United States Court of Appeals — D.C. Circuit

David H. Disraeli
v.
United States Securities and Exchange Commission

Case No. 08-1037  |  Admin. Proc. File No. 3-12288
Final Brief for the Petitioner
Part of an ongoing series — ← SCOTUS Petition (No. 09-941)  |  TSSB §1983 Action  |  WhoIsDavidDisraeli.com

What This Case Was About

In January 2005, SEC examiners arrived at Lifeplan Associates, Inc. — David Disraeli's registered investment advisory firm in Austin, Texas — for what they described as a routine examination. It was not routine. Within 24 hours, examiner Linda Yoder sent an email to her supervisor stating that Disraeli "should not be in the business" and was "reaming his clients." The investigation had already reached its conclusion before it began.

What the SEC found was poor bookkeeping — specifically, a loan or transfer of offering proceeds from Lifeplan to Disraeli personally, imperfectly documented. What it could not show was fraud. Nine out of ten investors said they were not defrauded. Nine out of ten wanted to keep their investment. Two investors who initially signed SEC-authored declarations later recanted after receiving full disclosure. One of them was a full professor of law at the University of Texas and a Harvard Law graduate.

"The Commission placed itself in the mind of the 'Reasonable Investor' in place of nine actual investors." — Brief of Petitioner

The SEC's Administrative Law Judge, Brenda Murray, admitted from the outset that she did not know why she was there. She showed repeated confusion about the proceeding's main purpose, continually interrupted witnesses and counsel, and ultimately said she would "figure it all out later." Her initial decision, issued March 5, 2007, was riddled with factual errors — wrong dates, wrong characterizations, wrong legal conclusions — most of which the Commission simply rubber-stamped without review.

The sanctions imposed were severe: revocation of registration, a lifetime industry bar, a $120,000 civil penalty (reduced to $85,000 on appeal to the Commission), disgorgement of $84,300 plus prejudgment interest, and cease-and-desist orders. The Commission never articulated why a lesser sanction would not have served the same remedial purpose — which, under controlling D.C. Circuit precedent, it was required to do.

This brief challenged the Commission's fraud finding as unsupported by substantial evidence, and its sanctions as arbitrary, capricious, and punitive in violation of the standards established in Steadman v. SEC and Paz Securities v. SEC.

Core Arguments

Materiality

The Commission substituted a hypothetical "reasonable investor" for nine actual investors who testified they were not defrauded and wanted to keep their investment. Under TSC Industries v. Northway (1976), materiality is assessed under all circumstances — including what actual investors said.

30-State Exemption

The Commission's interpretation of Rule 203A-2(e) created a logical impossibility: the exemption was available only to advisers who didn't need it. Disraeli had a good-faith, reasonable belief he was entitled to rely on the multi-state exemption — and the Commission offered no contrary evidence.

Sanctions Too Severe

Under Steadman and Paz Securities, the Commission bears a heightened burden when imposing maximum sanctions. It must explain why lesser remedies would not suffice. The Commission never did. The sanctions ended a career, shut a company, and imposed $170,000 Disraeli had no ability to pay.

ALJ Errors

The ALJ's initial decision contained numerous factual errors: wrong dates, wrong characterizations of the TSSB order, wrong investor counts (counting one investor couple as two), and legal conclusions unsupported by the record. The Commission affirmed without addressing any of them.

Bias & Prejudgment

Examiner Linda Yoder concluded Disraeli "should not be in the business" 24 hours into a multi-day examination — before reviewing books and records. Her testimony at hearing required her to admit she made no conclusions until back at the office. The record showed both.

Inability to Pay

The Commission erroneously held Disraeli waived his inability-to-pay defense. The actual rule — Rule 630 — states the defense may be raised before "either" the Commission or the ALJ, and the Commission "may" require additional disclosure. It never entered such an order.

The Sanctions — And Why They Were Unjustified

Lifetime Bar
Association with any broker, dealer, or investment adviser
$85,000
Civil money penalty (reduced from $120,000)
$84,300+
Disgorgement plus prejudgment interest
Revocation
Investment adviser registration revoked

The Commission ordered disgorgement of $84,300 — but its own subpoenaed bank records showed Disraeli had already repaid at least $10,996.75, with additional payments through 2007 totaling $39,533.13. The Commission's disgorgement offset: $0. It simply ignored the evidence in its own records.

Steadman v. SEC, 603 F.2d 1126, 1139 (D.C. Cir.)

"We are empowered to set aside Commission orders that are arbitrary and capricious. We subscribe to the common-sense notion that the greater the sanction the Commission decides to impose, the greater is its burden of justification. Where, as here, the most potent weapon in the Commission's arsenal of flexible enforcement powers is used, the Commission has an obligation to explain why a less drastic remedy would not suffice."

Procedural Timeline

November 6, 2002
TSSB Emergency Cease-and-Desist Order
Texas State Securities Board issues emergency C&D against Disraeli without prior notice or hearing. TD Waterhouse and Fidelity terminate his accounts within hours. See §1983 action.
November 2002 – October 2003
Disraeli Manages Clients Without Fees
For one full year, Disraeli provides investment management services to existing clients at no charge while rebuilding his practice — a fact the Commission chose not to weigh as a mitigating factor.
October 2003
Lifeplan Associates, Inc. Formed and Registered
Disraeli incorporates Lifeplan and files Form ADV with the SEC, relying on the 30-state exemption from the prohibition on registration under the Investment Advisers Act.
January 10–12, 2005
SEC "Routine" Examination Begins
SEC examiners arrive for what is described as a routine examination. Within 24 hours, examiner Linda Yoder emails her supervisor that Disraeli "should not be in the business." Investigation conclusions preceded the investigation.
August 15–16, 2006
Administrative Hearing Before ALJ Brenda Murray
Two-day hearing. ALJ admits she does not know why she is there, repeatedly interrupts witnesses and counsel, and says she will "figure it all out later."
March 5, 2007
ALJ Initial Decision Issued
Decision contains numerous factual errors, wrong dates, and legal conclusions unsupported by the record. Only Disraeli (not the Division) appeals to the Commission.
December 21, 2007
SEC Commission Final Order
Commission affirms ALJ findings without addressing any of the enumerated defects. Reduces civil penalty from $120,000 to $85,000. Lifetime bar, revocation, and disgorgement order affirmed. Commission ignores $39,533 in documented loan repayments in its own records.
January 28, 2008
Appeal Docketed — D.C. Circuit No. 08-1037
Petition docketed within 60 days of final order, satisfying statutory timeliness requirements under 15 U.S.C. §§77i(a), 78y(a), and 80b-13(a).
March 12, 2008
Final Brief Filed — Panel Included Judge Kavanaugh
Brief filed pro se. The D.C. Circuit panel hearing this matter included then-Circuit Judge Brett Kavanaugh, later elevated to the U.S. Supreme Court.
2009
Petition for Certiorari — SCOTUS No. 09-941
Following the D.C. Circuit's decision, Disraeli petitioned the United States Supreme Court. See full SCOTUS petition.
June 27, 2024
SEC v. Jarkesy — Constitutional Vindication
The Supreme Court holds 6-3 that the SEC's use of in-house administrative courts to adjudicate fraud claims violates the Seventh Amendment right to jury trial. The precise constitutional framework Disraeli argued for over 20 years is now the law of the land.

Full Text of the Brief

Filed pro se, March 12, 2008. D.C. Circuit Case No. 08-1037. Reproduced here as a matter of public record.

IN THE UNITED STATES COURT OF APPEALS

FOR THE D.C. CIRCUIT

 

Case No. 08-1037

 

DAVID H. DISRAELI,

Petitioner,

v.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION,

Respondent.

 

FINAL BRIEF FOR THE PETITIONER

 

This appeal is being considered under Local Rule 34(j)

CONVENTIONS
All references to the record will appear at JDA #, P# for the Joint Deferred Appendix and the corresponding page number, or the Supplemental Appendix as Sup App and exhibit #.
JURISDICTIONAL STATEMENT
This is an appeal of a final order of the United States Securities and Exchange (SEC) Commission, Admin Proc File No. 3-12288. Petitioner submitted to the Jurisdiction of the SEC when he responded to the Order for Public Proceedings brought by the SEC against Petitioner. Petitioner's standing is based on judicial review provided by 15 U.S.C. §§77i(a), 78y(a), and 80b-13(a).
FILING DATES SHOWING TIMELINESS OF APPEAL
The Commission issued its final order on December 21, 2007 and Petitioner's petition was docketed on January 28, 2008, within the sixty days allotted under the three statutes mentioned above.
STATEMENT THAT THE MATTER IS RIPE FOR APPEAL
Petitioner is seeking review of a final order of the Commission and has exhausted all of his administrative remedies. Therefore, this matter is ripe for appeal.
STANDARD OF REVIEW
The proper standard of review in this case is best articulated as follows:
"The Commission's choice of sanctions is reviewed for a gross abuse of discretion. Kane v. SEC, 842 F.2d 194, 201 (8th Cir. 1988). The Commission's findings of fact must be affirmed if supported by substantial evidence. Lowell H. Listrom & Co. v. SEC, 803 F.2d 938, 941 (8th Cir. 1986). The choice of sanction may not be overturned unless we find it 'unwarranted in law or . . . without justification in fact . . . .' Kane, 842 F.2d at 201."
(Lowry v. SEC 340 F.3d 501, 504)
STATEMENT OF THE ISSUES
The issues presented in this case are:
I. Is the Commission's determination that violations of 10b-5 of the Securities and Exchange Act and 17(a) of the Securities Act supported by the substantial evidence and the law based on the official record?
II. Did the Commission ignore portions of the record which were favorable or mitigating factors in determining that Petitioner violated anti-fraud statutes in the offer of a security?
III. Did the Commission abuse its discretion by awarding sanctions far too punitive to serve a remedial or punitive purpose?
IV. Does the Commission's sanction provide a remedial purpose — the least punitive — in which to protect the public?
V. Did the Commission abuse its discretion in refusing to consider Respondent's inability to pay?
VI. Is the Commission's decision and finding in direct conflict with this circuit and sister circuits?
VII. Did the Commission err in determining that Petitioner DID NOT have a reasonable basis for choosing the exemption from the prohibition from registration?
VIII. Did the Commission err in determining that the Petitioner was not and is not entitled to rely upon the 30-state exemption?
STATEMENT OF THE CASE
This is a case where the United States Securities and Exchange Commission began an investigation after an on-site examination on January 10th-12th, 2005. The Commission's final order is the result of bias on the part of the agency and ineffective assistance of counsel on the part of Disraeli. In their decision, this agency has created a novel approach to securities fraud where it placed itself in the mind of the "Reasonable Investor" in place of nine actual investors. Petitioner filed this appeal to challenge the Commission's finding of fraud which is not supported by the substantial evidence, and the severity of the sanctions imposed, which Petitioner submits are arbitrary and capricious.
The record clearly demonstrates that the Commission failed to consider any other sanction which would achieve the same purposes as those imposed. The Commission's opinion is void of any inference drawn in favor of the Petitioner and rather than a de novo review of the entire record (which is required) is simply a rubber stamping of the Law Judge's opinion. In fact, the law judge's opinion is riddled with mistakes and legal conclusions not based on the facts, the law, or the record. The Commission's opinion fails to address any of the defects in the decision of the ALJ which were enumerated in Petitioner's brief before the Commission. The Commission's opinion makes clear that the Respondent was provided no latitude whatsoever with regard to his pro se status and shows that it refused to consider any mitigating factors or evidence in the record that struck at the heart of the questions of materiality, misstatements or omissions.
This brief will show that the Commission did not meet its burden of proving the elements of securities fraud, or that Disraeli intentionally filed false documents with the commission, and that even if true, the sanctions imposed do not satisfy the test outlined in Steadman v. SEC, 603 F.2d 1126, 1137.
STATEMENT OF FACTS
The case went before administrative law judge Brenda Murray on August 15th and 16th of 2006 and the initial decision by the ALJ was issued on March 5th, 2007. The ALJ's decision was appealed by the Respondent only and the Commission issued their final ruling on December 21, 2007. The final order found that Petitioner willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5, and that Disraeli violated Section 206 of the Investment Advisers Act of 1940 and Advisers Act Rule 206(4)-4(a)(1), by making material misstatements and omissions in the offer and sale of securities. The law judge also found that Disraeli willfully violated Advisers Act Sections 203A and 207 by registering with the Commission as an investment adviser when he did not qualify for Commission registration and by making material misstatements and omissions in his registration applications. The law judge found further that Disraeli violated Advisers Act Section 204 and Advisers Act Rules 204-2(a)(1), 204-2(a)(2), and 204-2(a)(6) by failing to maintain accurate books and records. The law judge revoked Disraeli's investment adviser registration, barred Disraeli from association with a broker, dealer, or investment adviser, imposed a $120,000 civil money penalty on Disraeli, ordered that Disraeli disgorge $84,300 plus prejudgment interest, and imposed cease-and-desist orders on Disraeli and Lifeplan. The Commission affirmed the Law judge's findings except for the penalty which was reduced to $85,000.
The ALJ admitted from the outset that she did not know why she was there, showed repeated confusion about the proceeding's main purpose, continually interrupted witnesses and counsel, and finally said she "would figure it all out later." For example, the ALJ said that Respondent's testimony was not credible and inconsistent — without any mention of what those inconsistencies were.
SUMMARY OF THE ARGUMENT
Federal securities laws provide a comprehensive framework to allow the SEC, among other things, to prevent and detect securities fraud and insure compliance from those required to be registered with the Commission. On occasion, the Commission will single someone out for what it perceives as gross violations of its statutes and rules and impose extremely harsh sanctions. The heart of this case involves primarily the offering of securities by an investment advisor to the investment advisor's own clients. This small private transaction became the subject of a protracted and expensive investigation and consequent action by the SEC. Upon investigation, the agency found very poor accounting — including commingling of the advisor's funds and expenses with the owner's funds and expenses — but not fraud.
Although the Commission cites a number of fraud statutes, they all contain the same basic elements. For example, 15 U.S.C. §77q(a) states it shall be unlawful for any person in the offer or sale of any securities to employ any device, scheme, or artifice to defraud; or to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made not misleading; or to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon the purchaser. The Commission cannot show, based on a preponderance of the evidence, that a security was offered based on a material misrepresentation or omission.
Instead, the Commission's decision is based on a subset of facts. When viewed in isolation, these facts may make a case for violation of the anti-fraud statutes cited. If, on the other hand, the Commission had considered all the evidence in the record, it should have found, at most, bookkeeping irregularities due to the fact that there were numerous mitigating factors which counseled against fraud. For example, the Commission found that $84,500 of offering proceeds wound up on Petitioner's personal checking account, a fact which is not in dispute. What is in dispute is whether Disraeli benefited to the tune of $84,500, whether this transfer was permitted, or if those funds found their way into the corporation for the business purposes outlined in the Private Placement Memorandum (hereafter "PPM" — JDA 72).
ARGUMENT
THE OFFERING
The SEC chose to isolate the transfer or loan to Disraeli, which they allege is a material omission, from the numerous disclosures which made it clear that Lifeplan Associates, Inc. may have a very short lifespan indeed. The SEC failed to weigh the omission of the loan with all the other disclosures which spoke directly to the "probable future," and more specifically the doubtful future of the company.
The proper standard for determining whether an omitted fact was material in a Rule 10b-5 case is the same as that formulated by the Supreme Court in TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976), namely, whether there is "a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of a reasonable shareholder." Harkavy v. Apparel Industries, Inc., 2 Cir., 1978, 571 F.2d 737, 741; Holmes v. Bateson, 1 Cir., 1978, 583 F.2d 542, 558 & n.20. The Court in TSC Industries stressed that materiality depends upon what a reasonable shareholder would, not might, consider important.
(SEC v. MacDonald, 699 F.2d 47, 49)
In addition to the question of materiality, the Commission fails to answer precisely how much of the offering proceeds actually went toward the running of Lifeplan Associates, and absent that, how the company was able to function and grow if their allegations were actually true. Both the ALJ's decision and the Commission's final decision are silent with regard to the funds that Disraeli did spend on business expenses. In total, Lifeplan Associates operated from September 20, 2003, until the Commission's order on December 21, 2007. This Court is being asked to believe that a startup company can operate for four years on less than $100,000 in total capital.
LINDA YODER, CPA
Both the ALJ and the Commission appear to have placed great weight on the testimony of their only staff witness, Linda Yoder. The record shows that Ms. Yoder is a CPA but has never practiced public accounting, never owned a business, and never worked in the private sector in any capacity for at least the past 25 years. Ms. Yoder's testimony is not credible and contradictory.
On JDA 50 p. 159, Ms. Yoder claims that Disraeli's records "were not true and accurate and missing a lot of entries" — without pointing to any exhibit or evidence in support. On page 161, she claims records contained "many erroneous postings" without identifying which postings. Under cross examination, Ms. Yoder confirmed that her statement about the unreliability of Lifeplan's financials was "simply a judgment call." The Division offered no proof or evidence to support her "professional judgment."
This email was sent just over 24 hours after the exam had begun. Ms. Yoder's conclusion after 24 hours in the field that Petitioner "should not be in the business" and "is reaming his clients" is in direct contradiction to her own testimony that she does not form conclusions until well after she leaves the field — and is evidence of prejudgment and bias.
ADVISERS ACT RULE 206(4)-4(a)(1)
The Commission claims that Disraeli willfully violated Rule 206(4)-4(a)(1) by failing to disclose his financial condition including his tax lien. The Commission is mistaken. The tax lien was released one month after Lifeplan became registered and had no effect on any client. The Act states that an advisor must inform his clients of any fact that is reasonably likely to impair the ability of the adviser to meet contractual obligations or requires prepayment of management fees of $500 for six months or more in advance. No client was ever required to prepay more than six months in advance. The evidence clearly demonstrates that Disraeli had managed his clients' accounts without collecting any fees for over a year. Disraeli's contracts allowed termination without notice and therefore there was no reasonable possibility that his financial condition could have impaired his contractual obligations. Disraeli therefore did not violate 206(4)-4(a)(1) and there is no evidence in the record that proves otherwise.
THE THIRTY-STATE EXEMPTION
The Commission's opinion that the purpose of Rule 203A-2(d) is designed to ensure that the exemption is available only to start-up advisers who "would be used primarily by persons who start their own advisor firms after having been employed by or affiliated with other advisers" — yet the SEC claims that Disraeli was not a new advisor because he started Lifeplan with the expectation that his old clients would agree to use him again. This contradiction is a clear sign of arbitrariness. Furthermore, Disraeli was not an investment advisor when he filed his October 8, 2003 ADV with the Commission — an indisputable fact. Therefore he was a new advisor.
According to the Staff's logic, an investment advisor would have to be separately registered in 29 states directly with each of those states' securities regulators, and then be required to register in the 30th state before he could rely on the 30-state exemption. The Staff's position proposes that an advisor could avail himself of the 30-state exemption once he is already registered in the 30 states, and therefore not in need of the 30-state exemption. In other words, the Staff's position is illogical: one can avail himself only when it is not needed. If the Court were to adopt the Staff's position, it would be presenting a philological conundrum for future advisors contemplating registration under the 30-state exemption from the prohibition from registration under the Investment Advisers Act of 1940.
MITIGATING FACTORS
The Commission has failed to acknowledge any mitigating factors that may be used in weighing appropriate sanctions. First, it is an undisputed fact that Disraeli cooperated fully with the examiners who came to examine him and with the Commission's investigation thereafter. It is also undisputed that Disraeli willingly provided precise details of the loan or transfers to the examiners, including the promissory note, and informed his clients of the investigation as soon as he became aware it was being questioned.
The Commission's own evidence shows, through subpoenaed bank records, that repayments of at least $10,996.75 did in fact take place. Disraeli's personal bank records from November 2003 through March 17, 2005, and Lifeplan's bank statements, show corresponding repayment deposits. From March 2005 through the end of 2007, Disraeli paid an additional $28,536.38, for a grand total of $39,533.13. The Commission provided Petitioner with an offset of $0 for loan repayments — factually incorrect and an abuse of discretion.
GENERAL ERRORS OF THE LAW JUDGE
Although the Commission claims to have reviewed the instant case de novo, it appears to be largely based on the findings of the ALJ and her underlying rationale. Following are a sample of gross errors contained in the law judge's initial decision:
The ID states: "On November 6, 2002, the TSSB issued an Emergency Cease-and-Desist Order, against Disraeli for conduct relating to his offer and sale of unregistered securities in the State of Texas . . . The Emergency Order found that Disraeli engaged in fraud in the offer and sale of securities." The Order No. CDO-1483 does NOT say that Disraeli offered and sold unregistered securities — only that he offered them. Hence he never collected any money.
The ID states that Disraeli "used his principal's license and became affiliated with a broker-dealer where he moved his accounts." Contrary to this, Disraeli's principal license had not been effective since October 31, 2002, and he did NOT and could not move his accounts.
The ID misstates that Respondent was subject to an 18-month suspension when he has never been suspended by any regulatory body. Rather, Disraeli agreed to withdraw and refrain from registration in Texas in exchange for a commitment that the State would not use any allegations in the agreed order against him after 18 months had passed.
The ID states: "Five investors expected that Disraeli would use the Offering proceeds in any way he saw fit, while three investors . . . would not have invested in Lifeplan if they had known that Disraeli was going to use the Offering proceeds for his personal expenses and a loan to himself." The record and stipulated exhibits show that Lenese Marek never gave any testimony, but signed an affidavit prepared by SEC staff. The law judge counts both Mareks as two investors instead of one. Both Frank Cross AND John Gauthier signed affidavits prepared by SEC staff and recanted after being given full disclosure. Therefore, a total of nine investors said they expected Disraeli to use the offering proceeds in any way he saw fit.
Footnote 53 states: "Disraeli has waived his right to claim that he is unable to pay disgorgement or a civil penalty because he did not assert this claim at the hearing." This is incorrect. Disraeli's defense was a denial of any wrongdoing — not a waiver of any right.
SANCTIONS
The Commission has not followed the teachings of this and other circuits with regard to sanction justification. The D.C. Circuit has held:
"We do not suggest the Commission must make an on-the-record finding that a sanction is remedial, but it must explain why imposing the most severe, and therefore apparently punitive sanction is, in fact, remedial, particularly in light of the mitigating factors brought to its attention." (Paz Sec. v. SEC, 494 F.3d 1059, 1065)
The Commission would end Petitioner's career, shut down his company, and order him to pay almost $170,000 that he has no way to pay. As stated, the Commission fails to consider any mitigating factors — not a single one.
"When the Commission chooses to order the most drastic remedies at its disposal, it has a greater burden to show with particularity the facts and policies that support those sanctions and why less severe action would not serve to protect investors." (Steadman v. SEC, 603 F.2d 1126, 1137)
The SEC has an arsenal of weapons to use besides the securities industry's equivalent of the death penalty. The SEC has failed to articulate why the most severe sanction is the only one that serves the purposes of the protection of the investing public. The Commission knows from prior court cases that it is required to explain in detail its choice of sanction and why no other sanction is appropriate. In this case, the Commission should not have a second bite at the apple. The Commission's sanctions should be vacated.
LACK OF EFFECTIVE ASSISTANCE OF COUNSEL
The record in this case is incomplete. Petitioner's counsel failed to adequately represent him. The record is silent on why two investors changed their minds — because Petitioner's counsel failed to call Shoshana Thoma-Isgur as a witness against Petitioner's protests. Petitioner's counsel also advised him that calling 8 of the 9 investors who claimed they were not defrauded was not necessary.
Petitioner submits that Thoma-Isgur's testimony would prove that she was not investigating the violation of securities laws — she was manipulating witnesses to tell a story she had already formed. For example, Mr. Ronnie Marek became so intimidated in Ms. Thoma-Isgur's office that he refused to be placed under oath. Later, pursuant to a subpoena, Mr. Marek did testify. Thoma-Isgur repeatedly asked Mr. Marek if he would have invested in Lifeplan Associates had he known fact a, b, or c. Mr. Marek refused to provide the testimony she wanted. Mr. Marek's own attorney then stepped in to assist her. Ms. Thoma-Isgur should be called to explain why she withheld the fact that Disraeli had negotiated his $39,000 tax lien down to $9,630 while questioning Mr. Marek.
None of the investors, as of this late date, save Mr. Marek, have asked for their money back. Mr. Marek testified that he invested with the hope of two forms of return: the discount on his management fees (which he received) and future profits from Lifeplan Associates — which has been foreclosed by the Commission.
INABILITY TO PAY
The Commission abused its discretion in its determination of Disraeli's inability to pay. The Commission on page 31 of its decision states that Disraeli waived his right to assert his inability to pay, and even if he had not, that his sworn statements were inadequate, and even if they were, it has the discretion to consider or not consider a respondent's inability to pay. Disraeli did not waive his right to assert the defense of inability to pay and did the best he could without legal counsel to meet the requirements of this defense.
The Commission erroneously states that Disraeli's net worth is slightly more than the total disgorgement and penalties — counting $250,000 of private stock in Lifeplan which was an estimate and for which there is no market. As of the filing of this brief, the stock is worthless as the company has no activity.
The Commission misreads its own Rule 630, which states that the issue of inability to pay may be brought before EITHER the Commission or the law judge and in "any proceeding in which an order for the payment of penalties may be entered." The Commission by order MAY require the filing of certain disclosures. The Commission never entered an order requiring more detailed information than that which Petitioner filed. Petitioner's right was not waived.
CERTIFICATE OF COMPLIANCE
Petitioner certifies that this brief complies with the type volume requirements of Circuit Rule 32(a)(7)(B) and (C). The brief was prepared with Microsoft Word, has 1,264 lines of text and 11,995 words.
PRAYER FOR RELIEF
For all the reasons stated in this brief, Petitioner prays that this Court vacate the decision of the Commission, or alternatively remand the case for the limited purpose of adducing additional evidence for which there was a reasonable failure to do so previously.
 
Respectfully Submitted,
 
David H. Disraeli, Pro Se
1525 Cypress Creek Rd., Suite H-109
Cedar Park, TX 78613
FAX: 512.857.0844
 
Filed: March 12, 2008
CERTIFICATE OF SERVICE
I, David H. Disraeli, certify that I caused a copy of this brief for Petitioner to be delivered to the Securities and Exchange Commission via their attorney of record, Alan Capute, on March 12, 2008 via electronic mail and U.S. First Class Mail: 100 F Street, NE, Washington, DC 20549-8010.