Charles Hughes & Co. v. SEC

139 F.2d 434 (1943)

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Charles Hughes & Co. v. SEC

United States Court of Appeals for the Second Circuit
139 F.2d 434 (1943)

Facts

Charles Hughes & Company (the company) (defendant) was a registered broker-dealer that traded in over-the-counter (OTC) securities. The company sold OTC securities to solicited, unsophisticated customers at prices way above market price, but the company did not disclose to the customers the markup, the market price, or the company’s profits on the sales. However, it is unclear whether the company actively misrepresented facts to the customers. The Securities and Exchange Commission (SEC) (plaintiff) issued an order finding that the company had committed fraud and deceit upon its customers in violation of the Securities Acts of 1933 and 1934 by failing to disclose the market prices or the company’s markups on the sales of the OTC securities. The company appealed the order.

Rule of Law

Issue

Holding and Reasoning (Clark, J.)

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