Securities & Exchange Commission v. Mainland Securities Corp.

192 F. Supp. 862

Opinion

WEINFELD, District Judge.

It is uncontroverted that such basic books and records of the corporate defendant as were produced on January 25, 1961, were not current and therefore were in violation of S.E.C. rules. More important than the violation itself is that it prevented a determination of whether there was compliance with the Net Capital Rule.

The Court, on this application, has disregarded the conflicting contentions as to whether the Net Capital Rule was violated on two prior occasions, since such violations are not the basis of the present application. Based solely upon the facts presented on the issue of noncomplianee with the rule requiring the maintenance of current records, the Court is satisfied that the protection of the investing public requires the granting of the application to assure that the rule will be respected. The fact that the violations were corrected after they were ascertained by S.E.C. officials does not suggest that defendants will not return to their prior slipshod methods. The Court is not persuaded that failure to keep the record current was inadvertent.

While not attempting to evaluate explanations given for the absence of certain records required to be kept on the premises, it does tax credulity to accept the explanation that the cashier of this small organization had the only key to the cabinet in which the records purportedly were locked up.

The motion is granted.