Fed. Sec. L. Rep. P 99,004 United States of America v. Paul F. Kendrick

Appellant Paul F. Kendrick, a stockbroker, appeals from his conviction following jury trial of two counts of violating federal securities laws and one count of perjury. On appeal appellant makes many assignments of error. The principal issue presented is whether the actions taken by him in connection with margin accounts of two of his customers were taken “in connection with the purchase or sale” of securities in violation of § 10(b) of the Securities Exchange Act of 1934,15 U.S.C. § 78j(b) and Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240 .10b-5.

I.

Appellant in 1970 formed his own firm, Kendrick & Co., with its office in San Francisco, California. Appellant was the chief executive officer and principal shareholder. In 1971, Kendrick & Co. was licensed by the SEC. For two of its customers, Laurence Spitters and the Congregation of the Passion (a Roman Catholic religious order), Kendrick & Co. established margin accounts with Dean Witter & Co. in San Francisco, each of which accounts was secured by pledged securities owned by the customer and placed in the hands of Dean Witter. Dean Witter looked to appellant for instructions in the advancing of funds…