## Facts

- Richard L. Goble founded North American Clearing, Inc. (NAC), a broker-dealer clearing firm for numerous small brokerage firms.
- NAC was required to maintain a customer reserve account under the SEC’s Customer Protection Rule to safeguard customer assets and comply with a formula-based reserve requirement.
- In early 2008, NAC experienced cash-flow problems.
- Goble directed NAC’s CFO to record a fictitious $5 million money market fund “purchase” on NAC’s books.
- The sham entry reduced NAC’s computed reserve requirement, and Goble and NAC’s CEO signed a wire request transferring funds out of the reserve account to NAC’s operating account.
- FINRA intervened quickly; the transferred funds were returned, but NAC later failed to meet reserve obligations and wound down operations.
- The SEC filed a civil enforcement action alleging (among other claims) that Goble committed primary securities fraud under Exchange Act § 10(b) and Rule 10b-5 and that he aided and abetted NAC’s violations of the Customer Protection Rule and Exchange Act books-and-records requirements.
- After a bench trial, the district court found Goble liable for § 10(b)/Rule 10b-5 fraud and for aiding and abetting NAC’s customer protection and recordkeeping violations, and entered a permanent injunction including a lifetime bar from the securities business.

## Issues

1. Whether the district court’s findings supported primary liability under Exchange Act § 10(b) and Rule 10b-5 based on an internal sham transaction affecting reserve computations.
2. Whether Goble was liable for aiding and abetting NAC’s violations of the Customer Protection Rule and Exchange Act books-and-records requirements.
3. Whether the permanent injunction—including provisions tracking statutory text and a lifetime securities-industry bar—was overbroad or an impermissible “obey-the-law” injunction.

## Decision

- Reversed the finding of primary securities fraud liability under § 10(b) and Rule 10b-5.
- Affirmed the finding that Goble aided and abetted NAC’s violations of the Customer Protection Rule and the books-and-records provisions.
- Vacated the injunction provisions tied to § 10(b)/Rule 10b-5, the lifetime securities-business bar, and additional overbroad “obey-the-law” paragraphs.
- Remanded for the district court to reconsider and rewrite injunctive relief consistent with the appellate decision.

## Legal Principles

- Primary liability under Exchange Act § 10(b) and Rule 10b-5 requires conduct meeting the rule’s fraud elements, including a deceptive act or material misrepresentation “in connection with” the purchase or sale of securities; internal misconduct affecting regulatory compliance is not enough absent findings satisfying those elements.
- Aiding-and-abetting liability may be established where (1) a primary securities-law violation occurred, and (2) the defendant knowingly provided substantial assistance to that violation.
- Injunctive relief must be tied to the violations actually proven; when liability is reversed, injunction provisions premised on that liability must be vacated.
- Injunctions that merely command compliance with statutes or rules, without concrete prohibitions tailored to the misconduct and risk of recurrence, are disfavored; severe industry-wide lifetime bars require adequate justification.

## Conclusion

The court held that the sham reserve-related bookkeeping supported aiding-and-abetting liability for customer protection and recordkeeping violations but did not, on the district court’s findings, support primary § 10(b)/Rule 10b-5 fraud; it therefore narrowed the equitable relief by vacating overbroad injunction provisions and the lifetime industry bar and remanded for a revised injunction.


Sec. & Exch. Comm'n v. Goble, 682 F.3d 934 (11th Cir. 2012)