Court Opinion

ID: 9428201
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:23:06.728336+00
Date Added: 2024-06-11T17:23:12.209353
License: Public Domain

Justice Powell,
with whom Justice Stewart joins, dissenting.
The Securities and Exchange Commission (SEC), acting under the antifraud provisions of the Investment Company Act of 1940 and the Investment Advisers Act of 1940, has imposed severe sanctions on petitioner. He has been barred permanently from practicing his profession and also forced to divest himself of an investment at a substantial loss. In making its findings of fraud and imposing these penalties, the SEC applied the “preponderance of the evidence” standard of proof.
The Court today sustains the action of the SEC, holding *105that § 7 (c) of the Administrative Procedure Act (APA), 5 U. S. C. § 556 (d), commands the use of this standard in disciplinary proceedings brought under the securities laws. The Court recognizes, however, ante, at 95-96, that the general provisions of the APA are applicable only when Congress has not intended that a different standard be used in the administration of a specific statute. The critical inquiry thus is the identification of the standard of proof desired by Congress.
The SEC acted in this case under § 9 (b) of the Investment Company Act of 1940, 15 U. S. C. § 80a-9 (b), and § 203 (f) of the Investment Advisers Act of 1940, 15 U. S. C. § 80b-3 (f). Sanctions imposed under these sections are the functional equivalent of penalties for fraud. At common law, it was plain that allegations of fraud had to be proved by clear and convincing evidence. E. g., Addington v. Texas, 441 U. S. 418, 424 (1979); Woodby v. INS, 385 U. S. 276, 285, n. 18 (1966); Weininger v. Metropolitan Fire Insurance Co., 359 Ill. 584, 598, 195 N. E. 420, 426 (1935); Bank of Pocahontas v. Ferimer, 161 Va. 37, 40-41, 170 S. E. 591, 592 (1933); Bowe v. Gage, 127 Wis. 245, 251, 106 N. W. 1074, 1076 (1906). Congress enacted the Investment Company and Investment Advisers Acts against this common-law background. There is no evidence that Congress, when it adopted these Acts, intended to authorize the SEC to abandon the then-applicable standard of proof in fraud adjudications. See Whitney v. SEC, 196 U. S. App. D. C. 12, 604 F. 2d 676 (1979); Collins Securities Corp. v. SEC, 183 U. S. App. D. C. 301, 562 F. 2d 820 (1977).
The APA, upon which the Court relies, did not become law for some seven years after the enactment of the two statutes under which the SEC imposed these penalties. Again, the Court points to no specific evidence that Congress intended the APA to supplant the burden-of-proof rule generally applicable when the securities laws were enacted. Thus, the APA — the general statute applicable only where a specific *106statute is not — should have no bearing on the proof burden in this case.
I imply no opinion on the question whether the evidence supports the SEC’s allegations against petitioner. It is clear, however, that the SEC’s finding of fraud and its imposition of harsh penalties have resulted in serious stigma and deprivation. Cf. Addington v. Texas, supra.* In the absence of any specific demonstration of Congress’ purpose, we should not assume that Congress intended the SEC to apply a lower standard of proof than the prevailing common-law standard for similar allegations. With all respect, it seems to me that the Court’s decision today lacks the sensitivity that traditionally has marked our review of the Government’s imposition upon citizens of severe penalties and permanent stigma.

 Petitioner has practiced the profession of investment adviser for many years. He has been forever barred from resuming that profession. Many penalties imposed under our criminal laws — such as monetary fines and probation — are far less severe, and yet these can be imposed only under the “beyond a reasonable doubt” standard of the criminal law.