Securities and Exchange Commission v. Tobia, Jr.

Background

The Securities and Exchange Commission filed a civil enforcement action against Alfred Tobia, Jr. and Elizabeth Lee. This document is a final judgment as to Tobia only. Tobia entered a general appearance, accepted the court’s jurisdiction, waived service of the complaint, and consented to entry of judgment. He did so without admitting or denying the complaint’s allegations, except for the jurisdictional matters and the limited admission described below.

Terms of the Judgment

The court permanently restrained and enjoined Tobia from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The prohibition covers using interstate commerce, the mail, or a national securities exchange in connection with a securities purchase or sale to employ a scheme to defraud, make materially false or misleading statements or omissions, or engage in conduct operating as fraud or deceit. The judgment specifically addresses trading on material nonpublic information in breach of a fiduciary or similar duty, and communicating such information to another person for securities trading purposes. The injunction also binds Tobia’s officers, agents, employees, attorneys, and people acting together with him who receive actual notice of the judgment.

For five years after entry of the judgment, Tobia is prohibited from serving as an officer or director of an issuer whose securities are registered under Exchange Act Section 12 or that must file reports under Section 15(d). He must pay the Commission a $785,020 civil penalty within 10 days after entry. The Commission may use lawful collection procedures to enforce the penalty, and post-judgment interest applies to amounts unpaid after that period.

The consent is incorporated into the judgment. Tobia agreed not to seek reimbursement or indemnification for the penalty and not to claim a tax deduction or credit for it. He waived findings of fact and conclusions of law, any jury-trial right, and any right to appeal. He also agreed that, solely for bankruptcy discharge exceptions under Section 523(a)(19), the complaint’s allegations are true and that amounts owed under the judgment are debts for violations of federal securities laws. The court retained jurisdiction to enforce the judgment.

Court’s Ruling and Classification

Judge Ronnie Abrams stated that the court remained concerned, for reasons discussed in another opinion, about the Commission’s practice of restraining speech. The judge nevertheless approved the judgment because Tobia was willing to sign the consent decree and because the approval was consistent with the cited Second Circuit decision. The court ordered the Clerk to enter the final judgment immediately under Federal Rule of Civil Procedure 54(b).

This is classified as a procedural order because the court entered a consent judgment without deciding the complaint’s allegations through an adversarial merits ruling. The judgment resolves the claims asserted against Tobia in this civil proceeding; the text does not state a disposition of the claims against Lee.