J. C. Cowdin, a director of Curtis-Wright Co., phoned Robert Gintel, a partner of Cady, Roberts & Co., a stock brokerage house, and advised him that Curtis-

Wright’s quarterly dividend had been cut. Gintel immediately entered orders selling Curtis-Wright shares for his customers’ accounts. The stock was selling at over $40 a share when the orders were executed but fell to $30 soon after the dividend cut was announced to the public. The SEC contended that the firm, Cady, Roberts & Co., and Gintel violated section 10

(b) of the 1934 act, Rule 10b-5, and section 17

(a) of the 1933 act. Gintel and Cady, Roberts & Co.

disagreed. Decide. [In re Cady, Roberts & Co., 40 SEC 907]

AppendixLO1