus e of a ct i on ar i s i ng under t he Exchange A ct , even i f t he contr ol perso n di d not i nduce a ct s w hi ch
c o n stitu te a v io latio n u n d e r th e E x c h a n g e A c t.
18 C. Finally , we hold that Ba

rcla y ’s failure to pay

the pena lty

was an ac t constituti nga ca use of a ction under a

provision of the Ex chang e Ac t, specifica lly § 21(e)

. We have note d that a “c ause of 15 action” ha s b ee n define d as “the fac t or fac ts which g ive a pe rson a right to judicial relief . . . [ or] to ins titute judicial procee dings.” In re Remington Rand Corp. , 836 F.2d 825, 830 n.5 (3d Cir. 1988) (quoting Bla ck’s L aw Dictionary 201 (5th ed. 1979)). In this ca se, the re le va nt fa c ts ar os e wh e n Ba

rc lay fa ile d to pa

y its pe na lty

wi thi n thirty day s as provided by

the Or d er
. At that point, the SEC had a
caus e o f a c ti o n a g a in s t B ar c la y ar is in g un d e r a p r o v is io nof the Exc ha ng e Ac t be c a

us e § 2 1( e ) p ro vid e s in

pa rt that th e dis tr ic t c ourt sT he am i cus , r e l yi n g o n a N in th C ir c u it c a s e , SE C v. 16 McC ar t hy , 3 2 2 F. 3 d 6 5 0 ( 9 t h Ci r
. 2 0 03) , a r g u e s t h a t a n SEC
a p p lic a tio n p u rs u a n t to § 2 1 (e ) d o e s n o t co m m e n c e a n “ a c tio n ,” and t her efor e t hat B arcl ay ’s fa i l ur e t o payt he pena l t y di d not
cons t i t ut e a “ca us e of a ct i on. ” R el y i ng on t he def i ni t i on of “appl i cat i on” i n B l a ck’s L aw D i ct i on ary , the N in th C irc u it i n McC ar t hy di s t i ngui s hed “a ppli ca ti ons ” fr om “ac t i ons ” fort he pur pos e of de t er m i ni ng w het her SEC a p p l i c a t i o n s b r ought under § 21( e) r equi r e a for m al compl ai nt and ful l for m al pr ocee di ngs p u rs u a n t to th e F e d e ra l R u le s o f C iv il P ro c e d u re
. S e e id

. at 6 5 6 -57. R egar dl es s of t he mer i t s of t hat di s t i nct i on i n t he
c o n tex t o f th a t c a se , w e d o n o t f in d th a t d istin c tio n a p p lica b le to t he i s s ue of w het her t he fa i l ur e t o compl y w i t h an SE C or der
c o n s titu te s a “ c a u s e o f

a c tio n ” u n d e r § 2 1 (e ). I n f a c t, B lack ’s L aw D i ct i on ary defi nes an “a ct i o n ” as any “ci vi l or cr i m i nal j udi ci al pr ocee di ng, ” and t hi s br oad def i ni t i o n is suppor t ed by t he fol l ow i ng r eas oni ng: A n ac ti o n h as b ee n d ef in e d to b e a n o rdin ary pr ocee di ng i n a cour t of j us t i ce, b y w hi ch one par t y pr os ecut es anot h e rp a r t yf o rt h e enf or cement
or pr ot ect i on of a r i ght , t he r edr es s or pr event i on of a w r ong, or t he puni s hm ent of a publ i c off ens e. B u t in so m e se n se th is d e f in iti o n is e q u a lly ap p lic a b le t o sp ec ial p roc ee d ing s. M o re acc ur at el y , i t i s defi ned t o be any j udi ci al pr o c e e d i n g , whi c h , i f c onduct ed t o a det er m i nat i on, w i l l r es ul t i n a j udgm ent or decr ee.

19 of the United States, upon a pplication by

the SEC, shall have jurisd ic ti on

to i ssu e or de rs c omm and ingany pe rs on to c omp ly

wi th the SEC’s orders. See15 U.S.C § 78u(e) . Acc ording ly , the SEC was entitled to obtain judicia l r elief ag ainst Ba rcla y in the District Court wh e n B arc lay vio late d the Or de r b y fa ili ngto p ay

its pe na lty

wi thi n thirty day s. Ba rcla y ’s failure t o pay

the pena lty

thus was an a ct g iving ri se to a c a us e of a c tio n und e r t

he Exc ha ng e Ac t. 16T h e a c tio n is s a id to ter m in a te a t ju d g m e n t. B l ack’s L aw D i ct i on ary31 (8t h ed

. 20 04 ) ( qu oti ng 1 M orr i s M

. Es t e e , Es t e e ’ s Pl e a di ng s , Pr a c t i c e , a nd For ms § 3, a t 1 ( Car t e r P. Pom er oy ed. , 3d ed. 1885) )

. T he “s peci al p roc ee di ngs ” i n a d ist ri ct co u rt fo ll o w ing an S E C ap p li ca ti o n b rou g h t u n d er § 2 1 (e) fit this ge n era l def init ion o f a n “a cti o n ”– ev en if th e y are not conduct ed as ful l ci vi l act i ons gover ned byt he Feder al R ul es of C i vi l Pr ocedur e–bec aus e t heyar e j udi ci al pr ocee di ngs w hi ch ter m in a te in a ju d g m e n t o r d e c re e
. C o n se q u e n tly , the N in th C i r cui t ’ s hol di ng i n McC ar t hy t hat appl i cat i ons under § 21( e)
ar e not ful l ci vi l act i ons w i t hi n t he meani ng of t he Feder al R ul es o f C iv il P ro c e d u re is n o t in c o n sis ten t w it h o u r h o ld in g th a t a par t y ’ s fai l ur e t o compl y w i t h an SE C or der i s a “ca us e of
ac ti o n ” u n d er § 2 1 (e).
B eca us e t he pl ai n l anguage of § 20( a)– inclu di ng t he 17 E xchange A ct ’ s s t at ut or y defi ni t i on of “pe r son”–s uppor t s our cons t r uct i on of § 20( a) , t hi s i s not a ca s e i n w hi ch w e ar e us i ng t h e g e n e r a l r e m e d i a l p u r p o s e s o f t h e s e c u r i t i e s l a w s t o j u s t i f y a d e p a rt u re f

ro m th e la n g u a g e o f § 2 0 (a ). C f. P i nt er , 486 U

. S. at
20 D.

In sum, the pl ain l anguag e of § 20(a) require s our holding that the SEC ha d a c la im fo r pa y me nt fr om B ru

no un de r § 20 (a) b e c a

us e Bru n o wa s jointl y

and seve rally

liable to the SEC for a de bt in the amount of B arc lay ’s unpaid pena lty . The S EC was a person to whom Ba rcla y was liable a s the result of an ac t constituti nga ca use of a ction under the Ex chang e Ac t. Bruno, who controlled B arc lay , induc ed and
was a culpable pa

rticipant in the ac t constituti ngthis cause of action, and ther efor e he w as jointly and seve rally

liable f o r t h i s debt in the
am o unto f

th e unp a i d

p e n a l ty.
We further

note that our c o n s t ru cti on of § 20(a) ser ves the
reme dial purposes of the Ex chang e Ac t. W i th a more na rrow 176 5 3 . S im ilarly , b e c a u se § 2 0 (a ) i s a su b sta n tiv e liab ili ty provis i on , w e are not i m ply i ng t hat t he S E C has a cl ai m against B ru n o m e re ly o n th e b a s is o f a ju ri s d ic tio n a l p ro v i s i o n
. C f. Tou c he R oss , 442 U

. S. at 577. Fi nal l y , as w e di d i n R ochez B ros. , 527 F. 2d at 889- 90, w e ar e l ooki ng t o t he l anguage of § 20( a) to defi ne t he s ci ent er r equi r ement s for cont r ol per s ons u n d e r § 2 0 (a ). C

f. A ar on , 4 4 6 U .S . a t 6 8 9 -9 7 . A c c o rd in g ly , it i s appr opr i at e forus t o cons i der t he r em ed ial pur pos es of t he
sec u ri ti es law s as w e c o n stru e § 2 0 (a).
21 construction of § 20( a), the deter rent e ffe cts of civil pena lties arising under the Ex chang e Ac t would be diluted in case s such as this one wher e a c losely -held fir

m is subject to a penalty , and the pe rsons controllingthe firm tra

nsfer the firm’s assets to themselves, ca using the firm to be una

b l e t o pay

its penalty . Although § 20(b) may provide a n overla pping r emedy

in some such ca ses, control pe rsons who in d u c e th e tran s f

e r s o f th e f

ir m’ s a s s e ts to th e ms e lv e s may not have pa rticipated in the unde rly

ing violations. In th at s en se, our c umu lativ e c on str

uc tio n of § 2 0(b) and

§ 2 0( a ) t arg e ts d if

fe re nt f or ms of wrong doing, a

nd thus § 20(a) , g iven our construction, could reac h wrong doers who might otherwise escape liability under § 20(b). Consequently , our co n s t ru ction of § 20(a ) is also supported by the
reme dial purposes of the Ex chang e Act. Cf. Huddleston , 459 U.S. at 381-87.

IV.

Our holdi ng that the S EC had a claim for pay ment from B runo under § 20( a) be cause of his joint and sever al liability for a debt in the
amou nt o f t he un pa id p e na lty

do e s no t its e lf imp ly that th e SEC c ou ld
asser t this claim in its A

pplication under § 21( e). B runo has a rgued that beca use he was not a party to the Orde r, he c ould not be order ed to pay the pena lty

on Ba rcla y ’s beha lf. The amicus also has re asonedT he am i cus ci t es S E C v . C h e rif

, 9 3 3 F

. 2 d 4 0 3 , 4 1 3 (7th C ir

. 18 19 91 ), for t he propo si t i on t hat § 21(e) canno t be u sed t o im po se i ndi vi dual l i abi l it y o n a par t y not named i n t he admi ni s t r at i ve p ro c e e d in g s a n d n o t a lleg e d to h a v e v io late d th e E x c h a n g e A c t. I n C h e rif , t he par t y acc us ed of vi ol at i ng t he s ecur i t i es l aw s had al l egedl y been us i ng t he non-pa r t y ’ s br oker age acc ount t o m ake tr a d e s
. I d. at 406- 07. I n a § 21( e) appl i cat i on, t he SE C s ought a p reli m inary injun cti o n fre ez ing the a ssets in the n o n -pa rt y ’s
a c c o u n t , b u t t h e SEC d i d n o t c l a i m t h a t t h e a c c o u nt hol der h im s e lf h a d v io la te d th e s e c u ri tie s la w s
. I d. at 41 3

. T he Sevent h C i r cui t hel d t hat “[n] ot hing i n t he s t at ut e or cas e l aw s ugges t s t hat [§ 21( e) ] aut hor i zes a cour t t o fr eez e t he as s et s of
a n o n -p a rt y , one agai ns t w hom no w r ongdoi ng i s al l eged

. ” I d.
a t 4 1 3 -1 4 (e m p h a s is a d d e d ). A c c o rd in g ly, C h e rif is d istin g u ish a b le f

ro m o u r c a se b e c a u se h e re th e S E C a lleg e d in its a p p lica tio n th a t B ru n o “ k n o w in g lyf a iled to c a u se B a rc lay t o compl y w i t h t he C om m i s s i on’ s or der , ” and w e hol d t hat t hi s w as an al l egat i on of w r ongdoi ng for t he purpos e of find ing Bruno jo in tlya n d se v e ra lly liab le f o r a d e b t in th e a m o u n t o f th e u n p a id p en alt y u n d er § 21 (a). Ind ee d , the S ev en th C ircu it ’s
w ron g d o ing req u ir em en t fo r ne w claim s b rou g h t u n d er § 2 1 (e),
as s t at ed i n C h e rif

, w i l l aut om at i cal l y be s at i s fi ed w hen t he new cl ai m s ar e prope r l y s t at ed agai ns t a cont r ol per s on under § 20( a) i n a § 21(e ) appl i cat i on. T hat i s beca us e one el ement of cont r ol person l i abil i t y un der § 20(a) i s t hat t he contr ol person w as a

“ c u lp a b le p a r ti c ip a n t” in th e c o n tro lled p e rso n ’s a c t o r a c ts
c o n s titu tin g th e v io la tio n o r c a u s e o f a c tio n
. See R och ez B ros. , 5 2 7 F .2 d a t 8 8 9 -9 0

. 22 that § 21(e) is merely

an enf orce ment m ec h anis m for existi ngSEC order s and that the Dist ri ct C o u rt did not have jurisdiction to issue this judgment and order ag ainst Br uno. We hold, however , that the 18 plain l anguag e of § 21( e), inter prete d in light of the br oad re medial purp os e s o f t

he Exc ha ng e Ac t, gra

nts jurisd ic tio n to the dis tr ic t c ourt s to or der control persons who a re jointly and seve rally

liable under

§23 20(a) to fulfill their individual financial obligati ons to the releva nt claimant, eve n wher e those c ontrol person s ar e not s ubject to an exis ting SEC order

. We b e g in a g a in w ith the te xt of the re le va

nt p ro vis ion . B y

its pla in t e rm s, the gra

nt o f j urisd ic tio n to th e dis tr ic t c ourt s in § 2 1( e ) i s no t li mi ted to or de ri ngpe rs on s su bje c t to e xistin gSEC or de rs to comply with those order s. Rather, the br oad langua g e of § 21( e)
e mpo we rs the dis tr ic t c ou rt s “to i ssu e writs of mand amus , injunctions, and order s commanding [] any person to comply with the provisions of [the Ac t] , the rules, regulations, and order s thereunde r . . . .” See 15 U.S.C. § 78u(e).

In this case, we hold that the District Court’s order direc ting Br uno to pa y Ba rcla y ’s unpaid penalty was an orde r c ommanding B ru no to c omp ly

wi th h is o bli g atio ns un de r § 20 (a). As dis c us se d in Part I I I .B, su

pra , when a

party is j o i n t l y and seve rally

liable for a financ ial obligation, that party is individually responsible for paying th e e n t i r e am o unto f

th e o b l i g at i o nt o th e c r e d i t o r
. A c c o r d i n g l y, ins of ar a s B ru no wa s jo int ly

and se ve ra lly lia ble fo r B arc lay ’s de bt t o th e S E C un d e r § 2 0 ( a ) , § 2 0 ( a ) c r e at e d a d uty o n B r un o ’ s b e h a l f t o pay the entire amount of this obligation to the SEC. In that sense, the District Court simply commanded B runo to comply with his duti es as define d by

§ 20(a) , and ther efor e the Distri ct C ourt had jurisdiction to issue this order under

§ 21(e)

. We note ag ain that while our construction of § 21(e ) is based primarily on the plain languag e of th e p ro v i sion, it i s further
s u p p o rt e d b y th e b r o a d

r e m e d i a l p ur

p o s e s o f th e E x c h an g e A c t

. In thi s c a se , a s th e SEC con ceded , B ru no ’s joi nt a

nd se ve ra l li a

bil ity
un de r § 20 (a) d id n ot arise until B ru no ind uc e d a nd c ulp a bly p art i c i p at e d

i nB ar c l ay’ s f

a i l ur e t o p a

y th e p e n a l ty w i th i nth i rty d ays as re quired by

the Orde r. Ac cording ly , the SEC could not have order ed B runo to comply

with his duti es under

§ 20(a) in the orig inalB r uno ar gues t hat t he SE C s houl d be r equi r ed t o i ns t i t ut e a 19

n e w a d m in istra tiv e p r o c e e d in g , n a m in g h im a s a p a rty , if it wi s h e s t o i mp o s e a c i v i l p e n a l t y o n h i m t h r o u g h § 2 0 ( a )

. As B run o ri g h tl y p o ints ou t, h o w ev er, t h e S E C ca n asse ss m o n etary penal t i es i n admi ni s t r at i ve pr ocee di ngs onl y i f th e p ar t y has
w illf u ll y p a r t i c ip a te d in a v io la tio n o f th e s e c u ri tie s la w s
. See 15 U

. S. C

. 78u- 2( a)

. T h e S E C has not cl ai m ed t hat B r uno par t i ci pat ed i n B ar cl ay ’ s vi ol at i ons of § 17(a ) and R ul e 17- a- 5,
n o r ha s the S E C claim ed that B run o h as “ v iola ted” § 2 0 (a). R at her , t he SE C i s m er el y s eeki ng pay m ent of a f i nanci al obl i gat i on for w hi ch B r uno i s j oi nt l y and s ever al l y l i abl e under § 20( a)

. A ccor di ngl y , t he SE C coul d not s eek t o i m pos e a m onet ar y penal t y on B r uno t hr ough an adm ini s t r at i ve pr ocee di ng on t he bas i s of i t s § 20( a) cl ai m , and for t hat r eas on t he r emedi al pur pos es of t he Exc h an g e A ct ar e s er ved byour hol di ng t hat t he SE C can a s s er t s uch a c l ai m in a § 21(e ) appl i cat i on i ns t ead.
T he am i cus su g g e sts th a t ra th e r th a n c laim in g a rig h t to 20 pay m ent fr om B r uno ar i s i ng under § 2 0 (a) i n a § 21( e) appl icati o n , t he SE C coul d have a s s er t ed a r i ght t o pay m ent f ro m B ru n o a risin g u n d e r so m e o th e r sta te o r f e d e ra l sta tu te in
a s epar at e ci vi l act i on. B eca us e w e hol d t hat t he pl ai n l anguage of § 20(a ) m ade Bruno i ndi vi dual l y l i abl e t o t he SE C for a debt i n t he amount of t he unpai d penal t y , and t hat t he pl ai n l anguage of § 21( e) gr ant ed t he D i s t r i ct C our t j ur i s di ct i on t o or der B r uno
24 Or de r b e c a

us e B ru no did no t y e t hav e any su c h duti e s. In c ontr a st, 19 when B arc lay

failed to pa

y the pena lty

within thirty day s, the SEC’s
c a u s e o f a c t i o na g a i n s tB ar c l ay un d e r § 2 1 ( e ) ar o s e
. C o n s e qu e nt l y, our construc tion of § 21(e) serve s the reme dial purposes of the E xc h an g e A c t b e c a

u s e it a ll o w s th e SE C to s e e k c o urt or ders direc ti n g p ay

me nt f o r an unp a id p e n a lt

y f r o m a ll o f th e p arti e s who
are jointly an d s ev er al l y

liable for suc h a pena lty , and to do so in a
s i n g l e p r o c e e d i n gan d

atth e f i r s tp o s s i b l e o p p o rtun i ty. 20t o compl y w i t h hi s dut i es under § 20( a) , w e nee d not cons i der t he av ai l abil i t y of o t her r em edies

. V. Following discovery and the SEC’s unoppose d moti o nfor
sum m ary judgme nt, the District Court corre ctly held that the undisputed fac ts of this case e st ab lished that Br uno was jointly

and
sever ally liable under § 20(a) for Ba rcla y ’s unpaid pena lty . Fur

ther, the District Court pr operly conclude d that it ha d jurisdiction unde r § 21(e) to order B runo to compl y wi t h his obligations under § 20(a)

. W h i l e w e b as e b o tho f th es e ho l d i n gs p ri m ar i l y o n th e pl ai nl an gu age o f t h e relevant provisions, we also note that this construction of § 20 (a) a nd § 2 1( e ) s e rv e s th e re me dia l pu rp os e s o f the Exc ha

ng e Ac t. In short, this construction o f t h e re levant provisions fac ilitates the
c oll e c tio n o f S EC p e na lti e s in c a se s whe re pe ople who c ontr ol a pers o n s ub

j ect to an SEC pena lty

culpably attempt to transfe r the assets of the c ontrolled person to themselve s rather than direc ting the controlled pe rson to pay

its penalty . Fa ci l i t ati ngthe collec tion of SEC pe na lti e s in

su c h ca se s h e lps to g ive tho se pe na lti e s th e ir fu ll intended deter

rent eff ect, which in tur

n serve s the reme dial purposes
o f the Exchang e Ac t. Accor dingly , we will af firm the judgment of the Di stric t Co ur

t.