No.

10-1186
Oral Argument Not Scheduled

UNITED STATES COURT OF APPEALS

DISTRICT OF COLUMBIA CIRCUIT

John Gardner Black )

)
v. )
)
Securities and Exchange Commission )
("Commission") )

APPELLANT'S REPLY TO
COMMISSION'S OPPOSITION
__________________________________________________________________

Petition for Review of Securities Exchange Commission Denial for Reinstatement

_____________________________________________________________________________________

The Commission filed an opposition to Black's request to supplement his

Appellant's Brief on March 24, 2011. That filing by the Commission is designed to

confuse this Court and deflect its attention from the issue of this appeal.
 This appeal is an appeal of the Commission "arbitrary and capricious" denial

of Black's reinstatement, not an appeal of events fourteen years ago.

Rather, this is an appeal of the Commission's, "arbitrary and capricious"

denial of Black's reinstatement as an investment adviser. Black has already

documented before this Court that the valuation method he employed in 1997 is

now sanctioned by the Commission. Even the Commission has not disputed that

Black's model complies with the its own regulations. They have had the model for

fourteen years to analyze it. The Commission's refusal to reinstate Black is going

beyond just "arbitrary and capricious". Why won't the Commission at least refute

with facts and analysis the output from Black's model? At least give a more factual

and cogent argument than Black breached a contract. What absolves the

Commission from compensating Black's clients for the value of their investment?

The Commission's "Reasons" for Their Opposition

1. The Wall Street Journal Article

The Commission states that Black failed to show how the Lehman

"maneuvers" were the same as Black's. The Commission misinterpreted Black's

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Addendum. Black demonstrated the punishment he received for his alleged actions

was unique. It showed that the Commission acts in an "arbitrary and capricious"

manner. Lehman executives, who meant to mislead investors, continue to practice

their profession. Yet the Commission has refused to reinstate Black, who did not

mislead investors as to the fair value of the securities they owned. This point is

germane to these proceedings because it reflects the Commission's arbitrary and

capricious method of operation.

2. Representation to Clients

The Commission states that Black's investment products were not backed by

liquidation value of securities equal to the amount invested by the clients. The

facts are, as stated by or not disputed by the Commission: (1) the clients owned an

investment product; (2) that was purchased at fair value; (3) whose fair value was

reported pursuant to government regulations; (4) and, whose fair value was to be

determined by a reasonable expectation of profits. It is counterintuitive that the

Commission, who never alleged that Black caused the loss of $70 million of

investor assets or that the advice he gave as to the fair value of the investment

product owned by those clients was incorrect, would now be attempting to mislead

this Court by insinuating otherwise. Had the Commission paid Black's clients the

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fair value of the "investment products" in 1997, there would have been no loss for

any client.

Assume everything the Commission alleged in its complaint is accurate,

which Black has admitted. Black has admitted to not disclosing the liquidation

value of the assets owned by his company, Financial Management Sciences

["FMS"]. Instead he used a mathematical model to "calculate the value" of the

assets. [Appendix, Complaint, pg 9, ¶34] After fourteen years, the Commission has

not even pointed to a regulation it has promulgated where the issuer of an asset

back security must disclose the forced liquidation value of the underlying assets on

a monthly basis. As of April 9, 2009 such an issuer may mark those assets to a

mathematical model, in all important aspect, identical to the model used by Black

in 1997.

But what regulation or act of Congress gives the Commission the authority

to destroy hundreds of millions of dollars of investor assets because the issuer of

an asset back security may have breached a contract? And even if that issuer did

breach a contract, under what authority may the Commission avoid compensating

the investors for the fair value of their investment? It is an absurd conclusion that

anyone, even the Commission, could destroy an enterprise whose value was

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determined by a reasonable expectation of profits, then tell the investors in that

enterprise that they are only entitled to the liquidation value of that enterprise's

assets.

This point is not germane to these proceedings.

3. The $2 million Misappropriation

The Commission states that Black has not addressed the "personal and

business" expense "misappropriation" alleged in the SEC complaint in 1997. While

Black considers the issue not part of this appeal, for this Court's information, less

than $20 of the "misappropriation" was for personal expenses, and that was due to

a clerical error. The remaining $1,999,980 of "misappropriation" was the

legitimate operating business expenses of FMS, a corporation which was not

alleged to have violated the Investment Adviser's Act. The Commission admits that

it did not prosecute its complaint for those allegations against that corporation,

Black or Devon Capital Management, a registered adviser. Had the Commission

done so, Black and his companies would have been found innocent of those

allegations because the "investment products" owned by his clients had a fair value

in excess of the purchase value.

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 Again, this point is not germane to these proceedings.

4. The Guilty Plea

Black was indicted by a grand jury for representing the value of the

"investment product" as being "...equal to the remaining liabilities of Devon to the

clients." To avoid litigation of the fair value of the "investment product", the

government moved the district court to amend Black's indictment by removing that

allegation. Black could not have entered a guilty plea to the grand jury indictment.

Assuming he could have entered such a plea, the Commission would be able to

point to the court proceedings or the guilty plea that stipulated the fair value of the

"investment product". They cannot do that.

Again, this point is not germane to these proceedings.

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Conclusion

What is before this Court is whether the Commission may now, "arbitrarily

and capriciously", deny Black's registration as an investment adviser for

conducting valuation practices in 1997 that are currently sanctioned by the

Commission. Black's innocence or guilt for events fourteen years ago are not

before this Court despite attempts by the Commission to incorporate them here.

The Commission's change in sanctioned valuation practices occurred on April 9,

2009. The Commission has not disputed that Black's valuation methods are in

compliance with existing regulations. Instead they attempt to throw a red herring at

this Court by arguing irrelevant points, designed to confuse and mislead.

Appellant has fulfilled his obligation of demonstrating that the Commission

has acted in an arbitrary and capricious manner in denying his reinstatement. Black

is entitled to his reinstatement.

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March 28, 2011 Respectfully Submitted,

_______________________________
John G. Black, Pro Se
1446 Centre Line Road
Warriors Mark, PA 16877
814-632-8631
jblack010@gmail.com

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 CERTIFICATE OF SERVICE

I hereby certify that two true and correct copies of this filing of:

APPELLANT'S REPLY TO
COMMISSION'S OPPOSITION

Was sent to:

Christopher Paik
Securities Exchange Commission
Mail Stop 8030-A
100 F. Street, N.E.
Washington, DC 20549

Via first class mail, postage prepaid on March 28, 2011.

____________________________________
John G. Black
 JOHN G. BLACK
1446 Centre Line Road
Warriors Mark, PA 16877
814-632-8631

March 28, 2011

Mr. Mark Langer

Clerk of the Court
United States Court of Appeals
Room 5523 United States Courthouse
333 Constitution Ave, N.W.
Washington, DC 20001

Dear Sir:

Enclosed, please find an original and four copies of:

APPELLANT'S REPLY TO
COMMISSION'S OPPOSITION

Please time stamp the additional first pages and return to me in the enclosed envelope.

Thank you for your assistance.

Sincerely,

John G. Black