United States Securities and Exchange Commission v. H. Thomas Fehn

This appeal requires us to apply Section 104 of the recently enacted Private Securities *1280 Litigation Reform Act of 1995, which expressly authorizes the Securities and Exchange Commission (“SEC”) to bring injunc-tive actions against those who aid and abet violations of certain securities laws.

California attorney H. Thomas Fehn appeals the district court’s final judgment and permanent injunction order of April 1, 1994, which ordered Fehn to refrain from aiding and abetting violations of Section 10(b) and Section 15(d) of the Securities Exchange Act of 1934 and related regulations. Fehn advances three distinct challenges to the district court’s injunction. He first contends that the Supreme Court’s decision in Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), which held that a private plaintiff may not maintain an action for aiding and abetting violations of Section 10(b) of the Securities Exchange Act, should extend to SEC injunctive actions like the one that precipitated this case. Fehn argues, in the alternative, that even if Central Bank does not preclude the SEC’s injunctive action against him, the district court erroneously concluded that he aided and abetted violations of Section 10(b) and Section 15(d) and related regulations. Finally, Fehn contends that the district court abused its discretion in entering a permanent injunction against him.

We have jurisdiction over this appeal from a final judgment pursuant to 28 U.S.C. § 1291. We hold that extension of Central Bank to SEC injunctive actions is barred by Section 104 of the recently enacted Private Securities Litigation Reform Act of 1995, Pub.L. 104-67, 109 Stat. 737 (1995). We affirm the district court’s permanent injunction order because we conclude that the court correctly found that Fehn had aided and abetted violations of Section 10(b) and Section 15(d) of the Securities Exchange Act and related regulations, and did not abuse its discretion in permanently enjoining him from future aiding and abetting violations.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Initial Public Offering by CTI Technical, Inc.

CTI Technical, Inc. was incorporated in Nevada in January 1987 by its promoter, Las Vegas resident Edwin “Bud” Wheeler. Although Wheeler directed CTI’s operations from the date of its incorporation, his status as company president and chief executive officer was not disclosed publicly until August 1988. In June 1987, seeking to raise capital to acquire other businesses, CTI conducted a $200,000 “blind pool” initial public offering of securities (“IPO”).

The CTI offering was tainted by violations of state and federal securities laws. First, CTI violated state blue sky laws by failing to register its securities with the states in which those securities were sold. Second, although CTI filed a Form S-18 registration statement with the SEC, 1 it violated the Securities Act of 1933 and SEC regulations 2 by failing to disclose that Wheeler was the promoter of the company and controlled its nominal directors. Finally, Wheeler and Stoneridge Securities, Inc., underwriter for the IPO, attempted to defraud investors by manipulating the price of the securities in aftermarket trading.

II. The SEC Investigation of CTI’s Initial Public Offering

In early 1988, the SEC launched a formal investigation of CTI’s IPO. That investigation was to culminate in the SEC’s September 1989 complaint against CTI and Wheeler. As a result of the SEC’s action, the defendants consented to a permanent injunction against future securities laws violations, and Wheeler was convicted of securities fraud for misstatements and omissions in CTI’s registration statement. 3

*1281 In connection with the SEC investigation, defendant-appellant Fehn was retained to represent CTI and Wheeler, as well as CTI’s underwriter and various CTI officers and directors. Fehn is a California attorney who has specialized in securities law during nearly three decades of practice. He has represented clients in connection with the registration and offering of securities under the Securities Act of 1938, compliance with reporting and disclosure requirements under the Securities Exchange Act of 1934, and litigation of various securities matters. Prior to Fehn’s retention in connection with the SEC investigation, Fehn’s law firm had represented underwriter Stoneridge Securities during CTI’s IPO.

During the SEC investigation of CTI and Wheeler, Fehn became aware that CTI was not in compliance with certain reporting requirements of the Securities Exchange Act of 1934. First, Fehn learned that after the IPO, CTI had failed to file Form 10-Q quarterly reports as required by Section 15(d) of the Securities Exchange Act and related regulations. Second, Wheeler’s investigative testimony before the SEC revealed that the Food and Drug Administration had banned sales of a diet product known as “Accupatch,” CTI’s main product and the source of gross sales of $1 million a month, and had impounded CTI’s existing inventory of the product. CTI’s registration documents, however, failed to disclose these FDA actions.

Fehn advised Wheeler that CTI was required to file the quarterly Form 10-Q’s, and that it must disclose, in particular, the FDA’s restriction of its Accupatch product. He also discussed with Wheeler whether the Securities Exchange Act required disclosure, in the Form 10-Q’s, of Wheeler’s and CTI’s apparent violations of the Securities Act of 1933 in connection with the IPO. Wheeler flatly refused to make such disclosures. Fehn later testified that he told Wheeler it was his professional opinion that such disclosures were unnecessary under the regulations, and furthermore could impair Wheeler’s ability to assert his Fifth Amendment privilege against self-incrimination with respect to those earlier violations.

Because Wheeler wished to limit CTI’s expenses, he had a non-lawyer employee of CTI — rather than Fehn — draft the Form 10-Q’s. Fehn gave Wheeler a copy of Regulation S-K, which outlines disclosure requirements for Form 10-Q, an instruction booklet describing how to fill out a Form 10-Q, and a sample Form 10-Q. The employee prepared a draft of the Form 10-Q for the quarter ending March 31, 1988, which disclosed the FDA’s ban on CTI’s Accupatch product. However, the Form 10-Q mischaracterized Wheeler’s true role in CTI, describing him as CTI’s recently appointed CEO and president rather than the individual who in fact had promoted, incorporated, and controlled the company since its inception. The form also failed to disclose the potential civil liability stemming from Wheeler’s and CTI’s earlier violations of state and federal securities laws. Fehn reviewed and edited the draft of the Form 10-Q, incorporating financial statements he had obtained from CTI’s accountant. Fehn maintains that he made no substantive changes to the document, and, in particular, did not delete from the report any information the SEC later contended was improperly omitted. Fehn’s secretary mailed the final Form 10-Q to the SEC, where it was filed in August 1988.

Based on CTI’s Form 10-Q for the quarter ending March 31, 1988, Fehn’s law firm prepared and mailed two other Form 10-Q’s, for the quarters ending December 31, 1987, and June 30, 1988, respectively. These forms, too, mischaracterized Wheeler’s relationship to CTI, and failed to mention contingent liabilities stemming from CTI’s and Wheeler’s earlier securities law violations. Fehn insists that his involvement in the preparation of these later Form 10-Q’s was minimal, but the SEC points out that editing notations in Fehn’s handwriting appeared on drafts of these Form 10-Q’s. These Form 10-Q’s were filed in November 1988.

III. The SEC Injunctive Action Against Fehn

In November 1992, the SEC filed a complaint against Fehn, alleging that in preparing and filing the three Form 10-Q’s, Fehn had aided and abetted violations of Sections *1282 10(b) and 15(d) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b) and 78o(d), and violations of Rules 10b-5, 12b-20, and 15d-13, 17 C.F.R. §§ 240.10b-5, 240.12b-20, and 240.15d-13. Pursuant to Section 20(b) of the Securities Act of 1933, 15 U.S.C. § 77t(b), and Sections 21(d) and 21(e) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78u(d) and 78u(e), the SEC brought an action to permanently enjoin Fehn from future securities laws violations. The SEC alleged that CTI and Wheeler had violated Section 10(b) and Section 15(d) by preparing and filing Form 10-Q’s that contained false accounts of Wheeler’s role in the promotion, formation and management of CTI and his control over CTI stock and directors, and failed to disclose “material contingent liabilities” stemming from CTI’s violations of state and federal securities laws in connection with its 1987 IPO. Additionally, the SEC alleged that Fehn had knowingly lent “substantial assistance]” to Wheeler and CTI in the preparation and filing of the faulty Form 10-Q’s.

On April 1, 1994, following a bench trial, the district court entered final judgment against Fehn, based on its findings that Fehn had aided and abetted violations of Sections 10(b) and 15(d) of the Securities Exchange Act, the Act’s antifraud and reporting provisions, respectively, along with Rules 10b-5, 12b-20, and 15d-13. Because it concluded that there was a reasonable likelihood of future violations on Fehn’s part, the district court entered an order permanently enjoining Fehn from future aiding and abetting violations of the securities laws. Fehn timely appealed.

ANALYSIS

Fehn raises three challenges to the district court’s permanent injunction order. First, he argues that the Supreme Court’s decision in Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), issued just two weeks after the permanent injunction order in this case, precludes SEC injunctive actions such as the one brought against him. Failing that challenge, he argues that the district court erred in finding that he aided and abetted violations of Sections 10(b) and 15(d) of the Securities Exchange Act and related regulations. Finally, he insists that the district court abused its discretion in entering a permanent injunction against him.

I. The SEC’s Authority to Enjoin Aiding and Abetting Violations of the Securities Laws after Central Bank

Because Fehn’s challenge to the SEC’s injunctive authority presents a question of law, we review this issue de novo. Campbell v. Wood, 18 F.3d 662, 681 (9th Cir.) (en banc), cert. denied, — U.S. -, 114 S.Ct. 2125, 128 L.Ed.2d 682 (1994).

We note that Fehn’s argument may well be precluded by recent congressional action. Concerned that Central Bank might be extended to eliminate the SEC’s power to enjoin aiding and abetting violations, Congress recently enacted legislation reinforcing the SEC’s authority to enjoin the aiding and abetting of primary violations of several securities laws. 4 That legislation, Section 104 of the Private Securities Litigation Reform Act of 1995, Pub.L. 104-67, 109 Stat. 737 (1995), appears to prevent lower federal courts from extending the logic of Central Bank to SEC injunctive actions.

A. Section 104 of the Private Securities Litigation Reform Act of 1995

Section 104 of the Private Securities Litigation Reform Act amended the heading to 15 U.S.C. § 78t by inserting the underlined portion: “Liability of controlling persons and persons who aid and abet violations.” Section 104 also added an entire new subsection to 15 U.S.C. § 78t. New subsection 78t(f) reads:

(f) Prosecution of persons who aid and abet violations

For purposes of any action brought by the Commission under paragraph (1) or (3) of *1283 Section 78u(d) of this title, 5 any person that knowingly provides substantial assistance to another person in violation of a provision of this chapter, or of any rule or regulation issued under this chapter, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided.

By its clear terms, Section 104 provides that aiding and abetting a violation of Chapter 2B, which encompasses 15 U.S.C. § 78a through § 78kk, is itself a violation, and as such is subject to injunctive actions and civil actions for money penalties by the SEC under 15 U.S.C. §§ 78u(d)(l) and 78u(d)(3). Both Section 10(b), 15 U.S.C. § 78j(b), and Section 15(d), 15 U.S.C. § 78o(d), fall within Chapter 2B. Section 104 of the Private Securities Litigation Reform Act thus authorizes SEC injunctive actions for the aiding and abetting of violations of Sections 10(b) and 15(d) and related regulations, and thereby reverses any impact Central Bank might have had on the SEC’s power to enjoin aiding and abetting of these securities provisions.

Legislative history confirms that Section 104 was intended to override Central Bank’s apparent elimination of the SEC’s power to enjoin the aiding and abetting of securities law violations. Discussion of the proposed legislation is contained in Senate Banking Committee Report No. 104-98 on the Senate version of the bill, S. 240. That report makes clear the drafters’ intent to authorize the SEC to enjoin those who aid and abet such violations:

Prior to the Supreme Court’s decision in Central Bank of Denver v. First Interstate Bank of Denver, courts of appeals had recognized that private parties could bring actions against persons who “aided and abetted” primary violators of the securities laws. In Central Bank, the Court held that there was no aiding and abetting liability for private lawsuits involving violations of the securities antifraud provisions.

The Committee considered testimony endorsing the result in Central Bank and testimony seeking to overturn this decision. The Committee believes that amending the 1934 Act to provide explicitly for private aiding and abetting liability actions under Section 10(b) would be contrary to S. 240’s goal of reducing meritless securities litigation. The Committee does, however, grant the SEC express authority to bring actions seeking injunctive relief or money damages against persons who knowingly aid and abet primary violators of the securities laws.

S.Rep. No. 98, 104th Cong., (1995) (emphasis added).

The Conference Report adopted S. 240’s Section 104 as part of the combined bill, H.R. 1038. See 141 Cong. Rec. S17,965-03, *S17,-984 (daily ed. Dec. 5,1995) (statement of Sen. Moseley-Braun). Although the Conference Report does not discuss the purpose of Section 104, floor statements by several senators consistently describe Section 104 as a provision to reinstate the SEC’s power to enjoin the aiding and abetting of the securities laws. Introducing the conference bill, Senator D’Amato remarked:

The conference report also reinstates the SEC’s authority — which the Supreme Court put into question in the Central Bank of Denver case — to bring actions against defendants who knowingly aid and abet securities fraud.

141 Cong. Rec. S17,933-04, *S17,934 (daily ed. Dec. 5, 1995) (statement of Sen. D’Ama-to).

Sen. Dodd stated that the legislation:

restores enforcement authority to the Securities and Exchange Commission. That was lost ... in the 1994 Supreme Court case, the Central Bank case. We, in this bill, restore what the Central Bank took away from the SEC here.

[T]he bill restores the ability of the Securities and Exchange Commission to pursue those who knowingly aid and abet securities fraud.

*1284 141 Cong. Rec. S17,933-04, *S17,957 (daily ed. Dec. 5, 1995) (statement of Sen. Dodd).

Sen. Reid noted that “[t]he compromise agreement authorizes the SEC to bring enforcement actions against those who aid and abet a securities fraud, thus reversing the Supreme Court’s Central Bank decision as it applies to the SEC.” 141 Cong. Rec. S17,-965-03, *S17,977 (daily ed. Dec. 5, 1995) (statement of Sen. Reid).

Finally, in complaining about the bill’s failure to create an express private cause of action against aiders and abettors, Sen. Sar-banes stated:

This bill, unfortunately, restores only the SEC’s ability to go after aiders and abettors of violations of the securities laws and then only in part — only in part. The provision in the bill is limited to violations of section 10(b) of the Securities Exchange Act and to defendants who act knowingly.

141 Cong. Rec. S17,933-04, *S17,937 (daily ed. Dec. 5, 1995) (statement of Sen. Sar-banes).

These statements by legislators reinforce our conclusion that Section 104, by its terms, empowers the SEC to enjoin the aiding and abetting of “violation[sj of .. provision[s] of [[CJhapter 2B], or of any rule or regulation issued under [[CJhapter 2B],” which includes 15 U.S.C. § 78a through § 78kk. Section 104 thus covers the type of injunctive action in this case, which sought to enjoin Fehn’s alleged aiding and abetting of violations of Section 10(b) and Section 15(d) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b) & 78o(d). Given the unique timing of events in this case, however, we must determine if Section 104 applies to the events underlying this particular injunctive action.

B. Whether Section 104 of the Private Securities Litigation Reform Act of 1995 Applies to this Case

A threshold consideration is whether Section 104 applies to this appeal, which was argued before Section 104 was enacted. The district court’s final judgment against Pehn and permanent injunction order were entered April 1, 1994. At that moment, it was the well-settled law of this Circuit that there existed a private right of action for aiding and abetting violations of Section 10(b). See Hauser v. Farrell, 14 F.3d 1338, 1343 (9th Cir.1994). 6 Just eighteen days later, on April 19, 1994, the Supreme Court issued its decision in Central Bank, eliminating the implied private cause of action for aiding and abetting violations of Section 10(b) of the Securities Exchange Act. This decision, which was premised on the Court’s conclusion that the statute did not prohibit aiding and abetting, threw into doubt the viability of SEC injunctive actions like the one brought against Fehn. Central Bank, 511 U.S. at -, 114 S.Ct. at 1455. 7 Fehn thereafter appealed to this Court, arguing that Central Bank should extend to SEC injunctive actions. On December 22, 1995, two months after oral argument in this appeal, Congress overrode a presidential veto to enact the Private Securities Litigation Reform Act of 1995. Section 104 of the Act prohibits precisely what Fehn seeks in this appeal: the extension of Central Bank to SEC injunctive actions.

This sequence of events is unusual in that the SEC’s authority to enjoin aiding and abetting existed at the time of the final judgment against Fehn, was arguably precluded two weeks later by Central Bank, and was reinstated several weeks after the appeal was argued. Although the Private Securities Lit *1285 igation Reform Act does not expressly make Section 104 applicable to conduct and events that precede its enactment, principles governing the retrospective application of statutes indicate that Section 104 applies to Fehn’s appeal.

In Landgraf v. USI Film Products, 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), the Supreme Court clarified the proper analysis for deciding whether a statute enacted while an appeal is pending should apply to events and conduct that occurred before that statute’s enactment. The Court’s treatment of this problem had long been fraught with confusion stemming from the clash of two “seemingly contradictory” default rules that come into play where statutes “do not specify their temporal reach.” Landgraf, 511 U.S. at -, 114 S.Ct. at 1496. The first default rule is that “a court is to apply the law in effect at the time it renders its decision.” Id. (quoting Bradley v. School Bd. of Richmond, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974)). The second, conflicting, default rule is that “ ‘[r]etroactivity is not favored in the law,’ ” and this principle carries the “interpretive corollary that ‘congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result.’ ” Id. (quoting Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208, 109 S.Ct. 468, 471, 102 L.Ed.2d 493 (1988)).

In Landgraf, the Court set forth an analysis intended to resolve this conflict. Land-graf described a two-step analysis for determining whether to apply an intervening civil statute to events that precede its enactment. When a case implicates a federal civil statute enacted after the events in suit, a court’s first task is to determine “whether Congress has expressly prescribed the statute’s proper reach.” Id., at -, 114 S.Ct. at 1505. If Congress has done so, “there is no need to resort to judicial default rules,” since the statute guides its application. Id. If, however, “the statute contains no such express command, the court must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.” Id. If the statute has “retroactive effect,” explained the Court, “our traditional presumption teaches that it does not govern absent clear congressional intent favoring such a result.” Id.

In this case, the Private Securities Litigation Reform Act, enacted December 22,1995, does not “expressly prescribe[ ] [Section 104’s] proper reach.” Id. Within Title I of the Act, which contains Section 104, Section 108, a note entitled “Applicability,” provides:

The amendments made by this title shall not affect or apply to any private action arising under title I of the Securities Exchange Act of 1934 or title I of the Securities Act of 1933, commenced before and pending on the date of enactment of this Act.

Section 108, Pub.L. 104-67, 109 Stat. 737 (1995) (emphasis added).

Although Section 108 provides that the Act is to apply to “private” actions only from the date of enactment, the provision is silent with respect to actions by the'SEC. Because the Act contains no “express[ ] prescription]” as to Section 104’s temporal scope, we therefore “must determine whether [Section 104] [has] retroactive effect.” Landgraf, 511 U.S. at -, 114 S.Ct. at 1505.

To ease the tension,between the Bradley default rule (“a court is to apply the law in effect at the time it renders its decision,” Bradley, 416 U.S. at 711, 94 S.Ct. at 2016), and the presumption against retroactivity (“congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result,” Bowen, 488 U.S. at 208, 109 S.Ct. at 471), Landgraf clarified the definition of “retroactive” or “retrospective,” terms the Court used interchangeably. It explained that “[a] statute does not operate ‘retrospectively’ merely because it is applied in a case arising from conduct antedating the statute’s enactment,” or “upsets expectations based in prior law.” Landgraf, 511 U.S. at -, 114 S.Ct. at 1499 (citation omitted). Instead, the test of retroactivity is “whether the new provision attaches new legal consequences to events completed before its enactment.” Id. (emphasis added).

*1286 Deciding whether retroactivity exists, explained the Court, is a fact-intensive inquiry:

The conclusion that a particular rule operates ‘retroactively5 comes at the end of a process of judgment concerning the nature and extent of the change in the law and the degree of connection between the operation of the new rule and a relevant past event. Any test of retroactivity will leave room for disagreement in hard cases, and is unlikely to classify the enormous variety of legal changes with perfect philosophical clarity.

Id. (emphasis added). Factors that should guide courts include “familiar considerations of fair notice, reasonable reliance, and settled expectations.” Id. 8

Applying the Landgraf analysis here, it appears Section 104 does not “attach new legal consequences” to the events underlying the SEC’s injunction of Fehn. Indeed, Section 104 may be said to restore the legal consequences that obtained at the time of the district court’s judgment against Fehn, but that may have been temporarily eliminated by the Central Bank decision. It therefore does not “impair rights [Fehn] possessed when he acted, increase [Fehn’s] liability for past conduct, or impose new duties [on Fehn] with respect to transactions already completed.” Id., at -, 114 S.Ct. at 1505. We need not address whether Section 104, in expressly authorizing SEC injunctive actions for aiding and abetting other violations of Chapter 2B, creates wholly new legal consequences, since the SEC’s power to enjoin aiding and abetting violations of Sections 10(b) and 15(d) antedated Section 104. See Hauser, 14 F.3d at 1343 (aiding and abetting liability under Section 10(b)); SEC v. Arthur Young & Co., 590 F.2d 785, 786 (9th Cir.1979) (aiding and abetting liability under Section 15(d)).

Moreover, in the context of Fehn’s appeal, Section 104 lacks the features that make application of a civil statute to antecedent events objectionable. The rationale under-girding the “presumption against retroactive legislation” has little relevance to the unusual sequence of events in this case. Id., at -, 114 S.Ct. at 1497. The presumption against retroactive legislation is grounded in “[elementary considerations of fairness,” which “dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly,” and which require that “settled expectations [] not be lightly disrupted.” Id. In this case, Fehn’s expectations have not been defeated: at the time the SEC launched its investigation of his activities, Central Bank had not yet been decided and Fehn therefore had every reason to expect that the SEC had the authority to enjoin the aiding and abetting of violations of Sections 10(b) and 15(d) of the Securities Exchange Act. Although Central Bank ignited a temporary hope that Fehn might be able to avoid the injunction, Congress rather swiftly undid any effect Central Bank had on the SEC’s injunctive authority.

Finally, Landgraf articulated another principle that makes the application of Section 104 to this ease appropriate. In refining the definition of “retroactivity,” the Landgraf court enumerated several exceptions to the general presumption against retroactivity, explaining that “[e]ven absent specific legislative authorization, application of new statutes passed after the events in suit is unquestionably proper in many situations.” Id., at -, 114 S.Ct. at 1501. One such *1287 exception has particular relevance here. This exception provides that where the new statute “authorizes or affects the propriety of prospective relief,” the “application of the new provision is not retroactive.” Id. (emphasis added). Intervening statutes that grant injunctive power fall under this category because “ ‘relief by injunction operates in futuro.’ ” Id. (citing American Steel Foundries v. Tri-City Central Trades Council, 257 U.S. 184, 201, 42 S.Ct. 72, 75, 66 L.Ed. 189 (1921)). In American Steel Foundries, the Court held that Section 20 of the Clayton Act, enacted while the case was pending on appeal, governed the propriety of injunctive relief against labor picketing. It remanded the case for application of the intervening statutory provision, which limited district courts’ powers to enjoin labor picketing. 9

Section 104, as applied to this case, falls within that exception to the definition of ret-roactivity recognized by the Landgraf court: In authorizing the SEC to enjoin aiding and abetting, Section 104 “authorizes or affects the propriety of prospective relief.” Landgraf, 511 U.S. at -, 114 S.Ct. at 1501. Because Fehn’s appeal implicates only the SEC’s injunctive authority under the new statute, we need not address that portion of Section 104 authorizing the SEC to seek money penalties in civil actions for aiding and abetting violations of the securities laws. Based on the principles set forth in Land-graf, we conclude that we must apply Section 104 of the Private Securities Litigation Reform Act to Fehn’s appeal. We turn next to that task.

C. The Impact of Section 104 on Fehn’s Central Bank Argument

Having concluded that we must apply Section 104 of the Private Securities Litigation Reform Act to this appeal, we first examine its impact on Fehn’s assertion that Central Bank implicitly precludes the SEC’s injunc-tive action in this case. As we explained above, Section 104 expressly authorizes the SEC to bring injunctive actions against aiders and abettors of securities law violations. Congress responded rapidly and resoundingly to the Supreme Court’s elimination of private actions against aiders and abettors of securities law violations. In enacting Section 104, Congress flatly barred the judicial extension of Central Bank to impede SEC enforcement actions against aiders and abettors. In light of Congress’ emphatic repudiation of Central Bank in the context of SEC injunctive actions, we reject Fehn’s first challenge to the permanent injunction.

Fehn also argues that his actions did not constitute aiding and abetting under Section 10(b) and Section 15(d) of the Securities Exchange Act, and that the district court abused its discretion in permanently enjoining him from future violations. We turn next to consider the merits of these arguments.

II. Whether the District Court Erred in Finding Fehn Liable for Aiding and Abetting Violations of Section 10(b) and Section 15(d) of the Securities Exchange Act and Related Regulations

Before addressing Fehn’s contention that the district court erred in permanently enjoining him from future aiding and abetting violations of Sections 10(b) and 15(d) of the Securities Exchange Act, we must first ascertain the elements of aiding and abetting liability under Section 104 of the Private Securities Litigation Reform Act.

A. The Elements of Aiding and Abetting Liability under Section 104 of the Private Securities Litigation Act of 1995

In authorizing the SEC to pursue injunc-tive actions for aiding and abetting violations of certain securities laws, Congress provided that Section 104 governs the “[liability of controlling persons and persons who aid and abet violations.” Section 104 provides:

(f) Prosecution of persons who aid and abet violations For purposes of any action *1288 brought by the Commission under paragraph (1) or (3) of Section 78u(d) of this title, 10 any person that knowingly provides substantial assistance to another person in violation of a provision of this chapter, or of any rule or regulation issued under this chapter, shall be deemed to be in violation of such provision to the same extent as the person to whom such assistance is provided, (emphasis added)

We note that Congress employed language identical to that used by lower federal courts in articulating the elements of aiding and abetting under Section 10(b) before Central Bank eliminated private causes of action for aiding and abetting. Before Central Bank, the elements of aiding and abetting under Section 10(b) were: (1) the existence of an independent primary violation; (2) actual knowledge by the alleged aider and abettor of the primary violation and of his or her own role in furthering it; 11 and (3) “substantial assistance” by the defendant in the commission of the primary violation. Hauser, 14 F.3d at 1343. The new Section 104 defines aiding and abetting as follows: (1) the defendant acted “knowingly,” (2) the defendant “provide[d] substantial assistance,” and (3) that assistance was given “to another person in violation of a provision of this chapter, or of any rule or regulation issued under this chapter.” The elements of the new Section 104 clearly mirror the elements this Court and others traditionally used to define aiding and abetting under Section 10(b). In our view, the symmetry between the elements of aiding and abetting before Central Bank and after Section 104 is a strong indication that Congress intended Section 104 to preserve the definition of aiding and abetting as it existed pre-Central Bank.

The legislative history surrounding Section 104 bolsters our conclusion. The statements contained in that history consistently make clear that the amendment’s purpose is to negate any effect Central Bank might have had on the SEC’s authority to bring injunc-tive actions against aiders and abettors of certain securities law violations. Based on the language of the new Section 104 and its legislative history, we conclude that Section 104 simply restores the pre-Central Bank status quo with respect to SEC injunctive actions.

The elements of aiding and abetting under Section 15(d) are more difficult to discern, simply because there are virtually no pre- Central Bank decisions among the lower federal courts defining aiding and abetting liability for violations of Section 15(d). In this Circuit, Arthur Young recognized aiding and abetting liability under Section 15(d), but did not enumerate what the SEC must prove to establish it. Arthur Young, 590 F.2d at 786. As noted above, however, Section 104 employs the distinctive language defining the elements of aiding and abetting under Section 10(b). Based on the language of the new Section 104, we conclude that application of a similar test is appropriate in the context of Section 15(d), namely: (1) the existence of an independent primary violation; (2) actual knowledge by the alleged aider and abettor of the primary violation and of his or her own role in furthering it; and (3) “substantial assistance” in the commission of the primary violation. Hauser, 14 F.3d at 1343 (setting forth elements of aiding and abetting liability under Section 10(b)).

B. Whether Fehn Aided and Abetted Violations of Sections 10(b) and 15(d) of the Securities Exchange Act and Related Regulations

Fehn’s challenge to the district court’s final judgment is multi-faceted. First, he contends that the district court erred in finding primary violations of Sections 10(b) and 15(d) of the Securities Exchange Act, insisting that *1289 these provisions and their implementing regulations did not require disclosure of Wheeler’s role as promoter, or of the contingent liabilities stemming from CTI’s and Wheeler’s earlier securities law violations. In the alternative, he contends that such a disclosure requirement was trumped by Wheeler’s Fifth Amendment privilege against self-incrimination. He also argues that Wheeler lacked the requisite scienter for commission of the primary violation. Second, Fehn argues that, even if there were primary violations of Sections 10(b) and 15(d) and related regulations by CTI and Wheeler, Fehn did not “substantial[ly] assist” those violations. Finally, he insists that he did not possess the requisite scienter for aiding and abetting liability because his professional advice to CTI and Wheeler was offered in good faith. We review de novo the district court’s conclusions of law, and we review for clear error its findings of fact. Campbell,