U.S. Securities and Exchange Commission v. Amah

Background

The Securities and Exchange Commission brought this action against Evarist C. Amah for violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. On September 28, 2023, the court granted the Commission’s motion for summary judgment on all of its claims, finding Amah liable. The opinion addressed the Commission’s later motion for final judgment and remedies. Amah appeared without a lawyer.

Permanent injunction

The Commission sought a permanent injunction barring future violations of the federal securities laws. The court considered whether there was a substantial likelihood of future violations. It relied on its earlier findings that Amah had violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Section 206 of the Advisers Act and Rule 206(4)-8.

The court also relied on its findings that Amah acted with scienter, meaning the required wrongful state of mind; specifically, it found that he acted with reckless disregard for the truth. The violations were continuous and systematic for at least three years, rather than isolated. The court further found that Amah continued to deny wrongdoing and that the record did not show restrictions that would prevent him from serving as an investment adviser and engaging in similar conduct in the future. The court therefore granted the requested permanent injunction.

Disgorgement and prejudgment interest

Disgorgement is a remedy requiring a defendant to give up gains connected to unlawful conduct. The Commission sought $10,000, asserting that Amah retained or diverted that amount into his personal accounts on two occasions. Amah argued that he was not unjustly enriched, had lost substantial money through the investments, and had paid more than $33,000 in unreimbursed business expenses.

The court rejected those arguments. It held that Amah’s losses did not offset the $10,000 he retained from funds transferred by clients. It also declined to deduct the claimed business expenses because Amah provided only an unsupported two-page typed list, without underlying records or a sworn declaration. The court approved the requested $10,000 disgorgement.

The Commission also sought $1,617.82 in prejudgment interest. Prejudgment interest compensates for the time value of money obtained through unlawful conduct. The court found that the Commission’s calculation, which used the Internal Revenue Service underpayment rate, was appropriate and approved disgorgement including that interest.

Civil penalty

A civil penalty is a monetary sanction intended to punish violations and deter future misconduct. The securities statutes provide three penalty tiers. The third tier applies when a violation involves fraud or similar misconduct and directly or indirectly causes substantial losses or creates a significant risk of substantial losses.

The court found that a third-tier penalty was appropriate because Amah acted with reckless disregard for the truth, repeatedly violated the securities laws over at least three years, and caused at least $600,000 in losses. The court also found that he did not acknowledge his culpability and that the record did not justify reducing the penalty based on his financial condition.

Because Amah violated three securities laws, the court approved the Commission’s requested $669,667 civil penalty, described as one third-tier penalty for each statute violated.

Disposition

The court granted the Commission’s Motion for Final Judgment and Remedies and requested that the Clerk terminate the pending motion.