the administrative convenience of the SEC. They serve a very real
protective function. They, like the anti-manipulation provisions,
are aimed at protecting against direct private injury. This
desire continues into Section 12(g), though it was not enacted
until 1964. H.R.Rep. No. 1418, 88th Cong., 2d Sess. (1964) at 2
U.S.Code Cong. & Admin. News, 3013 (1964), indicates that Section
12(g) is designed to put over-the-counter securities in which
there is a substantial public interest on the same regulatory
level as listed securities so far as the disclosure-oriented
provisions of the Act are concerned; it is intended "to extend to
investors in certain over-the-counter securities the same
protection now afforded to those in listed securities."
Pursuant to the Congressional belief that disclosure is
essential to complete and effective investor protection, the
Securities Exchange Act of 1934 establishes procedures by which
the investing public can obtain the information needed to make
intelligent investment decisions. Section 12 is the cornerstone
in this system. In registering its securities the issuer must
disclose all information which may affect the investment
decision. This information then is kept current by annual and
periodic filings under Section 13. Section 13 reports, however,
need be submitted only if a security has been registered pursuant
to Section 12. Similarly, the proxy protections of Section 14 and
the insider disclosures of Section 16 also are keyed expressly to
a Section 12 registration. A threshold violation of Section 12
may well strip an investor of many of the protections Congress
intended that he have. It would be anomalous to echo the
protections afforded an investor by the Act's reporting
requirements and then hold that an investor has no remedy when he
has been injured by the abridgement of those protections. The
essential objective of securities legislation is investor
protection. This implies the availability of judicial relief
where necessary to achieve that result. J.I. Case Co. v. Borak,
377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964). Any holding
by this court which permits the circumvention of basic
protections of the Act would "leave such legislation little more
than a snare and delusion." Charles Hughes & Co. v. Securities
and Exchange Commission, 139 F.2d 434, 437-438 (2d Cir. 1943). If
Section 12(g) here were construed as not granting a right of
action to plaintiffs, the avowed purpose of disclosure would be
no more than a snare and a delusion. Cf. Baird v. Franklin,
141 F.2d 238, 244 (2d Cir. 1944) (Clark, J., dissent).
I perceive no reason to treat a violation of Section 12(g) any
differently from, for example, a violation of Section 10 or
Section 14 of the Act. Certainly, the protection it affords an
investor is no less important than the protections of the
anti-fraud provisions. See H.R.Rep. No. 1383, supra. The Act
strives to make control of securities transactions "reasonably
complete and effective." 15 U.S.C. § 78b. If this goal is to be
obtained, if the investing public is to be completely and
effectively protected, Section 12(g) must be construed as
granting to injured investors individual causes of action to
enforce the statutory disclosure duties imposed on issuers. Cf.
Kaminsky v. Abrams, 281 F. Supp. 501 (S.D.N.Y. 1968); Chicago
South Shore & South Bend Railroad v. Monon, 1964-66 CCH
Fed.Sec.L.Rep. ¶ 91,525 (N.D.Ill. 1965); Kroese v. Crawford,
1961-64 CCH Fed.L.Rep. ¶ 91,262 (S.D.N.Y. 1963). But see Smith v.
Murchison, 310 F. Supp. 1079 (S.D.N.Y. 1970); Robbins v. Banner
Industries, Inc., 285 F. Supp. 758 (S.D.N.Y. 1966). Indeed, some
authorities suggest that a violation of any section of the
Securities Exchange Act of 1934 gives rise to a private right of
action. Rogers v. Crown Stove Works, 236 F. Supp. 572 (N.D.Ill.
1964); Hawkins v. Merrill Lynch, Pierce, Fenner & Beane,
85 F. Supp. 104 (W.D.Ark. 1949). Irrespective of whether that is the
law, I am mindful
of the Supreme Court's dictate in J.I. Case Co. v. Borak,
supra, 377 U.S. at 433, 84 S.Ct. at 1560, that I be "alert to
provide such remedies as are necessary to make effective the
congressional purpose [of the Securities Exchange Act of 1934]."
A private right of action under Section 12(g) is such a remedy.
It is not at all uncommon for federal courts to fashion a federal
remedy or claim for relief where federal rights are concerned.
Textile Workers v. Lincoln Mills, 353 U.S. 448, 457, 77 S.Ct.
923, 1 L.Ed.2d 972 (1957).
Defendants' second argument focuses on the relationship of
Section 18(a), 15 U.S.C. § 78r(a),*fn3 to Section 12(g). It is
asserted that Section 18(a) is the exclusive remedy for Section
12(g) violations. The argument is one of statutory construction:
when an enactment expressly provides a particular remedy or
remedies, courts should not, by implication, expand the coverage
of the statute to include other remedies. See, e.g.,
Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714,
87 S.Ct. 1404, 18 L.Ed.2d 475 (1967). "When a statute limits a
thing to be done in a particular mode, it includes the negative
of any other mode." Botany Mills v. United States, 278 U.S. 282,
289, 49 S.Ct. 129, 132, 73 L.Ed. 379 (1929). The principle
reflects the ancient maxim "expressio unius est exclusio
alterius." Since the Act endows the SEC with means to enforce its
provisions and also creates a private cause of action under very
limited circumstances, it may be argued that the maxim compels
the conclusion that the remedy created in Section 18(a) is the
exclusive avenue for private redress of Section 12(g) violations.
Cf. National Railroad Passenger Corp. v. National Ass'n of
Railroad Passengers, 414 U.S. 453, 94 S.Ct. 690, 38 L.Ed.2d 646
(U.S. 1974); duPont v. Wyly, 61 F.R.D. 615 (D.Del. 1973); In re
Penn Central Securities Litigation, 347 F. Supp. 1327 (E.D.Pa.
1972), modified, 357 F. Supp. 869 (E.D. Pa. 1973), aff'd,
494 F.2d 528 (3d Cir. 1974); Kardon v. National Gypsum Co., supra.
I believe the argument is untenable as it relates to failure to
register violations of Section 12(g). Even the most basic general
principles of statutory construction must yield to clear contrary
evidence of legislative intent. National Railroad Passenger Corp.
v. National Ass'n of Railroad Passengers, supra; Neuberger v.
Comm'r, 311 U.S. 83, 88, 61 S.Ct. 97, 85 L.Ed. 58 (1940). In the
debates on the passage of the Act, Senator Steiwer clearly
recognized that violations of Section 12 may give rise to civil
liabilities not expressly sanctioned in the Act. 78 Cong.Rec.
8586 (1934) (remarks of Senator Steiwer). Those assertions went
uncontested. Additionally, Section 28(a), 15 U.S.C. § 78bb(a),
directly states that "the rights and remedies provided by this
title shall be in addition to any and all other rights and
remedies that may exist at law or in equity." The inference of a
private cause of action, even in the face of Section 18(a), is
consistent with the evident legislative intent and with the
of the purposes intended to be served by the Act. The specific
liability sections of the Exchange Act "do not cover all the
variegated activities with which [the] Act is concerned." III L.
Loss, Securities Regulation 1785 (2d ed. 1961).
I also reach the same result when a technical statutory
construction formula is employed. Inartfully stated, Section
12(g) says: thou shalt register. Ostensibly, then, a failure to
register is a violation of Section 12(g). However, the mandate to
issuers to file also indicates by implication: thou shalt file
true and accurate statements. Hence, also by implication, the
filing of a misleading registration statement is a violation of
Section 12(g). Am I to conclude that the creation of an express
civil remedy for the latter violation indicates an intent to
preclude the former? I think not. The violations and their
attendant remedies are separate and distinct. Under the Kardon
formulation, the doing of either act evokes common law tort
liability and thus gives rise to an implied private cause of
action. The common law causes of action exist independently of
each other and so would the implied causes of action under
Section 12(g). True as it is that Section 18(a) is the exclusive
Exchange Act remedy for filing misleading statements, see duPont
v. Wyly, supra; In re Penn Central Securities Litigation,
supra, the existence of that express remedy, in my view, does
not preclude me from implying a cause of action from Section
12(g) when the issuer completely ignores the registration
Accordingly, defendants' motion to dismiss for failure to state
a claim upon which relief can be granted is denied.