This litigation challenges the validity of action taken by the Securities and Exchange Commission against the appellant company, a registered broker-dealer in securities, which has specialized in underwriting securities pursuant to Regulation A of the Commission. Under Regulation A, speaking generally, public offerings of $300,000 or less are exempt from the principal registration requirements of the Federal securities legislation.1 On the basis of material reported to it by its staff, the appellee Commission on September 16, 1960, temporarily suspended the Regulation A exemption for the stock of Pearson Corporation, underwritten by appellant, and ordered hearings under its Rule 261 as to whether the suspension should be made permanent.2 On September 26, 1960, the Commission instituted proceedings to determine whether grounds were present to revoke or suspend Holman's registration as a broker and dealer in securities. The registration and the Regulation A suspension proceedings were combined on October 31, 1960, and additional violations of the securities laws were alleged on November 15, 1960.3 Hearings commenced on December 16, 1960, and have been continuing intermittently.

The Commission order of September 16, 1960, which temporarily suspended the Regulation A exemption, brought Rule 252(e)(2), which is included in Regulation A, into operation. This Rule provides:

'(e) No exemption under this regulation shall be available for the securities of any issuer if any underwriter of such securities, or any director, officer or partner of any such underwriter was, or was named as, an underwriter of any securities--

'(2) covered by any filing which is subject to pending proceedings under Rule 261 or any similar rule adopted under section 3(b) of the Act, or to an order entered thereunder within five years prior to the filing of such notification.'

The Rule thus automatically disqualified appellant from engaging in the distribution of securities under the privileges given by Regulation A. The disqualification will be removed if the Commission upon completion of the proceedings under Rule 261 decides to revoke the suspension order.

Appellant brought suit in the District Court on June 13, 1961, contending that Rule 252(e)(2) is invalid because it deprives Holman of a substantial going business without notice or hearing. The complaint also charges that the Commission's proceedings are void because the order precipitating them was issued without a quorum and because of alleged ex parte communications by the Commission staff to members of the Commission. Appellant's requests for an injunction against continuation of Commission proceedings, and for a declaratory judgment holding Rule 252(e)(2) invalid, were denied by the District Court. Appellant's motions for a preliminary injunction and a stay of the Commission's proceedings were also denied.4

The threshold question is whether the District Court had jurisdiction to grant the relief requested. We believe it did as to the Rule 252(e)(2) issue, for reasons to be given presently. But we think that it lacked jurisdiction on the question of the procedural irregularities in the Commission proceedings alleged by appellant. Section 25 of the Securities Exchange Act of 1934, 15 U.S.C.A. 78y, and Section 9 of the Securities Act of 1933, 15 U.S.C.A. 77i, both provide for direct review in the Courts of Appeals of Commission orders. Appellant has permitted the sixty-day period, within which it might have sought review in a Court of Appeals, to expire. That statutory route certainly is applicable where mere procedural errors of the kind asserted by Holman are involved. Cf. American Sumatra Tobacco Corp. v. Securities and Exchange Commission, 68 App.D.C. 77, 93 F.2d 236 (1937); Securities and Exchange Commission v. Andrews, 88 F.2d 441 (2d Cir. 1937). The allegations made here-- as to lack of a quorum and as to ex parte communications-- even if true, are not necessarily of a fundamental nature, and the evidence developed in the hearing may prove to be such that, in the context of the whole case, the procedural irregularities will not amount to reversible error. Cr. UNA Chapter, Flight Engineers' International Ass'n AFL-CIO v. National Mediation Board, 111 U.S.App.D.C. 121, 294 F.2d 905 (1961). Allowing the Commission a prior opportunity to decide these matters avoids agency delay and gives the Commission a chance to correct its own errors. It may also, of course, eliminate any need for court review if the Commission eventually decides in Holman's favor.

On the other hand, Holman's challenge in the District Court to Rule 252(e)(2) would not seem to be precluded by the statutory provision for review by a Court of Appeals. Holman does not, in this suit, contest the validity of the temporary suspension of the Pearson issue, as such. Appellant's real attack is not against the suspension 'order,' which if final might have been subject to direct appellate review,5 but against the consequence resulting from the operation of a separate rule, which followed from the temporary suspension. It therefore seems highly unlikely that Holman would have been permitted to obtain review of the temporary suspension order immediately and directly in this court.6 But if Rule 252(e)(2) is invalid, Holman's business will have been extensively and perhaps irremediably damaged long prior to review of a final order.

We do not read the statutes which provide for direct review by this court as being exclusive where an order in itself is not being challenged, and where relief from its allegedly unconstitutional consequences might come too late. On the contrary, this would seem to be precisely the kind of situation where a direct test of the rule in a declaratory judgment proceeding would seem appropriate. Such a procedure is not only expeditious, but seems clearly within the intention and terms of both the Declaratory Judgments Act, 28 U.S.C. 2201, and Section 10(b) of the Administrative Procedure Act, 5 U.S.C.A. 1009(b). See B. F. Goodrich Co. v. Federal Trade Commission, 93 U.S.App.D.C. 50, 208 F.2d 829 (1953); Parker v. Lester, 227 F.2d 708 (9th Cir. 1955).

Appellee argues that appellant has not exhausted its administrative remedy under Rule 252(f), which provides that 'upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied,' the disqualifying provisions of Rule 252(e)(2) shall not apply. We agree with Holman that the remedy provided by Rule 252(f) is inadequate to give it full relief. In effect, that Rule gives the Commission discretion to remove the Rule 252(e)(2) disqualification with respect to a particular issue. Resort to it is accordingly not a mandatory prerequisite to this suit, which seeks relief of much broader nature.

We think that the District Court had, and we now have, jurisdiction to consider and decide the question whether Rule 252(e)(2) is invalid because it deprives Holman of a going business without notice or hearing.7 We now turn to that question.

Holman appears to be making two assumptions about the question. The first assumption is that a hearing is required prior to the taking of agency action of the present sort. The second is that the mere bringing of charges cannot lawfully result in any serious consequence to the person charged. Neither of these closely-related assumptions is tenable in the present context. In a wide variety of situations, it has long been recognized that where harm to the public is threatened, and the private interest infringed is reasonably deemed to be of less importance, an official body can take summary action pending a later hearing. Thus, in Fahey v. Mallonee, 332 U.S. 245, 67 S. Ct. 1552, 91 L. Ed. 2030 (1947), the action of the Federal Home Loan Bank Administration in appointing a conservator of a Savings and Loan Association prior to notice or hearing was upheld against constitutional challenge. And the summary seizure and destruction of food reasonably suspected of being unfit was many years ago sustained by the Supreme Court in North American Cold Storage Co. v. Chicago, 211 U.S. 306, 29 S. Ct. 101, 53 L. Ed. 195 (1908).8

A decision which is especially relevant to the case before us is Halsey, Stuart & Co. v. Public Service Commission, 212 Wis. 184, 248 N.W. 458 (1933). There, a statute providing for summary suspension of a stock broker's license, followed by a hearing if demanded by the broker, was upheld against a charge of unconstitutionality. To quote the opinion:

'It is said that there is no provision for a hearing. It is true that there is none prior to suspension. We do not regard this as fatal to the validity of the law. Having in mind that this is an exercise of the police power, and that it is valid in so far as it is reasonably necessary and appropriate to the promotion of the public welfare, it seems to us that the act must be sustained. The court may take notice of the fact that much harm may come to the citizens of the state, and that they may be the victims of much fraud and imposition unless they are speedily protected from improper practices in the sale of securities. Having in mind modern sales mithods and the speed at which the business of today is done, promptness of action on the part of the commission may be the measure of its effectiveness. While the suspension may seriously damage the business of a particular broker, this consideration is not fatal to the validity of the act, provided it is reasonably necessary to protect the public. The rights of the public to exercise the police power in its own protection are superior to those of any individual broker to sell under his license or certificate.' 248 N.W. at 461.

Cases of this sort involve a balancing of competing interests. The interest asserted by the Securities and Exchange Commission is protection of the securities-purchasing public. Normally, this is achieved by extensive registration and disclosure provisions. The Commission in Rule 252(e)(2) has provided that while a suspension hearing is in progress under Rule 261 these 'usual' protective measures, rather than the far less protective requirements applicable under Regulation A, shall govern issuance of securities by a party against whom suspension proceedings have been instituted.

On the other hand, Holman is asserting an interest in continuing to issue public offerings of securities of $300,000 or less without full registration, despite the suspension proceeding pending against it. Appellant has not been completely put out of business, as it would be if its license were suspended. It can issue any security if it complies with full registration requirements. And appellant may even be free to undertake some or many Regulation A issues by resort to Rule 252(f), if it can make a sufficient showing of good cause. Of course, Holman has been deprived of a portion of its previous business by the operation of Rule 252(e)(2). But this is a consequence very different from being put out of business entirely. In sum, the Securities and Exchange Commission's interest in protecting the public would seem to outweigh appellant's interest in being able to market small issues of securities without full registration for a temporary period while a hearing is in process.9

In all the statutes under which the Securities and Exchange Commission operates, Congress has given it broad rule-making powers. See III Loss, Securities Regulation 1936 et seq. (1961). In view of the nature of the subject matter, the grant of such powers was imperative, to protect investors against fraud or deception made possible by constantly changing conditions. In the field of exemptions from registration, the desire of Congress to protect the public appears paramount: the Commission is warned that in no event can it use the powers confided to it by Section 3(b) of the 1933 Act to exempt the public offering of an issue aggregating more than $300,000.10 The House Report on a bill offered in 1954 to amend certain provisions of the securities legislation noted that Regulation A in its present form 'provides for disclosure and disciplinary checks and suspension power so as to assure that issues offered under the regulation are offered under conditions which furnish practical protection against fraud.'11 The corresponding Senate Report also indicated that the Commission's regulations were known to the Congress and formed part of the basis upon which the new proposals should be considered.12 We must conclude that Congress saw nothing in Regulation A as a whole, or in Rule 252 in particular, which conflicted with its purpose: the contrary inference is rather to be drawn.

We conclude by saying that we find no arbitrariness in the operation of the challenged Rule in this case. The restriction imposed is a reasonable consequence of the charges reported against appellant by the Commission's staff, and is reasonably designed to protect the public until those charges are heard and adjudicated.

For these reasons, the judgment of the District Court will be

Affirmed.