(concurring and dissenting).
The transaction before us is the exact sort of scheme to obtain insider profits by short term dealings in convertible debentures and common stock that Section 16(b) of the Securities Exchange Act of 1934 (15 U.S.C.A. § 78p(b)) prohibits. The Securities & Exchange Commission, which at our invitation filed a brief in this appeal, fully agrees with that conclusion as does the court opinion, The plain rightness of the conclusion is convincingly set out in the latter and needs no further discussion.
The Commission, however, went on in its brief to argue that appellant in this instance should not be assessed his gains in the conversion operation because, according to the Commission, he did not *170make a recognizable profit under 16(b). In attempting to arrive at what might be described as a golden mean, the Commission’s reasoning, followed in the court opinion, is at odds with the conceded purpose of the statute, utterly unrealistic and, in ascribing lack of realized profit to appellant on his debenture maneuver, is impossible to follow.
Some effort has been made to explain away the accurate calculation by the district judge of appellant’s profit on his debenture sequence but the fact has never been disproven.
Admittedly appellant’s conversion of the debentures was voluntary. The guide line decision in the situation before us is Park & Tilford v. Schulte, 160 F.2d 984, 987 (2 Cir. 1947), cert. den. 332 U.S. 761, 68 S.Ct. 64, 92 L.Ed. 347 (1947). There a similar voluntary conversion of preferred stock into common followed by a sale within six months was held to be “a ‘purchase and sale’ within the statutory language of § 16(b).” As to this the court said: “Whatever doubt might otherwise exist as to whether a conversion is a ‘purchase’ is dispelled by definition of ‘purchase’ to include ‘any contract to buy, purchase, or otherwise acquire.’ § 3(a) (13). Defendants did not own the common stock in question before they exercised their option to convert; they did afterward. Therefore they acquired the stock, within the meaning of the Act. The Act certainly applies as well to executed acquisitions as to executory contracts to acquire. Not otherwise could the Act accomplish the Congressional purpose to protect the outside stockholders against at least short-swing speculation by insiders with advance information.” From that time down to and including the present the Park & Tilford holding that the conversion of a senior security into a junior security is the purchase of the latter within the meaning of Section 16(b) has been accepted as the general rule. Blau v. Lehman, 286 F.2d 786 (2 Cir. 1960), affirming 173 F.Supp. 590 (D.C.S.D.N.Y.1959), affirmed 368 U.S. 403, 82 S.Ct. 451, 7 L.Ed.2d 403 (1962); B. T. Babbitt, Inc. v. Lachner, 332 F.2d 255 (2 Cir. 1964).
In affirming another like exchange as a purchase and sale, the Second Circuit Court of Appeals said, “There is only one way to prevent stock manipulation by insiders to whom confidential information is available, and that is to squeeze every possible penny of profit out of such transactions.” Blau v. Lehman, supra, 286 F.2d p. 791. Though the use or knowledge of inside information is not a necessary prerequisite for the application of Section 16(b), Ferraiolo v. Newman, 259 F.2d 342, 346 (6 Cir. 1958), cert. den. 359 U.S. 927, 79 S.Ct. 606, 3 L.Ed.2d 629 (1957); Smolowe v. Delendo Corporation, 136 F.2d 231, 148 A.L.R. 300 (2 Cir. 1943), cert. den. 320 U.S. 751, 64 S.Ct. 56, 88 L.Ed. 446 (1943). Rheem Mfg. Co. v. Rheem, 295 F.2d 473 (9 Cir. 1961), the unmistakable fact that this defendant had such inside information is a matter of record in this case.
The majority substantially repeats the defense argument that Webster had “ * * * no opportunity either to realize a trading gain on speculative judgment exercised when the debentures were purchased or to exercise speculative judgment anew on the basis of inside information possessed at the time of conversion.” What happened here was that appellant, instead of holding the debentures or selling them converted them into common stock and thus, as the district court correctly ruled, “engaged in a transaction which could have resulted in the short term speculation which section 16(b) is designed to prevent.” By converting his debentures, appellant took the money which in effect he received for them, bought common stock with it and then sold 1300 shares of that stock within six months thereafter. In so doing he completed the cycle of purchase and sale of his debentures and common stock contrary to Section 16(b).
If appellant’s tactic could possibly have been used for short term speculation it is prohibited by the statute. Ferraiolo v. Newman, supra, 259 F.2d p. 346. In the light of this, appellant simply proclaims *171that the district court’s above noted clear factual resolvement of his financial ploy does not find that it could possibly have been used for short term speculation and so come under the ban of the statute. Appellant quotes and relies on an anonymous (student comment) piece in 59 Yale L.J. 510, 524 (1950) titled “The Scope of ‘Purchase and Sale’ under 16(b) of the Exchange Act” as his authority for concluding that “No profit, either in the normally accepted sense or within the meaning of § 16(b) was realized by Webster as a result of his conversion of the debenture into common stock.” The court opinion embraces that proposition completely. In sharp contra distinction to this combined view is the objective, basic computation by the district court which reveals that on May 18, 1959, the Webster debentures were to be reasonably valued at $131,400, representing the value of the 3600 shares of common stock at 36% received for them. The original cost of those debentures had been $60,-000. That gave Webster a statutory “profit realized” for $71,400 from this branch of his venture. It was for this amount that judgment was entered on the conversion phase against Webster in the district court. There is no authentic challenge of those figures nor of their rightful assessment against appellant because of his illegal manipulation of appellee’s debentures and common stock.
I would therefore affirm the judgment of the district court, i. e. for the $71,400 profit realized on the conversion of the debentures plus the $45,144.36 profit realized on the sale of the stock, making a total of $116,544.36.
Judge STALEY joins in this concurrence and dissent.