Opinion ID: 347126
Heading Depth: 1
Heading Rank: 5

Heading: Whether Wasson's Conduct was Willful.

Text: 30 The Commission sanctioned Wasson under § 15(b) of the Securities Act of 1934 for willfully violating § 5 of the Act and willfully aiding and abetting the violation of that provision. Wasson challenges the finding that he acted willfully, claiming that his behavior in failing to make a sufficient inquiry and to advise his superiors of all relevant facts was merely negligent. Relying on Ernst & Ernst v. Hochfelder, supra, Wasson submits that willfulness as a state of mind condition requires something more than negligence. Id. at n. 28. We agree that the concept of willfulness implies something more than mere negligence. However, neither the statute nor the relevant regulations defines the scope of that term. In negligence law, the words  'willful,' 'wanton,' and 'reckless' are employed either singly or in combination to characterize conduct    more heinous or culpable than ordinary negligence. 57 Am.Jur.2nd, Negligence, § 101 at 451; Prosser, Law of Torts, 184 (4th Ed. 1971). In several securities' cases prosecuted under the willfulness standard of § 15, violations were found where the defendant proceeded in apparent disregard of or with reckless indifference to a known obligation or set of facts. In Nees v. SEC, 414 F.2d 211 (9th Cir. 1969), a salesman was sanctioned for selling unregistered securities; he defended on the ground that he had no obligation to investigate the validity of his employer's claim of exemption. The Court found a willful violation on the ground that the defendant was aware of facts which should have caused him to question the exemption claim. Similarly, in Stead v. SEC, 444 F.2d 713 (10th Cir. 1971), cert. denied, 404 U.S. 1059, 92 S.Ct. 739, 30 L.Ed.2d 746 (1972), the Court upheld a willfulness finding where the defendant consciously closed his eyes to suspicious facts which should have suggested the need for registration. 31 In our judgment, Wasson's conduct fits squarely within the holdings of those cases and the meaning commonly given to the willful or reckless standard. He was aware of several facts suggesting the suspicious nature of the transaction. With reckless indifference to those facts, he proceeded to facilitate the sale, ignoring the obvious need for further inquiry and his duty to disclose all relevant information to his superiors. Our construction of the term willful, in accordance with those of the other Circuits, allows no other interpretation of Wasson's behavior. 32 For the reasons stated above, we affirm the order of the Commission respecting the violations of § 5(a)(1) and § 5(c).