Hughes v. SEC
United States Court of Appeals for the District of Columbia Circuit
174 F.2d 969 (1949)
Arleen W. Hughes (defendant) was a registered broker-dealer and investment adviser with her own firm. Each of her clients was required to sign an agreement that stated that, when the firm was acting as an investment adviser, the firm would also act as principal on the transactions, which meant that the firm would buy securities for its own account on the open market and then sell them to the client. Most of the time, Hughes acted as both broker-dealer and investment adviser simultaneously. Hughes did not disclose to the customers the price she paid for the securities, the market price, or the bid or ask price. The Securities and Exchange Commission (SEC) (plaintiff) determined that Hughes owed a fiduciary duty to her clients and that she had breached that duty by failing to fully disclose her interests adverse to her clients to obtain the clients’ informed consent. The SEC therefore revoked Hughes’s broker-dealer registration. Hughes petitioned for review of the SEC’s revocation, arguing that the agreement signed by each client fulfilled her disclosure obligations. Furthermore, a majority of Hughes’s clients, as amicus curiae, claimed that they had full knowledge and understanding of Hughes’s capacity as both broker-dealer and financial adviser.
Rule of Law
Holding and Reasoning (Clark, J.)
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