United States Court of Appeals
for the district of columbia circuit
Argued January 21, 2000 Decided March 14, 2000
No. 99-1167
Jacob Wonsover,
Petitioner
v.
Securities and Exchange Commission,
Respondent
On Petition for Review of an Order of the
Securities and Exchange Commission
Adam D. Cole argued the cause for the petitioner. Martin
E. Karlinsky, James W. Perkins and Frank C. Razzano were
on brief for the petitioner.
Randall W. Quinn, Assistant General Counsel, Securities
and Exchange Commission, argued the cause for the respon-
dent. Jacob H. Stillman, Solicitor, David M. Becker, Deputy
General Counsel, and Nathan A. Forrester, Attorney, Securi-
ties and Exchange Commission, were on the brief for the
respondent. Rada L. Potts, Attorney, Securities and Ex-
change Commission, entered an appearance.
Before: Sentelle, Henderson and Rogers, Circuit Judges.
Opinion for the court filed by Circuit Judge Henderson.
Karen LeCraft Henderson, Circuit Judge:
Jacob Wonsover petitions for review of the Security and
Exchange Commission's (Commission) Order Imposing Re-
medial Sanction and the accompanying Opinion of the Com-
mission (collectively, Sanction Order) suspending him "from
association with any broker or dealer for a period of six
months" and ordering him to cease and desist from commit-
ting or causing violations of sections 5(a) and 5(c) of the
Securities Act of 1933, 15 U.S.C. ss 77e(a), 77e(c) (1933 Act).
Joint Appendix (JA) 1, 2. Wonsover sold shares of Gil-Med
Industries, Inc. (Gil-Med) which he knew were not registered
and whose sale therefore violated the 1933 Act absent an
exemption from its registration requirements. Finding that
no exemption applied, the Commission determined that Wons-
over violated sections 5(a) and 5(c). The Commission also
determined that Wonsover's inquiry into the sources of the
shares was inadequate under the circumstances and that his
violations were therefore "willful" under section 15(b)(4) of
the Securities Exchange Act of 1934, 15 U.S.C. s 78o(b)(4)
(Exchange Act), which authorized his suspension.
While he argues his sales of unregistered securities were
exempt from the 1933 Act's prohibition, Wonsover primarily
disputes the Commission's finding of willfulness, contending
his inquiry regarding the unregistered shares was adequate
to preclude such a finding. Wonsover also argues that the
sanction is draconian and that the public interest would be
better served by reducing it to a censure. He requests that
we vacate the Commission's Sanction Order or, in the alterna-
tive, reduce the sanction to censure.
Substantial evidence supports the Commission's conclusion
that Wonsover acted without adequate inquiry under the
circumstances, in violation of sections 5(a) and 5(c) of the 1933
Act, and we hold that the Commission did not err in deter-
mining that the violations were willful. The sanction was not
the maximum the Commission could have imposed and we
defer to the Commission's discretionary determination. Ac-
cordingly, we deny Wonsover's petition for review.
I.
Wonsover began his career in the securities industry in
1981. Approximately five years later he met Shimon Gibori,
the founder and CEO of Gil-Med. Gil-Med made an initial
public offering in early 1998, registering with the Commission
1,050,000 shares (of 4,605,686 outstanding) for sale to the
public. This, the only stock Gil-Med registered, was traded
publicly on the NASDAQ System. On the whole, the stock
did not have much activity; its market was "thin." JA 841,
1103-06. Henry Vogel, a behavioral therapist and Gibori
associate who invested in and promoted Gil-Med, sold shares
to his friends, associates and patients during 1988 and 1989.
Informed of the difficulty shareholders were having in selling
the stock, Gibori and Vogel directed them to certain broker-
age firms for help. The shareholders found less than com-
plete success and Gibori ultimately referred them to Wons-
over, who was working at Paine Webber, Inc.
Between August 1989 and October 1990 Wonsover opened
accounts for nineteen purported Gil-Med shareholders whose
names were supplied to him by Gibori.1 Some of the share-
holders did not exist while others no longer owned the Gil-
Med shares held (and later sold) in their names.2 Wonsover
sold a total of 924,000 shares of unregistered Gil-Med stock.
In light of the applicable statute of limitations, the Commis-
sion focused on the sale of 665,000 shares for seven of the
nineteen shareholders because the sales occurred within five
years of the Commission's institution of proceedings against
__________
1 Counsel for petitioner conceded at oral argument that Wonsover
had personally met none of the shareholders, with the possible
exception of Vogel.
2 Gibori and Vogel had earlier bought shares back from certain
investors who had experienced difficulty selling them.
Wonsover.3 Sales from the seven shareholders' accounts
generated more than $300,000 in proceeds.
Wonsover understood that the clients held "restricted" Gil-
Med stock.4 The sale of restricted stock generally is forbid-
den by 15 U.S.C. s 77e. Wonsover, however, asserts that the
sales were covered by the exemption found in section 4(4) of
the 1933 Act, 15 U.S.C. s 77d(4),5 or at least that he reason-
ably believed they were covered by the exemption.6 He
directed all potential sales of Gil-Med shares through Paine
Webber's Restricted Stock Department (RSD) for clearance
and contends that this, along with some less substantial
efforts, constituted adequate inquiry into the restricted na-
__________
3 In this opinion we refer to facts surrounding the sales of Gil-
Med shares without distinguishing the seven shareholders from the
remaining twelve. The information available to Wonsover regard-
ing sales and accounts for the twelve Gil-Med shareholders whose
accounts are not included among the seven accounts at issue is
relevant to his culpability for activity involving the seven Gil-Med
accounts the Commission reviewed inasmuch as they shed light
either on Wonsover's knowledge of and investigation into the back-
ground of the unregistered shares or on his sale of the shares
without knowing of their background or adequately investigating it.
4 "[R]estricted" stock is defined as "[s]ecurities acquired directly
or indirectly from the issuer, or from an affiliate of the issuer, in a
transaction or chain of transactions not involving any public offer-
ing." 17 C.F.R. s 230.144(a)(3)(i).
5 This section exempts "brokers' transactions executed upon cus-
tomers' orders on any exchange or in the over-the-counter market
but not the solicitation of such orders." 15 U.S.C. s 77d(4). The
exempted "brokers' transactions" are further defined in the Com-
mission's regulations and the portion Wonsover relies on covers
"transactions by a broker in which such broker ... [a]fter reason-
able inquiry is not aware of circumstances indicating that the
person for whose account the securities are sold is an underwriter
with respect to the securities or that the transaction is a part of a
distribution of securities of the issuer." 17 C.F.R. s 230.144(g)(3).
6 Wonsover no longer argues that the transactions were covered
under various other exemptions, as he did before the Commission,
see JA 10-17.
ture of the stock. The referral to the RSD notwithstanding,
Wonsover did not show during the administrative proceedings
that he had acquired adequate background information on the
Gil-Med stock. Specifically, he could not produce investment
executive worksheets for any of the nineteen account-holders.
The worksheets, which he and other Paine Webber brokers
ordinarily complete when requesting clearance from the RSD,
reflect how and when the shareholders acquired the shares at
issue. Nevertheless, he claims the RSD contacted Gil-Med's
transfer agent, its lawyers and its auditors and ultimately
approved every sale of Gil-Med stock. Wonsover also cites
written confirmation he received from Gil-Med's transfer
agent and attorneys that the sales were legitimate. He
claims to have been duped by Vogel pretending to be one of
the listed, fictitious customers (Haim Cheap). In fact, Wons-
over relies on how elaborate and effective Gibori and Vogel's
ruse was7 in arguing that his actions were not willful viola-
tions of the 1933 Act.
Early in the administrative proceedings Wonsover freely
admitted (but would later recant) that he made no inquiry
into how or when the Gil-Med shareholders acquired their
stock. See, e.g., JA 836, 846-48. Instead, he passed the duty
of inquiry to Paine Webber's RSD and lawyers. See JA 836.
The Commission demonstrates that several "red flags" should
have alerted Wonsover to the fact that Gibori in fact con-
trolled the unregistered shares Wonsover was selling and,
therefore, no exemption was available.8 Those red flags
include Gibori's exercise of an unusual amount of control over
the nineteen accounts. He delivered account documentation,
picked up proceeds checks and held trading authorization for
at least two accounts. Some purported shareholders resided
__________
7 A separate civil action left Gibori permanently enjoined from
serving as an officer or director of a public company. Vogel
resolved the Commission's charges through settlement. See JA 5
n.7.
8 The Commission concluded that Gibori, as the founder and CEO
of Gil-Med who controlled the Gil-Med accounts, was in effect an
underwriter, making the exemption inapplicable. See supra note 5.
overseas. Fourteen of the nineteen listed Gil-Med headquar-
ters as their official address and many listed Gil-Med's
telephone number too. Despite the foreign mailing addresses
of three account holders, Wonsover heeded Gibori's instruc-
tions and directed their checks to Gil-Med and their corre-
spondence to Gil-Med to Gibori's attention. Similarly, many
of the accounts contained suspicious information. Some ac-
count forms represented U.S. citizenship while corresponding
W-8 forms certified foreign citizenship. Several had identical
personal addresses in Tel Aviv and identical bank references.
Some of the stock certificates forged by Gibori and Vogel,
which the Commission believes were amateurishly forged,
listed only a surname that, in one instance, was misspelled.
In addition to their relation to Gibori, the shareholders also
had an affiliation with Gil-Med. Some used Gil-Med head-
quarters as their personal mailing address and some even
identified their occupation as sales representatives for Gil-
Med. Another red flag was that the nineteen shareholders,
collectively, sought to sell a substantial block of Gil-Med
(924,000 shares, nearly equaling the entire public float of
1,050,000), a stock Wonsover knew was not widely traded.
The Commission also notes that the S-18 registration state-
ment of the 1998 offering reflected no ownership by any of
the nineteen shareholders and thus directly contradicted
Wonsover's stated belief that those shareholders acquired
their shares in 1986 or 1987 in private placements. See JA
1179-80. The last red flag the Commission identifies was the
difficulty in clearing the sales with the Gil-Med transfer
agent and the RSD, a difficulty Wonsover was aware of and
which he had not encountered in gaining approval for sale of
properly exempt, restricted stock in the past. In response to
the RSD's hesitation, he made repeated telephone calls to
push for its approval, including falsely claiming the sharehold-
ers were poor and needed the money immediately. See JA
982.
In a detailed opinion, the Commission affirmed the adminis-
trative law judge's (ALJ) conclusion that Wonsover violated
sections 5(a) and 5(c) of the 1933 Act, 15 U.S.C. s 77e,9 and
that the violations were willful under section 15(b)(4) of the
Exchange Act, 15 U.S.C. s 78o(b)(4),10 which grants the Com-
__________
9 s 77e. Prohibitions relating to interstate commerce and the
mails
(a) Sale or delivery after sale of unregistered securities
[Section 5(a)] Unless a registration statement is in effect as
to a security, it shall be unlawful for any person, directly or
indirectly--
(1) to make use of any means or instruments of transporta-
tion or communication in interstate commerce or of the mails to
sell such security through the use or medium of any prospectus
or otherwise; or
(2) to carry or cause to be carried through the mails or in
interstate commerce, by any means or instruments of transpor-
tation, any such security for the purpose of sale or for delivery
after sale.
. . .
(c) Necessity of filing registration statement
[Section 5(c)] It shall be unlawful for any person, directly or
indirectly, to make use of any means or instruments of trans-
portation or communication in interstate commerce or of the
mails to offer to sell or offer to buy through the use or medium
of any prospectus or otherwise any security, unless a registra-
tion statement has been filed as to such security, or while the
registration statement is the subject of a refusal order or stop
order or (prior to the effective date of the registration state-
ment) any public proceeding or examination under section 77h
of this title.
15 U.S.C. s 77e.
10 Section 78o, entitled "Registration and regulation of brokers
and dealers," reads in pertinent part as follows:
(b) Manner of registration of brokers and dealers
. . .
(4) The Commission, by order, shall censure, place limita-
tions on the activities, functions, or operations of, suspend for a
period not exceeding twelve months, or revoke the registration
of any broker or dealer if it finds, on the record after notice
and opportunity for hearing, that such censure, placing of
mission authority to suspend brokers for willful violations of
the 1933 Act. The Commission suspended Wonsover "from
association with any broker or dealer for a period of six
months" and, pursuant to 15 U.S.C. s 77h-1, ordered him to
cease and desist from committing or causing violations of
sections 5(a) and 5(c) of the 1933 Act. See JA 1, 2.
II.
We review the Commission's findings of fact for substantial
evidence. See Steadman v. SEC, 450 U.S. 91, 97 n.12 (1981)
("Commission findings of fact are conclusive for a reviewing
court 'if supported by substantial evidence.' ") (quoting 15
U.S.C. ss 78y, 80a-42, and 80b-13); 15 U.S.C. s 77i ("The
finding of the Commission as to the facts, if supported by
evidence, shall be conclusive."); see also Steadman, 450 U.S.
at 96 (securities laws provide scope of judicial review of
Commission disciplinary proceedings). As for the Commis-
sion's conclusions of law, we apply the standards set forth in
the Administrative Procedure Act (APA) and "will set aside
[its] legal conclusions only if 'arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law,' 5
U.S.C. s 706(2)(A)." Proffitt v. FDIC, ___ F.3d ___, 2000 WL
19129, *3 (D.C. Cir. 2000). Our review of the Commission's
sanction is limited both by the APA and Supreme Court
precedent. See Norinsberg Corp. v. Department of Agric., 47
F.3d 1224, 1227 (D.C. Cir.), cert. denied, 516 U.S. 974 (1995).
The APA limits our inquiry to whether the Commission's
sanction was "arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law," 5 U.S.C. s 706(2)(A);
see Norinsberg Corp., 47 F.3d at 1227-28, and the Supreme
__________
limitations, suspension, or revocation is in the public interest
and that such broker or dealer, whether prior or subsequent to
becoming such, or any person associated with such broker or
dealer, whether prior or subsequent to becoming so associat-
ed--
. . .
(D) has willfully violated any provision of the Securities Act
of 1933....
Court has told us not to disturb the Commission's choice of
sanction unless it is either "unwarranted in law or ...
without justification in fact." Id. at 1228 (quoting Butz v.
Glover Livestock Comm'n Co., 411 U.S. 182, 185-86 (1973)
(ellipsis in original) (quoting American Power & Light Co. v.
SEC, 329 U.S. 90, 112-13 (1946))); accord Pharaon v. Board
of Governors of Fed. Reserve Sys., 135 F.3d 148, 155 (D.C.
Cir. 1998); Bluestone Energy Design, Inc. v. FERC, 74 F.3d
1288, 1294 (D.C. Cir. 1996). "The main point is that a court
should not second-guess the judgment of the Commission in
connection with the imposition of sanctions, unless the [Com-
mission] has acted contrary to law, without basis in fact or in
abuse of discretion." Svalberg v. SEC, 876 F.2d 181, 185
(D.C. Cir. 1989).
Wonsover contends that the Commission applied the incor-
rect standard in determining willfulness and, in any event, his
conduct was not willful under either standard.11 He focuses
on the ALJ's articulation of the willfulness standard: "It is
well-settled that a finding of willfulness under [section
15(b)(4) of] the Exchange Act does not require an intent to
violate, but merely an intent to do the act which constitutes
the violation." JA 85. In his opening brief, Wonsover ar-
gued that the government must prove he acted with knowl-
edge that his conduct was unlawful, see Brief of Petitioner at
21, but he subsequently changed the standard to reckless
disregard. See Reply Brief at 3-9. While the Commission
did not endorse the ALJ's standard, it expressly affirmed his
decision under either formulation of willfulness, to wit: inten-
tional commission of the act constituting the violation or
__________
11 Although also arguing that the transactions were exempt under
section 4(4) of the 1933 Act, 15 U.S.C. s 77d(4), Wonsover does not
dispute that the accounts and sales involved a statutory underwrit-
er, a factor which ordinarily forecloses the exemption. See 17
C.F.R. s 230.144(g). Rather, he claims he was ignorant of that fact
at the time of the transactions despite what he contends was
reasonable inquiry. If his contention were to hold, the exemption
might be available to him. See id. s 230.144(g)(3). Our resolution
of this issue, therefore, turns on whether Wonsover's inquiry was
reasonable under the circumstances.
knowledge of (or reckless disregard of) the fact that his
conduct violated the law. See JA 17-21.
Wonsover argues that to find willfulness where the actor
had no knowledge that his conduct was unlawful would extin-
guish the higher degree of culpability the willfulness require-
ment establishes in what Wonsover calls a two-tiered system
of broker liability exposing only willful violators to the more
severe sanctions of censure and suspension. In other words,
he claims the Commission applied a standard rendering the
Congress' use of "willfully" meaningless instead of a standard
requiring proof of the actor's knowledge that his conduct
violated the law or, at a minimum, that he acted in reckless
disregard of the law. Most of the cases Wonsover relies on,
however, apply to statutory schemes different from the 1933
Act and the Exchange Act, see Brief of Petitioner at 21-22
(citing, for example, Bryan v. United States, 524 U.S. 184
(1998) (statute prohibiting unlicensed dealing in firearms);
Ratzlaf v. United States, 510 U.S. 135 (1994) (antistructuring
laws for domestic banks); TransWorld Airlines, Inc. v. Thur-
ston, 469 U.S. 111, 129 (1984) (ADEA)), and several involve
criminal prosecutions, see id. (citing, for example, Cheek v.
United States, 498 U.S. 192, 201 (1991) (income tax evasion)).
See generally United States v. O'Hagan, 139 F.3d 641, 647
(8th Cir. 1998) (distinguishing Ratzlaf and Cheek from securi-
ties cases). Wonsover does cite a Supreme Court opinion, as
well as the Eighth Circuit's opinion on remand, interpreting
section 10(b) of the Exchange Act. See, e.g., Brief of Petition-
er at 22-23 (citing United States v. O'Hagan, 521 U.S. 642
(1997), on remand 139 F.3d 641 (8th Cir. 1998)). The Su-
preme Court rejected by implication Wonsover's assertion
that one must know of the relevant legal requirement for his
act to willfully violate that requirement. See O'Hagan, 521
U.S. at 665-66 (discussing "two sturdy safeguards Congress
has provided regarding scienter" first, that "Government
must prove that a person 'willfully' violated the provision" and
second (and independently), that "defendant may not be
imprisoned for violating Rule 10b-5 if he proves that he had
no knowledge of the rule") (emphasis added). On remand the
Eighth Circuit followed suit: "Courts that have interpreted
'willfully' in s 32 [of the Exchange Act] have reached the
same conclusion that we reach in this case: 'willfully' simply
requires the intentional doing of the wrongful acts--no knowl-
edge of the rule or regulation is required." See O'Hagan, 139
F.3d at 647.
Willfulness is usually understood to be contextual. See
Ratzlaf, 510 U.S. at 141 ("Willful ... is a word of many
meanings, and its construction [is] often ... influenced by
its context.") (internal quotation marks omitted) (quoting
Spies v. United States, 317 U.S. 492, 497 (1943)). In the
context of the provision at issue here, we have rejected the
knowledge and the reckless disregard standards and defined
willfulness thus:
It is only in very few criminal cases that "willful" means
done with a bad purpose. Generally, it means no more
than that the person charged with the duty knows what
he is doing. It does not mean that, in addition, he must
suppose that he is breaking the law.
Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949) (internal
quotation marks omitted). In Gearhart & Otis, Inc. v. SEC,
348 F.2d 798 (D.C. Cir. 1965), we rejected the argument "that
specific intent to violate the law is an essential element of the
willfulness required to violate Section 15(b)" and noted that
the argument "ha[d] been rejected by this court, by the
Second Circuit, and by the Commission." 348 F.2d at 802-03.
We further stated that "[i]t has been uniformly held that
'willfully' in this context means intentionally committing the
act which constitutes the violation" and rejected the conten-
tion that "the actor [must] also be aware that he is violating
one of the Rules or Acts." Id. at 803.
In his reply brief and at oral argument, Wonsover seized on
our discussion of "willful misconduct" and "reckless disre-
gard" in Saba v. Compagnie Nationale Air France, 78 F.3d
664 (D.C. Cir. 1996), a decision interpreting the Warsaw
Convention. Wonsover contends that Saba, which discussed
cases involving securities laws, demands application of a
subjective recklessness standard, a standard more demanding
than ordinary reckless disregard. In Saba we acknowledged
the two recklessness standards we have applied and distin-
guished the more demanding subjective standard from the
one more akin to gross negligence: "One meaning of reckless-
ness, then, is simply a linear extension of gross negligence, a
palpable failure to meet the appropriate standard of care[,
and the] second, as we have recognized in other contexts, is a
legitimate substitution for intent to do the proscribed act
because, if shown, it is a proxy for that forbidden intent." 78
F.3d at 668 (citation omitted). One of the "other contexts"
the Saba court cited was the review of securities law viola-
tions. Describing that standard, the court said that either
the defendant must have known the risk of violation his action
presented or his action posed a risk "so obvious [he] must
have been aware of it." Id. at 668-69 (quoting SEC v.
Steadman, 967 F.2d 636, 641 (D.C. Cir. 1992) (reversing
SEC's determination that appellants violated section 17(a)(1)
of 1933 Act, section 10(b) and Rule 10b-5 under Exchange
Act and section 206(1) of Investment Advisers Act)). In
other words, "if it can be shown that a defendant gazed upon
a specific and obvious danger, a court can infer that the
defendant was cognitively aware of the danger and therefore
had the requisite subjective intent." Id. at 669.
Here, the Commission based its determination of willful-
ness on Wonsover's failure to conduct sufficient inquiry into
the sources of the unregistered Gil-Med shares in the circum-
stances before him. The Commission's regulations permit a
broker's transaction if the broker "[a]fter reasonable inquiry
is not aware of circumstances indicating that the person for
whose account the securities are sold is an underwriter with
respect to the securities or that the transaction is a part of a
distribution of securities of the issuer." 17 C.F.R. s 230.144.
An oft-quoted paragraph of a Commission release clarifies
when a broker's inquiry can be considered reasonable:
The amount of inquiry called for necessarily varies with
the circumstances of particular cases. A dealer who is
offered a modest amount of a widely traded security by a
responsible customer, whose lack of relationship to the
issuer is well known to him, may ordinarily proceed with
considerable confidence. On the other hand, when a
dealer is offered a substantial block of a little-known
security, either by persons who appear reluctant to dis-
close exactly where the securities came from, or where
the surrounding circumstances raise a question as to
whether or not the ostensible sellers may be merely
intermediaries for controlling persons or statutory un-
derwriters, then searching inquiry is called for.
Distribution by Broker-Dealers of Unregistered Securities,
Securities Act Rel. No. 33-4445 (Feb. 2, 1962). The circum-
stances facing Wonsover did not involve a modest offer, a
widely traded security or a customer with no relationship to
the issuer. Rather, the Gil-Med shareholders whose names
Gibori gave Wonsover offered him a substantial block of a
little-known and thinly traded security under circumstances
raising questions not only as to whether the ostensible sellers
may have been intermediaries for controlling persons or
statutory underwriters but also whether they even existed.
Clearly, a "searching inquiry" was called for.
Wonsover failed to investigate the Gil-Med accounts de-
spite Gibori's unusual degree of control over the accounts,
many of the shareholders' apparent affiliation with Gil-Med,
the sheer amount of shares involved for a thinly traded stock
(nearly equaling the public float), the inconsistent account
documentation and his difficulty in securing RSD clearance.
We conclude that substantial evidence supports the Commis-
sion's finding that Wonsover's inquiry was not reasonable
under the circumstances and that the Commission did not err
in determining that his resulting violations were willful under
our traditional formulation of willfulness for the purpose of
section 15(b) or even under the subjective recklessness stan-
dard Wonsover presses.12 Precedent will not suffer Wons-
over's argument that he justifiably relied on the clearance of
__________
12 Our decision upholding the Commission's finding of willfulness
leaves Wonsover no room to argue that he conducted a reasonable
inquiry (or was unaware of circumstances foreclosing the exemp-
tion) and that the sales were thus exempt under section 4(4) of the
1933 Act.
sales by the RSD, the transfer agent and counsel. See, e.g.,
O'Leary v. SEC, 424 F.2d 908, 912 (D.C. Cir. 1970) (reliance
on advice of counsel potentially mitigating but not exculpato-
ry); Sorrell v. SEC, 679 F.2d 1323, 1327 (D.C. Cir. 1982)
(broker's reliance on counsel's advice did not excuse his own
lack of investigation); Stead v. SEC, 444 F.2d 713, 716 (10th
Cir. 1971) ("The act of ... calling the transfer agent is
obviously not a sufficient inquiry."); A.G. Becker Paribas
Inc., 48 S.E.C. 118, 121 (1985) ("If a broker relies on others to
make the inquiry called for in any particular circumstances, it
does so at its peril."). As Paine Webber's Rule 144 Manual
cautioned, "[a]n investment executive ... has the primary
responsibility to prevent illegal sales of restricted or control
stock." Brief of Commission at 18.
Wonsover's argument that the sanction should be reduced
also fails. The statute authorizing the Commission to sus-
pend Wonsover limits when and how the sanction can be
imposed. The Commission must "find[], on the record after
notice and opportunity for hearing, that such ... suspension
... is in the public interest." 15 U.S.C. s 78o(b)(4). The
Commission complied with the statute's directives and ex-
pressly considered, among other aggravating and mitigating
factors, "the effect of Wonsover's misconduct on both the
securities industry as a profession and on the investing
public." JA 24-25. The sanction fell within the spectrum of
the Commission's statutory authority, see 15 U.S.C.
s 78o(b)(4); s 77h-1, and choosing a point on that spectrum
is a determination left to the Commission. See O'Leary, 424
F.2d at 912 ("[A]s to petitioners' protest that they 'were first
offenders,' acting in accord with advice of counsel, and caus-
ing no injury to the investing public, we concur with Chief
Judge Lumbard's statement in Tager v. SEC, 344 F.2d 5, 8
(2d Cir. 1965): 'While these factors might have warranted a
lighter sanction, they did not require one.' ").
For the foregoing reasons, we conclude that substantial
evidence supports the Commission's determination that
Wonsover failed to conduct reasonable inquiry into the
sources of the unregistered shares he sold and that his
inadequate inquiry in the face of several "red flags" justified
a finding of willfulness. In addition, we find no abuse of
discretion in the Commission's chosen sanction. Accordingly,
Wonsover's petition for review is
Denied.