## Facts

- Whitney & Co., Inc. was a registered broker-dealer whose president, Francis H. Mitchell, exercised complete control over the firm.
- During October–November 1958 (including October 31 and November 18), the firm operated with a substantial net capital deficiency under Exchange Act § 15(c)(3) and SEC Rule 15c3-1 while continuing to transact securities business with the public.
- The firm failed to file its 1958 annual financial report on time as required by Exchange Act § 17(a) and Rule 17a-5; the report was filed only after the SEC initiated proceedings.
- The firm’s general ledger was inaccurate as of October 31 and November 18, 1958, violating § 17(a) and Rule 17a-3.
- By late 1958, the firm corrected its books, raised funds sufficient to cure the net capital deficiency, and ceased broker-dealer operations; it argued these remedial steps and its exit from the business made revocation unnecessary.

## Issues

1. Whether revocation of Whitney & Co.’s broker-dealer registration was in the public interest where the firm admitted willful violations of net capital, books-and-records, and reporting requirements but later cured deficiencies and stopped doing business.
2. Whether Mitchell, as the firm’s controlling president, should be found a “cause” of the revocation under Exchange Act § 15A(b)(4).

## Decision

- The SEC revoked Whitney & Co.’s broker-dealer registration based on willful violations of Exchange Act §§ 15(c)(3) and 17(a) and Rules 15c3-1, 17a-3, and 17a-5.
- The SEC found that revocation was in the public interest despite the firm’s later remediation and cessation of broker-dealer activity.
- The SEC found Mitchell to be a cause of the revocation under § 15A(b)(4) due to his control over the firm and responsibility for the violations.
- As a collateral consequence of the revocation, the firm’s SRO membership and related representative status were effectively terminated, rendering separate SRO-review proceedings moot.

## Legal Principles

- A broker-dealer’s willful operation while below required net capital, particularly while continuing to transact with customers, is a serious violation supporting revocation.
- Accurate books and records and timely financial reporting are independent regulatory obligations; later correction or late filing does not bar sanctions for prior violations.
- The “public interest” standard permits strong sanctions to protect investors and maintain the integrity of regulatory oversight, even when a firm claims to have left the business or seeks to withdraw registration.
- A controlling associated person may be found a “cause” of a firm’s revocation under § 15A(b)(4) when the person’s control and management responsibility connect them to the firm’s willful violations.

## Conclusion

The SEC revoked Whitney & Co.’s broker-dealer registration for willful net capital, recordkeeping, and reporting violations and found its controlling president a cause of the revocation, emphasizing that post-violation remediation and business cessation do not preclude revocation where investor protection and regulatory integrity require a formal sanction.


In re Whitney & Co., 40 S.E.C. 1100 (1962)