Roth v. Securities and Exchange Commission

Charles Roth (plaintiff) was a registered representative with R.B. Marich, Inc., a member firm of the National Association of Securities Dealers (NASD). Roth participated in private insurance-company securities sales on seven occasions. Roth corresponded with investors on his own stationery, billed clients and received payment in his own name, and maintained transaction records and an office separate from R.B. Marich. The NASD charged Roth with violating its Rules of Fair Practice for failing to register as a broker-dealer. Roth acknowledged that he solicited clients and effected transactions autonomously. The NASD board of governors found that Roth had violated the rules and fined and disciplined him. Roth appealed to the Securities and Exchange Commission (SEC) (defendant). The SEC upheld the NASD’s findings and conclusions. Roth petitioned the United States Court of Appeals for the District of Columbia Circuit for review of the SEC’s order, arguing in part that he was not required to register as a broker-dealer under § 15(a)(1) of the Securities Exchange Act of 1934 (SEA) because he was a registered representative with R.B. Marich. Section 15(a)(1) provided that it was unlawful for any broker or dealer who was a natural person not associated with a broker or dealer to effect any transactions in securities or induce the purchase or sale of any security unless registered with the SEC. The SEC maintained that § 15(a)(1)’s exemption of natural persons associated with a broker or dealer applied only if the person was acting within the scope of his association with a registered firm.