Koss v. Securities and Exchange Commission

364 F. Supp. 1321 (1973)

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Koss v. Securities and Exchange Commission

United States District Court for the Southern District of New York
364 F. Supp. 1321 (1973)

Facts

In September 1971, the Securities and Exchange Commission (SEC) (defendant) commenced an administrative proceeding against Koss Securities (Koss) (plaintiff), a broker-dealer owned and managed by Theodore Koss and his wife (plaintiffs), alleging they violated the federal securities laws. Between February and May 1973, the SEC staff sent letters to six issuers that were planning to use Koss for upcoming offerings pursuant to SEC Regulation A, which exempts small offerings from registration under the Securities Act of 1933. The SEC staff letters asked the issuers to amend their offering documents to disclose that Koss was the subject of an SEC administrative proceeding and the nature of the allegations against Koss. The letters led two issuers to fire Koss. On June 25, the SEC staff (pursuant to an order by the SEC) advised Koss’s attorney that the comment letters to the issuers were withdrawn and that the SEC would not require issuers to disclose the administrative proceeding against Koss. However, the June 25 letter also notified Koss that the SEC’s regional offices would ask Koss to notify any issuer Koss served as a Regulation A underwriter about the administrative proceeding and the allegations against it and to advise such issuers about, among other things, their disclosure obligations and the possible effect any discipline the SEC imposed on Koss could have on their offerings. Koss sued the SEC, seeking a preliminary injunction prohibiting it from requiring issuers to disclose the SEC proceedings against Koss. Koss also challenged the SEC staff’s June 25 letter, which it issued after the commencement of Koss’s suit, as exceeding the SEC’s statutory authority. The SEC moved to dismiss the action on the ground that it was not ripe for judicial resolution.

Rule of Law

Issue

Holding and Reasoning (Bauman, J.)

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