An irreverent Wall Street Blog
SEC ALJ Sings Questions 67 & 68 and 25 or 6 to 4
November 15, 2016
Napoleon Bonaparte made a fair point when he quipped that "there is only one step from the sublime to the ridiculous." As demonstrated in a recent Securities and Exchange Commission proceeding, there is only a short distance from the sublime seriousness of charging a respondent with misconduct to the exasperating ridiculousness of trying to close the books on that proceeding and issue a decision.
Case In Point
In an Order Instituting Administrative and Cease-and-Desist Proceedings (the "OIP"), the Securities and Exchange Commission's ("SEC's") Division of Enforcement ("Enforcement") alleged that Respondent Christopher M. Gibson engaged in fraudulent and deceptive conduct from January 2010 through early 2013. In the Matter of Christopher M. Gibson, Respondent (OIP; '34 Act Rel. No. 77466; Invest. Adv. Act Rel. No. 4359; Invest. Comp. Act Rel. No. 32059; Admin. Proc. File No. 3-171784 / March 29, 2016). Enforcement alleged that Respondent Gibson acted as an investment adviser to the Geier International Strategies Fund, LLC (a private pooled investment fund), and as a fiduciary, he failed to disclose at least three instances of conflicts of interest to the fund and its investors.
NOTE: The OIP merely contains allegations and the respondent is presumed innocent until and unless found guilty by a preponderance of the evidence.
Cleaning Up After the Parade
From the March 2019 filing of the OIP, we fast forward to September 2016, at which time the SEC hearing concluded; and from there, just a few weeks further ahead in time in October, Enforcement filed its opening brief and proposed findings of fact and conclusions of law. Other than the Administrative Law Judge's ("ALJ's") issuance of the Initial Decision, about the only thing left for Respondent Gibson is to submit his papers setting forth why he believes he was not proven guilty. In a sense, the parade has passed by and the folks with the brooms are cleaning up after the elephants and horses.
25 or 6 to 4 ????
Frivolous and Specious
NOTE: The OIP merely contains allegations and the respondent is presumed innocent until and unless found guilty by a preponderance of the evidence.
Cleaning Up After the Parade
From the March 2019 filing of the OIP, we fast forward to September 2016, at which time the SEC hearing concluded; and from there, just a few weeks further ahead in time in October, Enforcement filed its opening brief and proposed findings of fact and conclusions of law. Other than the Administrative Law Judge's ("ALJ's") issuance of the Initial Decision, about the only thing left for Respondent Gibson is to submit his papers setting forth why he believes he was not proven guilty. In a sense, the parade has passed by and the folks with the brooms are cleaning up after the elephants and horses.
25 or 6 to 4 ????
On October 17, 2016, Respondent Gibson moved to correct portions of 30 pages of the hearing transcript and portions of 12 pages of investigative testimony; in response, Enforcement opposed the proposed corrections asserting that:
In the Matter of Christopher M. Gibson, Respondent (Order On Proposed Corrections to Hearing Transcript and Exhibits; Admin. Proc. Rulings Rel. No. 4339; Admin. Proc. Fiie No. 3-171784 / November 10, 2016).
[R]espondent has offered no explanation or argument in support of the revisions and, although Commission Rule of Practice 302(c) provides that a party may move for correction of the hearing transcript, there is no similar rule regarding investigative transcripts. Second, the Division has numbered the proposed changes to the hearing transcript (Exhibit 2) and listed numerically the proposed changes to which it does not object (Exhibit 1). The Division put the number of proposed transcript corrections at 141 and does not oppose sixty-six of them. The Division argued that in some cases the reason for the change is clear, but in some cases there is no assurance that the proposed change is a more accurate reflection of what was actually said; rather it appears to be what counsel thought the witness intended to say.
In the Matter of Christopher M. Gibson, Respondent (Order On Proposed Corrections to Hearing Transcript and Exhibits; Admin. Proc. Rulings Rel. No. 4339; Admin. Proc. Fiie No. 3-171784 / November 10, 2016).
You got all of that? 30 pages. 12 pages. 302(c). Exhibit 2. Exhibit 1. 141 proposed corrections. 66 non-opposed corrections. Sort of a catchy tune . . . reminds me of that Chicago classic:
Frivolous and Specious
The parties entered into discussions about the proposed corrections and those negotiations yielded some agreement over proposed changes, new changes, and the withdrawal of proposed changes. Ultimately, Respondent Gibson notified the ALJ that Enforcement's "remaining objections border on the frivolous "and that:
ALJ Order on Proposed Corrections
Numbers 92 and 99 . . . Questions 67 and 68 ?
[T]he argument opposing proposed changes to the investigative testimony [is] "specious," and argues that testimony taken for the purpose of investigating the events that formed the basis for this proceeding (and which the Division purports to use in place of hearing testimony) should be amended if inaccurate.
Numbers 92 and 99 . . . Questions 67 and 68 ?
Alas, the ALJ was left with the parties still disagreeing over 43 proposed transcriptions. In ruling on the remaining disputes, the ALJ said, in pertinent part:
ALJ Order on Proposed Corrections
[B]ased on my knowledge of the proceeding, recollection, and common sense, I GRANT the motion as modified by Respondent's reply and accept all but two of Respondent's proposed transcript corrections. That leaves unresolved numbers 92 and 99.
My office will provide a Microsoft Word version of the chart with the transcript corrections, and I ask the court reporting company to:
1) Check the tape of the hearing transcript regarding proposed changes numbers 92 and 99, and determine if the proposed changes are appropriate;2) Make all other proposed changes listed in the chart; and3) Issue a complete, amended transcript. If the court reporting company cannot establish that proposed changes numbers 92 and 99 are accurate, then the transcript will remain unchanged as to those two instances.
I DENY Respondent's motion to correct Division Exhibits 190 and 191, which are designated portions of Respondent's investigative testimony given on March 19, 2015, and December 21, 2015, respectively. In the absence of any explanation from Respondent, I have no basis of knowing whether the proposed corrections are valid representations of the testimony given on those occasions.