Document: 450 U.S. 91 101 S.Ct. 999 67 L.Ed.2d 69 Charles W. STEADMAN, Petitioner,v.SECURITIES AND EXCHANGE COMMISSION. No. 79-1266. Argued Dec. 3, 1980. Decided Feb. 25, 1981. Rehearing Denied April 20, See 451 933, 2008. Syllabus After an on-the-record hearing before Administrative Law Judge and review by the Securities Exchange Commission (SEC) in which preponderance-of-the-evidence standard of proof was employed, SEC held that petitioner had violated various antifraud provisions federal securities laws, sanctions were imposed. Petitioner sought Court Appeals on alleged ground, inter alia, SEC's use preponderance-of-the-evidence, rather than clear-and-convincing, determining whether he improper. The rejected argument. Held: 1. In adjudicatory proceedings SEC, § 7(c) Procedure Act applies. It provides pertinent part a sanction may not be imposed administrative agency except consideration whole record or parts thereof cited party supported "in accordance with reliable, probative, substantial evidence." Pp. 95-97. 2. properly used laws been violated. 97-104. (a) Section 7(c)'s language implies enactment proof. By allowing to only when they are . evidence," Congress implied must rest minimum quantity evidence. And phrase with" lends further support construction as establishing proof, suggesting weigh evidence decide, based weight evidence, disciplinary order should issued. 98-100. (b) While is somewhat opaque precise used, legislative history clearly reveals intended adopt standard. 100-102. (c) Such intent buttressed longstanding practice imposing according preponderance 103-104. 5 Cir., 603 F.2d 1126, affirmed. Peter J. Nickles, Washington, D. C., for petitioner. Ralph C. Ferrara, respondent. Justice BRENNAN delivered opinion Court. 1 proceedings, applies have question presented such violations proved clear convincing 2 * June 1971, initiated proceeding against certain his wholly owned companies. brought pursuant 9(b) Investment Company 19401 203(f) Advisers 1940.2 numerous management several mutual funds registered under Act. 3 lengthy evidentiary employed,3 theCommission between December 1965 1972, antifraud,4 reporting,5 conflict interest,6 proxy7 laws. Accordingly, it entered permanently barring from associating any investment adviser affiliating company, suspending him one year broker dealer securities.8 4 Commission's theUnited States Fifth Circuit number grounds, relevant our purposes. challenged He contended that, because potentially severe empowered impose circumstantial inferential nature might prove defraud, required clear-and-convincing petitioner's argument, holding established 1143 (1979). n. 8, supra. Because this contrary position taken United District Columbia Circuit, see Whitney v. 196 U.S.App.D.C. 12, 604 676 (1979); Collins Corp. 183 301, 562 820 (1977), we granted certiorari resolve conflict. 446 917, 100 1849, 64 271 (1980). We affirm. II Where has prescribed degree adduced proponent rule carry its burden persuasion proceeding, felt at liberty prescribe standard, "[i]t kind traditionally left judiciary resolve." Woodby INS, 385 276, 284, 87 483, 487, 17 362 (1966). However, where spoken, deferred "the traditional powers rules standards courts"9 absent countervailing constitutional constraints. Vance Terrazas, 444 252, 265, 540, 548, 62 540 For 15 U.S.C. 80a-9(b) 80b-3(f), conclude said applied.10 6 provide judicial courts appeals11 specify scope review.12 do indicate governs adjudications, however, turn (APA), 554, "applies every case adjudication statute determined after opportunity hearing," instances here.13 5(b), 554(c)(2), makes 7, 556, applicable proceedings.14 answer turns therefore proper 7.15 7 search congressional begins statute. Andrus Allard, 51, 56, 318, 322, 210 Reiter Sonotone Corp., 442 330, 337, 99 2326, 2330, 60 931 Cases Jam States, 340 593, 596, 71 515, 518, 95 L.Ed. 566 (1951). 7(c), 556(d), states part: 8 "Except otherwise provided statute, Any oral documentary received, but matter policy shall exclusion irrelevant, immaterial, unduly repetitious A issued those (Emphasis added.) 9 itself word "substantial" denotes quantity.16 evidence" thus requires decision Petitioner's contention "reliable, sets merely quality is, therefore, unpersuasive.17 10 Unlike 10(e), APA's explicit "Scope review" provision declares action unlawfulif "unsupported evidence,"18 issue if "supported (emphasis added). additional words with"19 suggest adjudicating simply enough " 'to justify, trial jury, refusal direct verdict conclusion drawn fact jury.' Consolo FMC, 383 607, 620, 86 1018, 1026, 16 131 (1966), quoting NLRB Columbian Enameling & Stamping Co., 306 292, 300, 59 501, 505, 83 660 (1939). Obviously, weighing relevance each side measured allocates risk error. Addington Texas, 441 418, 423, 1804, 1808, 323 contrast, does permit reviewing court determine there 'such reasonable mind accept adequate conclusion,' supra, S.Ct., 1026 Consolidated Edison Co. NLRB, 305 197, 229, 206, 216, 126 (1938). surprising, view entirely different purposes "substantial meanings context. Thus, argument establishes orders unavailing.20 11 suggests, establish concerning used. history, Congress' intent. original Senate version "no relevant, probative S. 79th Cong., 1st Sess. (1945). passed version, House reads today, accepted theamendment. doubt removed Report, expressly adopted standard: 12 "[W]here having come forward prima facie case, will prevail unless discredited rebutted. decide 'in evidence.' pro con, preponderance. short, these require conscientious rational judgment proofs adduced." H.R.Rep.No. 1980, 2d Sess., 37 (1946) added).21 13 Nor suggestion higher ever contemplated, much less intended. primarily concerned elimination decisionmaking premised poor quality—irrelevant, unreliable, nonprobative—and insufficient quantity—less id., 36-37 45; S.Doc.No. 248, 320-322 376-378 (1946); 21, 14 lead us conclude, standard.22 III Our As early 1938, suspend, expel, brokerage firm principals for, manipulation security prices violation 1934, 78i, greater required. re White, S.E.C. 466, 539-540 Use continued passage APA, persists today. E. g., Cea, 44 25 (1969); Pollisky, 43 458, 459-460 (1967). consistent practice, harmony persuasive authority subject governed Sierra Club, 347, 358, 2335, 2341, 943 National Association Dealers, Inc., 422 694, 719, 2427, 2442, 45 486 (1975); Skidmore Swift 134, 140, 65 161, 164, 89 124 (1944). Vermont Yankee Nuclear Power Natural Resources Defense Council, 435 519, 524, 98 1197, 1202, 55 460 (1978) stated 553, "maximum procedural requirements willing upon agencies conducting rulemaking procedures." similarly expressed APA satisfy determinations made free make choice, U.S., 265-266, 547-548, and, absence considerations, disturb it. Affirmed. 18 POWELL, whom STEWART joins, dissenting. 19 (SEC), acting 1940 1940, barred practicing profession also forced divest himself loss. making findings fraud penalties, applied "preponderance 20 today sustains holdingthat commands recognizes, ante, 95-96, general administration specific critical inquiry identification desired Congress. 21 acted 80a-9(b), 80b-3(f). Sanctions sections functional equivalent penalties fraud. At common law, plain allegations 424, 285, 18, 488, (1966); Weininger Metropolitan Fire Insurance 359 Ill. 584, 598, 195 N.E. 420, 426 (1935); Bank Pocahontas Ferimer, 161 Va. 37, 40-41, 170 S.E. 591, 592 (1933); Bowe Gage, 127 Wis. 245, 251, 106 N.W. 1074, 1076 (1906). enacted Acts common-law background. There no Congress, Acts, authorize abandon then-applicable adjudications. (1977). 22 relies, did become law some seven years two statutes penalties. Again, points supplant burden-of-proof generally enacted. APA—the not—should bearing case. 23 I imply supports clear, finding imposition harsh resulted serious stigma deprivation. Cf. supra.* demonstration purpose, assume apply lower prevailing similar allegations. With all respect, seems me Court's lacks sensitivity marked Government's citizens permanent stigma. empowers Commission, specified circumstances, "after notice [to] prohibit, conditionally unconditionally, either period time discretion deem appropriate public interest, person serving employee, officer, director, member advisory board, depositor of, principal underwriter company affiliated adviser, depositor, ." "on record" "censure place limitations activities associated seeking suspend exceeding twelve months bar being Disciplinary Rules Practice, CFR 201.1 et seq. (1980), enlarge, respects, protections afforded 551 (as "[a]gencies grant rights exercise their discretion, them chosen them"). respondent entitled receive timely charges questions determined. 201.6(a) retain counsel represent connection 201.2(b), file move more definite statement charges, §§ 201.7(a) (d), trial-type presided over impartial judge, other duly-appointed member, 201.11(b)-(c). present cross-examine adverse witnesses, object admission 201.14(a). compel production subpoena, 201.14(b), obtain witness statements possession staff cross-examination purposes, 201.11.1. hearing, right submit briefs proposed conclusions law. 201.16(d). initial judge include supporting reasons, material issues fact, record. 201.16(a). seek affirm, reverse, modify independent 201.17(g)(2), 201.21. 17(a) 1933, 77q(a); 10(b) 78j(b), Rule 10b-5 thereunder, 240.10b-5 (1980); 206(1)-(2) 80b-6(1)-(2). 78q(a), 17a-5 240.17a-5 30(a) 34(b) 80a-29(a) 80a-33(b). Sections 15(a)(1), 17(a), 17(e) 80a-15(a)(1), 80a-17(a), 80a-17(e). 20(a) 80a-20(a). allowed 90 days sell stock Steadman Compliance stayed pending completion review. petitioner, remanded "to articulate carefully grounds decision, including explanation why lesser suffice." (CA5 1979). reason accord deference congressionally courts. 487 (ascertaining first legislated deportation standard). task instant discerning intent, many arguments inapposite. contends, example, policy, consequences involving demand erroneous factfinding reduced requiring This overlooks, "traditional wisdom prescription. Title 77i, 78y, 80a-42, 80b-13 appeals. conclusive "if 80b-13; cf. 77i (Commission evidence"). "case adjudication" within 554. International Telephone Telegraph Electrical Workers, 419 428, 445, 600, 610, 42 558 (1975). Both 80b-3(f) explicitly "opportunity [an agency] hearing." Moreover, conducted record." appears while appear 1, Florida East Coast R. 410 224, 238, 93 810, 817, 35 223 (1973); Allegheny-Ludlum Steel 406 742, 757, 92 1941, 1950, 32 453 (1972); Seacoast Anti-Pollution League Costle, 572 872, 876 (CA1), cert. denied, 439 824, 94, 58 117 (1978). Rather, requirement satisfied substantive content adjudication. 80a-42 80a-9(b). Substantial-evidence here Citizens Preserve Overton Park, Inc. Volpe, 401 402, 415, 814, 823, 28 136 (1971); F.2d, 877. Otherwise effective would frustrated. Ibid. addition, 80a-9(b)(1)-(3) virtually identical 80b-3(e)(1), (4), (5), incorporated reference into difference former permits persons latter company. both statutes, enumerated, precisely type procedures 246, 821. "[t]he give interested parties 556 557 title." claim Federal Constitution application clear-and-convincing-evidence Tr. Oral Arg. 10. Webster's Third New Dictionary (1976) defines mean "considerable amount." course, quality-of-evidence standards. directing "irrelevant, "reliable" "probative" mandate level quality. concerns, 10(e) 706, provides, part, hold unlawful set aside action, findings, found unsupported title reviewed statute." 706(2)(E). refers 7. Addition could inadvertent. especially true light Report's discussion relationship 10(e): 'Substantial evidence' [in 10(e)] means substantial, plainly sufficient section issues." (1946). often denote But redundant. implausible think drafters scope-of-review middle statutory designed govern proceedings. "Hearings; presiding employees; duties; proof; evidence; basis decision." "is up almost specification elements procedure." K. Davis, Treatise 10:07, p. 332 (2d ed. More specifically, (placing order), broad governing admissibility directs exclude delineates "sanction imposed." overlooks functions Charlton FTC, 177 422, 543 903, 907 (1976); 29.01-29.11 (1958). recognized assumed already done. Representative Walter Pennsylvania, author Report drafter legislation, speaking during floor debate day bill House, meaning distinguished mere equity." 365 suggests usual contemplated. Sea Island Broadcasting FCC, 200 187, 190, 627 240, 243 (1980) ("The 'preponderance civil contemplated 556(d)"), 449 834, 65, 66 39 304, 820, 823 (1977) ."); Wigmore, Evidence 2498 (3d 1940); 288, 489 (Clark, J., dissenting). debate, context noted substantial-evidence test became desire then-prevalent scintilla-of-evidence test. done evidence: "Mr. Springer. gentleman Iowa gone bill. call attention relating reviewable acts, judiciary, Under procedure, cases even scintilla decisions rendered predicated character tribunal. Hancock. Even though Yes, introduced 376. reliance misplaced. Immigration Naturalization Service facts unequivocal, Nationality (INA) reached examining language, purpose 106(a)(4) 242(b)(4) INA. That contained "reasonable, little INA differ respects 7(c). labeled provision. construed "addressed courts," 283, adopted, scope-of-judicial-review INA, 487. provision, matters agency, To extent viewed representing "yardstick factfinder," concluded directed based. Id., 486. differs includes with." explained above, limited concerns Clark's dissent, disagree, "traditionally decides 289, 489, understanding Woodby, particular respect. previously Attorney General's Manual (1947) "given role played Department drafting legislation," 546, 1213, Clark General published. practiced years. forever resuming profession. Many criminal monetary fines probation—are far severe, yet can "beyond doubt"

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