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Each statutory provision, the Securities Exchange Act of 1934 and the Securities Act of 1933, requires the Securities Exchange Commission to make a proper showing that an injunction is warranted.
Plaintiff Securities and Exchange Commission filed a complaint seeking injunctive sanctions pursuant § 21(e) of the Securities Exchange Act of 1934, 15 U.S.C.S. § 78u(e), and § 20(b) of the Securities Act of 1933, 15 U.S.C.S. § 75t(b) to obtain injunctive sanctions, against defendants, National Student Marketing Corp. Et Al., who were involved with the unlawful securities fraud. The focal point of the charge filed by the plaintiff against these defendants was the corporate merger of Interstate with NSMC. The principal question presented was whether the defendants violated or aided and abetted the violation of the anti-fraud provisions of the federal securities laws. Plaintiff contended that these violations demonstrate a reasonable likelihood of future misconduct by the defendants, thereby justifying the requested permanent injunctive relief.
Should the plaintiff’s request for injunctive relief be granted?
The Court, after considering the totality of circumstances presented in this case, concluded that the plaintiff had not fulfilled its statutory obligation to make a proper showing that injunctive relief is necessary to prevent further violations by these defendants. The court held that, although defendants violated the securities laws in particular instances, the plaintiff failed to establish the reasonable likelihood that defendants would repeat those violations in the future. Defendants' conduct did not indicate that they had engaged in a deliberate and well-planned fraudulent scheme. Accordingly, judgment will be entered for the defendants and the complaint will be dismissed.