                   United States Court of Appeals
                       FOR THE EIGHTH CIRCUIT
     ___________

     No. 98-1524
     ___________

Securities and Exchange Commission, *
sued as United States Securities and *
Exchange Commission,                 *
                                     *
             Appellee,               *
                                     *   Appeals from the United States
      v.                             *   District Court for the
                                     *   District of Minnesota.
Nicholas A. Zahareas,                *
                                     *     [UNPUBLISHED]
             Defendant,              *
                                     *
Tuschner & Company, Inc.; John M.    *
Tuschner,                            *
                                     *
             Appellants,             *
                                     *
Euroamerican Securities, S.A.,       *
                                     *
             Defendant.              *
      ___________

     No. 98-1527
     ___________

Securities and Exchange Commission, *
sued as United States Securities and *
Exchange Commission,                 *
                                     *
             Appellee,               *
                                     *
      v.                            *
                                    *
Nicholas A. Zahareas,               *
                                    *
            Appellant,              *
                                    *
Tuschner & Company, Inc.; John M.   *
Tuschner,                           *
                                    *
            Defendants,             *
                                    *
Euroamerican Securities, S.A.,      *
                                    *
            Appellant.              *
                               ___________

                          Submitted: November 19, 1998
                             Filed: February 9, 1999

                                   ___________

Before BEAM, MAGILL, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
                           ___________

PER CURIAM.

       Nicholas Zahareas, Euroamerican Securities, S.A., John M. Tuschner, and
Tuschner & Co. appeal the district court's1 order granting a preliminary injunction to
the Securities and Exchange Commission (SEC) and denying their motions to dismiss
for lack of personal and subject-matter jurisdiction. Zahareas is currently subject to
a 1993 SEC bar order prohibiting him from associating with a broker or dealer. The
preliminary injunction (1) mandates that Zahareas comply with the 1993 bar order


      1
      The Honorable David S. Doty, United States District Judge for the District of
Minnesota.

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and enjoins him from associating with a broker or dealer; (2) enjoins Tuschner & Co.
from permitting a person subject to a bar order to become associated with Tuschner
& Co.; and (3) enjoins Zahareas, Tuschner and their agents from aiding and abetting
any violations of 15 U.S.C. § 78o(b)(6)(B)(i) and (ii).

      After careful review of the record and the parties' briefs, we affirm for the
reasons set forth in the district court's opinion. See 8th Cir. R. 47B.

MORRIS SHEPPARD ARNOLD, Circuit Judge, dissenting.

       After consenting to a 1993 SEC order that permanently barred him from
participation in the securities industry in the United States, Mr. Zahareas established
a broker-dealer business called Euroamerican in Athens, Greece. Tuschner & Co.,
a Minneapolis broker-dealer registered with the SEC, procured American securities
for Euroamerican's Greek clients. The SEC commenced this enforcement action
claiming that Mr. Zahareas violated the law by associating with a registered broker-
dealer, that Tuschner & Co. violated the law by associating with a barred person, and
that the parties aided and abetted each other in these violations.

       The order entered against Mr. Zahareas did not allow him to "associate with"
broker-dealers. Section 3(a)(18) of the Exchange Act, 15 U.S.C. § 78c(a)(18),
defines a "person associated with a broker or dealer" or an "associated person" as
"any partner, officer, director, or branch manager of such broker or dealer (or any
person occupying a similar status or performing similar functions), any person
directly or indirectly controlling, controlled by, or under common control with such
broker or dealer, or any employee of such broker or dealer." The SEC argued below,
and the trial court held, that the acts performed by Mr. Zahareas and Euroamerican
were similar to those performed by an employee, and that Mr. Zahareas was therefore
an "associated person" of Tuschner & Co.



                                         -3-
       The difficulty with this holding, as Defendants point out, is that the
parenthetical language relied upon by the SEC and the trial court for this proposition
("or any person occupying a similar status or performing similar functions"), is
located directly after the portion of the definition referring to partners, officers,
directors, and branch managers. This language does not in any way purport to modify
the part of the statute that defines employees, and thus cannot expand the definition
of an employee. Therefore only actual employees (and not persons similar to
employees) can be "associated persons."
       On appeal, the SEC appears to have abandoned its original position in favor of
an argument that Mr. Zahareas was an "associated person" because he was under
Tuschner & Co.'s control. The parties agree that the issue of control should be
decided by basic principles of agency law. The considerations that guide the inquiry
into whether control existed include where the right to control the means and manner
of performance resided, what the mode of payment was, who furnished relevant
materials and tools,who controlled the workplace, and who had the right to discharge.
See, e.g., Guhlke v. Roberts Truck Lines, 128 N.W.2d 324, 326 (1964). The most
important of these considerations is who had the right to control the means and
manner of performance. Id. The evidence before the district court in this case tended
to show that Euroamerican operated with separate materials and tools at a separate
location in a separate nation that Tuschner & Co.'s leadership had never visited; that
neither party had a right to discharge the other, although both had a right to sever
their business relationship; and, most important, that Tuschner & Co. had no right to
control the means and manner of Euroamerican's and Mr. Zahareas's business.
Euroamerican had its own clients before it started working with Tuschner & Co., and
was free to advise those clients however it wanted and engage in any business that it
wanted with those clients.

      The SEC calls our attention to several facts that it believes support its claim
that Mr. Zahareas was an agent of Tuschner & Co., none of which is particularly
persuasive to me. The SEC contends that Mr. Zahareas acted in a manner similar to

                                         -4-
that of a Tuschner & Co. representative, but the activities to which it points were not
inconsistent with two separate companies doing business with each other; it points
out that Tuschner & Co.'s compliance officer reviewed all orders and documents, but
that is only to be expected because Tuschner & Co. was the registered broker-dealer
subject to SEC regulation; and it notes that Tuschner & Co. kept Euroamerican's
clients when Tuschner & Co. severed its relationship with Euroamerican and
Mr. Zahareas, but that could simply be because those clients wished to continue
investments in American securities, a service it appeared that Mr. Zahareas could no
longer provide. Considering all these facts, it seems clear to me that the SEC has
falied to establish that Mr. Zahareas was under Tuschner & Co.'s control.

       Although the briefs in this case do not raise the matter, I note that the trial
court's findings on the relevant factual issues seem to be self-contradictory. The trial
court found both that Mr. Zahareas was an employee of Tuschner & Co. and that he
exercised control over Tuschner & Co. Since the core of an employer/employee
relationship is control, the court effectively found that Tuschner & Co. and
Mr. Zahareas were employees of each other. The two businesses appear to have had
some degree of influence over one another, as well as differing degrees of control
over the various components of the business deals they executed together, but neither
was legally under the control of the other.

       On the present state of the record, it appears to me that the district court erred
in entering the preliminary injunction. I would therefore reverse the judgment and
remand for further proceedings.




                                          -5-
A true copy.

               Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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