Robert L. McCook

Securities Exchange Act of 1934
Rel. No. 47572 / March 26, 2003

Admin. Proc. File No. 3-9440-EAJA

ORDER DENYING APPLICATION UNDER THE EQUAL ACCESS TO JUSTICE ACT

On the basis of the Commission's opinion issued this day it is

ORDERED that the application of Robert L. McCook for an award of attorneys' fees and costs under the Equal Access to Justice Act be, and it hereby is, denied.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes

¹ 5 U.S.C. § 504. The law judge awarded McCook $14,988.75 in attorneys' fees and $139.00 in expenses.

² Specifically, McCook was charged with aiding and abetting violations of Sections 15(c) and 17(a) of the Securities Exchange Act of 1934 and Rules 15c3-1, 17a-3, 17a-5, and 17a-11 thereunder. Among other things, Section 15(c) of the Exchange Act, 15 U.S.C. § 78o(c), makes it illegal for a broker or dealer to effect any transaction in a security in contravention of the Commission's rules with respect to financial responsibility. Exchange Act Section 17(a), 15 U.S.C. § 78q(a), requires every registered broker or dealer to keep certain records and file certain reports. Exchange Act Rule 15c3-1, 17 C.F.R. § 240.15c3-1, specifies the net capital requirements for brokers and dealers. Exchange Act Rule 17a-3, 17 C.F.R. § 240.17a-3, requires brokers and dealers to create and maintain certain records, including brokerage orders and memoranda of the firm's trading activity. As relevant here, Exchange Act Rule 17a-5, 17 C.F.R. § 240.17a-5, requires broker-dealers to file Financial and Operational Combined Uniform Single ("FOCUS") Reports within specified time periods. Exchange Act Rule 17a-11, 17 C.F.R. §§ 240.17a-11, provides in relevant part that every broker or dealer whose net capital falls below the required minimum must give notice of such deficiency that same day to the Commission. The rule also provides that a broker or dealer that fails to make or keep current the books and records required by Rule 17a-3 must give notice to the Commission of this fact on the same day. Further, the broker or dealer must transmit a report to the Commission within 48 hours of the notice saying what it has done or is doing to correct the situation.

³ Although we are authorized to review an initial decision on our own initiative, see 17 C.F.R. § 201.411(c), our usual practice is not to do so, and we did not do so here. That we did not order review should not be construed as an endorsement of the law judge's analysis of McCook's position.

⁴ 5 U.S.C. § 504(a)(1).

⁵ Hurst, Lynch, and Muller were originally respondents in the administrative proceeding brought against McCook, as was Kent T. Black. The allegations pertaining to Black are unrelated to the violations with which McCook was charged. The Commission accepted an offer of settlement from Black on July 16, 1998. See Kent T. Black, Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order, Exchange Act Rel. No. 40218, 67 SEC Docket 1677 (July 16, 1998). The Commission accepted offers of settlement fromMuller and Hurst on March 12, 1999. See Larry E. Muller, Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order, Securities Act Rel. No. 7655, Exchange Act Rel. No. 41166, 69 SEC Docket 1022 (Mar. 12, 1999); Joel L. Hurst, Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order, Securities Act Rel. No. 7654, Exchange Act Rel. No. 41165, 69 SEC Docket 1018 (Mar. 12, 1999). An Order Making Findings and Imposing Sanctions By Default was entered against Lynch on November 14, 2001. See Kent T. Black, Order Making Findings and Imposing Sanctions By Default against David Lynch, Securities Act Rel. No. 8033, Exchange Act Rel. No. 45052, 76 SEC Docket 819 (Nov. 14, 2001), aff'd sub nom. David E. Lynch, Exchange Act Rel. No. 46439 (Aug. 30, 2002), 78 SEC Docket 1269 (increasing civil money penalty).

⁶ There were two reasons for the policy restriction on holding securities in inventory. First, FM wanted to avoid incurring the market risk associated with holding the positions. Second, the more funds it had tied up in inventory, the higher FM's net capital requirement.

⁷ See Strategic Resource Management, Inc., 52 S.E.C. 542, 544 n.8 (1995) (defining "riskless principal transaction").

⁸ McCook testified that a supervisor told him to include a third party in the trades, but did not tell him why he should do this or whom he should choose.

⁹ As noted above, filing FOCUS Reports is required by Exchange Act Rule 17a-5.

¹⁰ See, e.g., Howard R. Perles, Exchange Act Rel. No. 45691 (April 4, 2002), 77 SEC Docket 896, 904 ; Sharon M. Graham, 53 S.E.C. 1072, 1080-81 (1998), aff'd, 222 F.3d 994, 1000 (D.C. Cir. 2000).

It was not necessary for the Division to establish that McCook knew that the improper conduct he assisted violated the securities laws. "'Knowledge means awareness of the underlying facts, not the labels that the law places on those facts.'" Nicholas P. Howard, Exchange Act Rel. No. 47357 (February 12, 2003), __ SEC Docket __, __ (quoting SEC v. Falstaff Brewing Corp., 629 F.2d 62, 77 (D.C. Cir. 1980)).

¹¹ Rita C. Villa, Exchange Act Rel. No. 42502 (March 8, 2000), 71 SEC Docket 2438, 2443.

¹² Id. (quoting FEC v. Rose, 806 F.2d 1081, 1087 (D.C. Cir. 1986)).

¹³ But see, e.g., Adrian C. Havill, 53 S.E.C. 1060, 1068 & n.18 (1998) (finding aiding and abetting liability despite asserted reliance on supervisor's advice).

¹⁴ In view of our determination, we need not reach the parties' contentions with respect to the amount of the award made by the law judge.

¹⁵ We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed in this opinion.