## Facts

- Alan C. Solomon was an officer and director of Weis Securities, Inc. and an allied member of the New York Stock Exchange (NYSE).
- Weis disclosed to the NYSE that it faced serious financial difficulty and that bookkeeping problems may have understated operating losses by up to $2.5 million.
- The NYSE initiated an internal investigation, found financial irregularities, and regularly reported developments to the Securities and Exchange Commission (SEC).
- Under Article XIV of the NYSE Constitution, members and allied members could be suspended or expelled for refusing to furnish information or testify in an NYSE investigation.
- Solomon, aware of that sanction, appeared with counsel before the NYSE and answered questions; he made admissions concerning a scheme to create misleading entries (including misidentification of convertible bonds) to present Weis as financially stronger than it was.
- Solomon did not invoke the Fifth Amendment during the NYSE interview and was not granted immunity.
- Solomon was later indicted and, after a bench trial in the Southern District of New York, convicted on one count of creating and maintaining false books and records of a broker-dealer; the government used his NYSE testimony at indictment and trial.
- Solomon appealed, arguing that the NYSE testimony was unconstitutionally compelled and therefore could not be used against him in the criminal prosecution.

## Issues

1. Whether the NYSE’s threat of suspension or expulsion for noncooperation made Solomon’s testimony “compelled” by the government so as to trigger the Fifth Amendment privilege against self-incrimination.
2. Whether the NYSE’s regulatory relationship and information-sharing with the SEC converted the NYSE’s investigation and interrogation into governmental action.

## Decision

- The Second Circuit affirmed the conviction.
- The court held that the NYSE was not a governmental actor when it questioned Solomon under its internal rules.
- The threat of suspension or expulsion was a private consequence of exchange membership, not governmental compulsion under the Fifth Amendment.
- The NYSE’s reporting to and cooperation with the SEC, without government direction or control of the interrogation, did not transform the NYSE’s conduct into state action.
- Because the Fifth Amendment was not implicated, Solomon’s NYSE admissions were admissible and could support the indictment and conviction.

## Legal Principles

- The Fifth Amendment privilege against self-incrimination applies to governmental compulsion; private pressure, including serious professional consequences imposed by a private association, does not trigger the privilege absent governmental instigation or control.
- Extensive federal regulation and routine cooperation with a federal agency do not, by themselves, convert a private self-regulatory organization’s investigative or disciplinary actions into state action.
- “Penalty” cases involving government-imposed forfeiture of public employment or government benefits for asserting the privilege are distinguishable where the threatened sanction is imposed by a private entity pursuant to membership rules.

## Conclusion

The court held that testimony obtained by the NYSE under threat of private discipline was not compelled by the government, so the Fifth Amendment did not bar prosecutors from using Solomon’s NYSE admissions in a subsequent criminal prosecution, and the conviction was affirmed.


United States v. Solomon, 509 F.2d 863 (2d Cir. 1975)