CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.
Brennan, J., delivered the opinion of the Court, in which Burger, C. J., and White, Marshall, Blackmun, Rehnquist, and Stevens, JJ., joined. Powell, J., filed a dissenting opinion, in which Stewart, J., joined, post, p. 104.
JUSTICE BRENNAN delivered the opinion of the Court.
In administrative proceedings, the Securities and Exchange Commission applies a preponderance-of-the-evidence standard of proof in determining whether the antifraud provisions of the federal securities laws have been violated. The question presented is whether such violations must be proved by clear and convincing evidence rather than by a preponderance of the evidence.
In June 1971, the Commission initiated a disciplinary proceeding against petitioner and certain of his wholly owned companies. The proceeding against petitioner was brought pursuant to § 9 (b) of the Investment Company Act of 1940*fn1
and § 203 (f) of the Investment Advisers Act of 1940.*fn2 The Commission alleged that petitioner had violated numerous provisions of the federal securities laws in his management of several mutual funds registered under the Investment Company Act.
After a lengthy evidentiary hearing before an Administrative Law Judge and review by the Commission in which the preponderance-of-the-evidence standard was employed,*fn3 the
Commission held that between December 1965 and June 1972, petitioner had violated antifraud,*fn4 reporting,*fn5 conflict of interest,*fn6 and proxy*fn7 provisions of the federal securities laws. Accordingly, it entered an order permanently barring petitioner from associating with any investment adviser or affiliating with any registered investment company, and suspending him for one year from associating with any broker or dealer in securities.*fn8
Petitioner sought review of the Commission's order in the
United States Court of Appeals for the Fifth Circuit on a number of grounds, only one of which is relevant for our purposes. Petitioner challenged the Commission's use of the preponderance-of-the-evidence standard of proof in determining whether he had violated antifraud provisions of the securities laws. He contended that, because of the potentially severe sanctions that the Commission was empowered to impose and because of the circumstantial and inferential nature of the evidence that might be used to prove intent to defraud, the Commission was required to weigh the evidence against a clear-and-convincing standard of proof. The Court of Appeals rejected petitioner's argument, holding that in a disciplinary proceeding before the Commission violations of the antifraud provisions of the securities laws may be established by a preponderance of the evidence. 603 F.2d 1126, 1143 (1979). See n. 8, supra. Because this was contrary to the position taken by the United States Court of Appeals ...