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Maryland Law Review

THE MARYLAND SURVEY: 1996-1997: Recent Decisions: The United States Court of Appeals for the Fourth Circuit


57 Md. L. Rev. 1256


Robert F. Bahrampour


VI. Securities Law

A. Affirming the Unique and Complementary Roles of the NASD and SEC
In Jones v. SEC, 1 the Fourth Circuit considered for the first time whether disciplinary action by the National Association of Securities Dealers (NASD) has a preclusive effect on similar proceedings brought by the Securities and Exchange Commission (SEC or Commission). 2 The court held that principles of res judicata, the Maloney Act of 1938, 3 and the Double Jeopardy Clause of the Fifth Amendment 4 did not bar the SEC from initiating its own action subsequent to an NASD disciplinary action. 5 In so ruling, the court legitimized the SEC's unique ability to review NASD actions 6 and to begin its own investigation following an NASD sanction. 7 Although the Fourth Circuit's decision rested on well-grounded legal principles, the court left open the question whether monetary penalties imposed by both the NASD and the SEC constitute multiple punishments in violation of the Double Jeopardy Clause.

1. The Case. - In 1989, Ivan D. Jones, Jr., a stockbroker, became director of a registered broker-dealer, Jones & Ward Securities, Inc. (Jones & Ward). 8 Soon thereafter, Jones notified the NASD that he had assumed all management responsibilities of the firm as president and "control person." 9 The year before, Jones and two other owners of Trask, Hunt, Hunt, Jones, Ltd. (THHJ) formed Sidbury Land Company (Sidbury), which issued stock in order to raise money for a recent acquisition of land by THHJ. ...
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