Court Opinion

ID: 9494586
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:41:12.905438+00
Date Added: 2024-06-11T17:56:29.352728
License: Public Domain

BRIGHT, Circuit Judge,
dissenting.
I respectfully and strongly dissent.
Judge Doty determined in part:
*1108The precise issue before the court is whether Tuschner & Co. exerted sufficient influence over Zahareas’ securities dealings to render Zahareas an “associated person” as the term is used in the Exchange Act. The court finds that the evidence sufficiently establishes that Za-hareas was controlled by Tuschner & Co. therefore he was an “associated person” under federal securities law.
SEC v. Zahareas, 100 F.Supp.2d 1148, 1153 (D.Minn.2000). This case presents the factual issue of whether Tuschner “controlled” Zahareas. The district court thoroughly examined the facts presented to it and determined that Tuschner & Co. did control Zahareas. This court should not reverse that fact-based decision.
The majority determines that the evidence fails to support the conclusion that Tuschner “controlled” Zahareas’s means and manner of performance. Although the majority discusses the statutory definition of “associated person,” it fails to consider the definition of “control.”
The phrase “directly or indirectly controlling,” as used in the Securities and Exchange Act, is a plain, direct phrase emanating from the verb “control.” In Black’s Law Dictionary, the verb form of “control” states in part: “1. To exercise power or influence over ... 2. To regulate or govern ....” BLACK’S LAW DICTIONARY 330 (7th ed.1999). Stated simply, “control” includes the exercise of restraint or direction. RANDOM HOUSE WEBSTER’S UNABRIDGED DICTIONARY 442 (2d ed.1997).
The majority accepts the facts found by the district judge but rejects the district court’s inference that Tuschner controlled Zahareas in Greece. The district court’s factual determinations show that Tuschner exercised power, influence, and direction over Zahareas in marketing the initial offering of ACT Teleconferencing.
The district court determined that Tus-chner’s control of access to ACT’s initial public offering made Zahareas dependent upon Tuschner. Zahareas, 100 F.Supp.2d at 1153. 200-300 Greek investors were steered by Zahareas to Tuschner; these Greek customers received a Tuschner account number and Tuschner materials. Id. at 1153-54. Tuschner only severed ties with Zahareas after the SEC began ■ to examine their relationship, then directed Zahareas on how to terminate the relationship. Id at 1153. Tuschner provided Za-hareas with Tuschner’s account opening materials, applications, W-8 tax forms, and margin agreements. Id. Tuschner reviewed and approved new account information from Zahareas on the Greek customers. Id. These are but a few of the facts found by the district court that show Tus-chner controlled Zahareas.
The majority has applied the principles of agency and determined that Zahareas was not Tuschner’s agent in order to reverse the district court. The agency theory was properly rejected by the district court because there are more ways to prove control than merely showing an agency relationship existed. Id. at 1153. In essence, the majority interprets control as equivalent to agency. Such analysis and reliance on agency principles fail to give the applicable statute a fair reading, considering the obligation of the SEC to oversee the securities markets and marketing.
I would affirm for the reasons so ably stated by Judge Doty in SEC v. Zahareas, 100 F.Supp.2d 1148 (D.Minn.2000).