STEADMAN V. SEC, 450 U. S. 91 (1981)

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U.S. Supreme Court

Steadman v. SEC, 450 U.S. 91 (1981)

Steadman v. Securities and Exchange Commission

No. 79-1266

Argued December 3, 1980

Decided February 25, 1981

450 U.S. 91


After an on-the-record hearing before an Administrative Law Judge and review by the Securities and Exchange Commission (SEC) in which the preponderance of the evidence standard of proof was employed, the SEC held that petitioner had violated various antifraud provisions of the federal securities laws, and sanctions were imposed. Petitioner sought review in the Court of Appeals on the alleged ground, inter alia, that the SEC's use of the preponderance of the evidence, rather than the clear and convincing, standard of proof in determining whether he had violated the securities laws, was improper. The Court of Appeals rejected the argument.


1. In adjudicatory proceedings before the SEC, § 7(c) of the Administrative Procedure Act applies. It provides in pertinent part that a sanction may not be imposed by an administrative agency except on consideration of the whole record or parts thereof cited by a party and supported by and "in accordance with the reliable, probative, and substantial evidence." Pp. 450 U. S. 95-97.

2. The SEC properly used the preponderance of the evidence standard of proof in determining whether the antifraud provisions of the federal securities laws had been violated. Pp. 450 U. S. 97-104.

(a) Section 7(c)'s language implies the enactment of a standard of proof. By allowing sanctions to be imposed only when they are "in accordance with . . . substantial evidence," Congress implied that a sanction must rest on a minimum quantity of evidence. And the phrase "in accordance with" lends further support to a construction of § 7(c) as establishing a standard of proof, suggesting that the adjudicatory agency must weigh the evidence and decide, based on the weight of the evidence, whether a disciplinary order should be issued. Pp. 450 U. S. 98-100.

(b) While § 7(c)'s language is somewhat opaque as to the precise standard of proof to be used, the legislative history clearly reveals that Congress intended to adopt a preponderance of the evidence standard. Pp. 450 U. S. 100-102.

Page 450 U. S. 92

(c) Such intent is buttressed by the SEC's longstanding practice of imposing sanctions according to the preponderance of the evidence. Pp. 450 U. S. 103-104.

603 F.2d 1126, affirmed.

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. 450 U. S. 104.

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