## Facts

- First City Financial Corporation, Ltd., a Canadian investment company controlled by the Belzberg family, pursued a potential hostile takeover of Ashland Oil, Inc.
- Marc Belzberg, a First City vice president, managed the company’s New York operations and evaluated U.S. investment opportunities.
- After a March 4, 1986 call between Belzberg and Bear Stearns CEO Alan Greenberg, Bear Stearns bought 20,500 Ashland shares; combined with First City’s existing holdings, First City’s beneficial ownership exceeded 5% of Ashland’s outstanding shares.
- Section 13(d) of the Securities Exchange Act of 1934 required a Schedule 13D filing within 10 days after exceeding 5% beneficial ownership.
- First City did not file within 10 days and, during the non-disclosure period, arranged additional purchases totaling 333,700 Ashland shares.
- First City filed the Schedule 13D 12 days after crossing 5%, disclosing it was considering a tender offer; Ashland’s stock price rose after disclosure and the tender offer announcement.
- First City later withdrew the tender offer and sold its Ashland position at a substantial profit.
- The SEC alleged the delayed filing was deliberate and enabled secret accumulation before the market reacted.

## Issues

1. Whether the evidence supported a finding that First City and Marc Belzberg willfully violated § 13(d) by deliberately delaying the Schedule 13D filing after obtaining more than 5% beneficial ownership.
2. Whether a district court may order disgorgement as equitable relief in an SEC enforcement action for § 13(d) violations despite no express statutory disgorgement provision.
3. Whether the disgorgement amount was permissible where profit attribution was uncertain, and how burdens of proof should be allocated.

## Decision

- The court of appeals affirmed the finding of a § 13(d) violation, holding the district court’s factual and credibility determinations were not clearly erroneous.
- The court held that disgorgement is available as equitable relief in SEC enforcement actions to deprive violators of unjust enrichment and deter violations, even without express statutory authorization in § 13(d).
- The court affirmed the disgorgement award, concluding the SEC provided a reasonable approximation of unlawful profits and uncertainty in measurement could be placed on the violators.

## Legal Principles

- Section 13(d) requires any person who becomes the beneficial owner (directly or indirectly) of more than 5% of a registered equity class to file a Schedule 13D within 10 days.
- In SEC enforcement actions, federal courts may grant the full range of equitable remedies necessary to effectuate the securities laws, including disgorgement.
- Disgorgement aims to strip unjust enrichment and deter future violations; it is not limited to remedies expressly listed in the violated provision.
- For disgorgement, the SEC must present a reasonable approximation of profits causally connected to the wrongdoing; the burden then shifts to the defendant to show the figure is not reasonable or that profits were unconnected to the violation.
- Mathematical precision is not required in calculating ill-gotten gains; evidentiary uncertainty may be resolved against the wrongdoer whose conduct created the uncertainty.

## Conclusion

The D.C. Circuit affirmed liability for a deliberate late Schedule 13D filing under § 13(d) and upheld an injunction and disgorgement, recognizing disgorgement as equitable relief in SEC actions and applying a burden-shifting, reasonable-approximation approach to calculating unlawful profits.


S.E.C. v. First City Fin. Corp., Ltd., 890 F.2d 1215 (D.C. Cir. 1989)