Opinion ID: 1189324
Heading Depth: 2
Heading Rank: 2

Heading: The Role of Federal Securities Receivers

Text: District courts possess broad power to remedy violations of federal securities laws. See SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1103 (2d Cir. 1972). Thus, [a]lthough neither the Securities Act of 1933 nor the Securities Exchange Act of 1934 explicitly vests district courts with the power to appoint trustees or receivers, courts have consistently held that such power exists. SEC v. Am. Bd. of Trade, Inc., 830 F.2d 431, 436 (2d Cir. 1987). Receivers appointed at the SEC's request are equipped with a variety of tools to help preserve the status quo while the various transactions [are] unraveled... to obtain an accurate picture of what transpired. Manor Nursing Ctrs., 458 F.2d at 1105. We have observed that [a] primary purpose of appointing a receiver is to conserve the existing estate. Esbitt, 335 F.2d at 143. Receivers are directed to marshal the assets of the defendant, id., and prevent the dissipation of [the] defendant's assets pending further action by the court, Am. Bd. of Trade, 830 F.2d at 436. This authority necessarily includes the power to investigate the defendant's transactions. See SEC v. Koenig, 469 F.2d 198, 202 (2d Cir.1972). Moreover, where the entity in receivership is a corporation, the receiver may report to the SEC and convene shareholder meetings on its behalf. Id. Yet the power of a securities receiver is not without limits. For example, we have expressed strong reservations as to the propriety of allowing a receiver to liquidate [an estate]. Lankenau v. Coggeshall & Hicks, 350 F.2d 61, 63 (2d Cir.1965). In addition, because receivership should not be used as an alternative to bankruptcy, we have disapproved of district courts using receivership as a means to process claim forms and set priorities among various classes of creditors. Am. Bd. of Trade, 830 F.2d at 437-38. More fundamentally, the authority of a receiver is defined by the entity or entities in the receivership. [T]he plaintiff in his capacity of receiver has no greater rights or powers than the corporation itself would have. Fleming v. Lind-Waldock & Co., 922 F.2d 20, 25 (1st Cir.1990) (internal quotation marks omitted). A receiver may commence lawsuits, but stands in the shoes of the corporation and can assert only those claims which the corporation could have asserted. Lank v. N.Y. Stock Exch., 548 F.2d 61, 67 (2d Cir.1977).