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decided: February 25, 1981.



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.

Author: Brennan

[ 450 U.S. Page 92]

 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

[ 450 U.S. Page 93]

     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

[ 450 U.S. Page 94]

     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

[ 450 U.S. Page 95]

     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 for the District of Columbia Circuit, see Whitney v. SEC, 196 U. S. App. D.C. 12, 604 F.2d 676 (1979); Collins Securities Corp. v. SEC, 183 U. S. App. D.C. 301, 562 F.2d 820 (1977), we granted certiorari to resolve the conflict. 446 U.S. 917 (1980). We affirm.


Where Congress has not prescribed the degree of proof which must be adduced by the proponent of a rule or order to carry its burden of persuasion in an administrative proceeding, this Court has felt at liberty to prescribe the standard, for "[it] is the kind of question which has traditionally been left to the judiciary to resolve." Woodby v. INS, 385 U.S. 276, 284 (1966). However, where Congress has spoken, we have deferred to "the traditional powers of Congress to prescribe rules of evidence and standards of proof in the federal courts"*fn9 absent countervailing constitutional constraints.

[ 450 U.S. Page 96]

     makes the provisions of § 7, 5 U. S. C. § 566, applicable to adjudicatory proceedings.*fn14 The answer to the question presented in this case turns therefore on the proper construction of § 7.*fn15

The search for congressional intent begins with the language of the statute. Andrus v. Allard, 444 U.S. 51, 56 (1979); Reiter v. Sonotone Corp., 442 U.S. 330, 337 (1979);

[ 450 U.S. Page 98]

     if "unsupported by substantial evidence,"*fn18 § 7 (c) provides that an agency may issue an order only if that order is "supported by and in accordance with. . . substantial evidence" (emphasis added). The additional words "in accordance with"*fn19 suggest that the adjudicating agency must weigh the evidence and decide, based on the weight of the evidence, whether a disciplinary order should be issued. The language of § 7 (c), therefore, requires that the agency decision must be "in accordance with" the weight of the evidence, not simply supported by enough evidence "'to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion sought to be drawn from it is one of fact for the jury.'" Consolo v. FMC, 383 U.S. 607, 620 (1966), quoting NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300 (1939). Obviously, weighing evidence has relevance only if the evidence on each side is to be measured against a standard of proof which allocates the risk of error. See Addington v. Texas, 441 U.S. 418, 423 (1979). Section 10 (e), by contrast, does not permit the reviewing court to weigh the evidence, but only to determine that there is in the record "'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,'" Consolo v. FMC, supra, at 620, quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).

[ 450 U.S. Page 100]

     It is not surprising, therefore, in view of the entirely different purposes of § 7 (c) and § 10 (e), that Congress intended the words "substantial evidence" to have different meanings in context. Thus, petitioner's argument that § 7 (c) merely establishes the scope of judicial review of agency orders is unavailing.*fn20

While the language of § 7 (c) suggests, therefore, that Congress intended the statute to establish a standard of proof, the language of the statute is somewhat opaque concerning the precise standard of proof to be used. The legislative history, however, clearly reveals the Congress' intent. The original Senate version of § 7 (c) provided that "no sanction shall be imposed . . . except as supported by relevant, reliable, and probative evidence." S. 7, 79th Cong., 1st Sess. (1945). After the Senate passed this version, the House passed the language of the statute as it reads today, and the Senate accepted the

[ 450 U.S. Page 101]

     amendment. Any doubt as to the intent of Congress is removed by the House Report, which expressly adopted a preponderance-of-the-evidence standard:

"[Where] a party having the burden of proceeding has come forward with a prima facie and substantial case, he will prevail unless his evidence is discredited or rebutted. In any case the agency must decide 'in accordance with the evidence.' Where there is evidence pro and con, the agency must weigh it and decide in accordance with the preponderance. In short, these provisions require a conscientious and rational judgment on the whole record in accordance with the proofs adduced." H. R. Rep. No. 1980, 79th Cong., 2d Sess., 37 (1946) (emphasis added).*fn21

[ 450 U.S. Page 102]

     Nor is there any suggestion in the legislative history that a standard of proof higher than a preponderance of the evidence was every contemplated, much less intended. Congress was primarily concerned with the elimination of agency decisionmaking premised on evidence which was of proof quality -- irrelevant, immaterial, unreliable, and nonprobative -- and of insufficient quantity -- less than a preponderance. See id., at 36-37 and 45; S. Doc. No. 248, 79th Cong., 2d Sess., 320-322 and 376-378 (1946); n. 21, supra.

The language and legislative history of § 7 (c) lead us to conclude, therefore, that § 7 (c) was intended to establish a standard of proof and that the standard adopted is the traditional preponderance-of-the-evidence standard.*fn22

[ 450 U.S. Page 103]


Our view of congressional intent is buttressed by the Commission's longstanding practice of imposing sanctions according to the preponderance of the evidence. As early as 1938, the Commission rejected the argument that in a proceeding to determine whether to suspend, expel, or otherwise sanction a brokerage firm and its principals for, inter alia, manipulation of security prices in violation of § 9 of the Securities Exchange Act of 1934, 15 U. S. C. § 78i, a standard of proof greater than the preponderance-of-the-evidence standard was required. In re White, 3 S. E. C. 466, 539-540 (1938). Use of the preponderance standard continued after passage of the APA, and persists today. E. g., In re Cea, 44 S. E. C. 8, 25

[ 450 U.S. Page 104]

     (1969); In re Pollisky, 43 S. E. C. 458, 459-460 (1967). The Commission's consistent practice, which is in harmony with § 7 (c) and its legislative history, is persuasive authority that Congress intended that Commission disciplinary proceedings, subject to § 7 of the APA, be governed by a preponderance-of-the-evidence standard. See Andrus v. Sierra Club, 442 U.S. 347, 358 (1979); United States v. National Association of Securities Dealers, Inc., 422 U.S. 694, 719 (1975); Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

In Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 524 (1978), we stated that § 4 of the APA, 5 U. S. C. § 553, established the "maximum procedural requirements which Congress was willing to have the courts impose upon agencies in conducting rulemaking procedures." In § 7 (c), Congress has similarly expressed its intent that adjudicatory proceedings subject to the APA satisfy the statute where determinations are made according to the preponderance of the evidence. Congress was free to make that choice, Vance v. Terrazas, 444 U.S., at 265-266, and, in the absence of countervailing constitutional considerations, the courts are not free to disturb it.



603 F.2d 1126, affirmed.

JUSTICE POWELL, with whom JUSTICE STEWART joins, dissenting.

The Securities and Exchange Commission (SEC), acting under the antifraud provisions of the Investment Company Act of 1940 and the Investment Advisers Act of 1940, has imposed severe sanctions on petitioner. He has been barred permanently from practicing his profession and also forced to divest himself of an investment at a substantial loss. In making its findings of fraud and imposing these penalties, the SEC applied the "preponderance of the evidence" standard of proof.

The Court today sustains the action of the SEC, holding

[ 450 U.S. Page 105]

     that § 7 (c) of the Administrative Procedure Act (APA), 5 U. S. C. § 556 (d), commands the use of this standard in disciplinary proceedings brought under the securities laws. The Court recognizes, however, ante, at 95-96, that the general provisions of the APA are applicable only when Congress has not intended that a different standard be used in the administration of a specific statute. The critical inquiry thus is the identification of the standard of proof desired by Congress.

The SEC acted in this case under § 9 (b) of the Investment Company Act of 1940, 15 U. S. C. § 80a-9 (b), and § 203 (f) of the Investment Advisers Act of 1940, 15 U. S. C. § 80b-3 (f). Sanctions imposed under these sections are the functional equivalent of penalties for fraud. At common law, it was plain that allegations of fraud had to be proved by clear and convincing evidence. E. g., Addington v. Texas, 441 U.S. 418, 424 (1979); Woodby v. INS, 385 U.S. 276, 285, n. 18 (1966); Weininger v. Metropolitan Fire Insurance Co., 359 Ill. 584, 598, 195 N. E. 420, 426 (1935); Bank of Pocahontas v. Ferimer, 161 Va. 37, 40-41, 170 S. E. 591, 592 (1933); Bowe v. Gage, 127 Wis. 245, 251, 106 N. W. 1074, 1076 (1906). Congress enacted the Investment Company and Investment Advisers Acts against this common-law background. There is no evidence that Congress, when it adopted these Acts, intended to authorize the SEC to abandon the then-applicable standard of proof in fraud adjudications. See Whitney v. SEC, 196 U. S. App. D.C. 12, 604 F.2d 676 (1979); Collins Securities Corp. v. SEC, 183 U. S. App. D.C. 301, 562 F.2d 820 (1977).

The APA, upon which the Court relies, did not become law for some seven years after the enactment of the two statutes under which the SEC imposed these penalties. Again, the Court points to no specific evidence that Congress intended the APA to supplant the burden-of-proof rule generally applicable when the securities laws were enacted. Thus, the APA -- the general statute applicable only where a specific

[ 450 U.S. Page 106]

     statute is not -- should have no bearing on the proof burden in this case.

I imply no opinion on the question whether the evidence supports the SEC's allegations against petitioner. It is clear, however, that the SEC's finding of fraud and its imposition of harsh penalties have resulted in serious stigma and deprivation. Cf. Addington v. Texas, supra.*fn* In the absence of any specific demonstration of Congress' purpose, we should not assume that Congress intended the SEC to apply a lower standard of proof than the prevailing common-law standard for similar allegations. With all respect, it seems to me that the Court's decision today lacks the sensitivity that traditionally has marked our review of the Government's imposition upon citizens of severe penalties and permanent stigma.


* Briefs of amici curiae urging reversal were filed by Carl L. Shipley for the National Committee of Discount Securities Brokers; and by Arthur F. Mathews, Robert B. McCaw, David M. Becker, and William J. Fitzpatrick for the Securities Industry Association.

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