980 F.3d 103
D.C. Cir.2020Background
- John M.E. Saad, a FINRA-registered broker-dealer, submitted a falsified expense report (fabricated airfare and hotel receipts) and sought reimbursement for a cellphone he purchased for a third party.
- An office administrator discovered inconsistencies, Penn Mutual fired Saad, and FINRA investigated; Saad lied during the investigation.
- FINRA's hearing panel found Saad converted employer funds and imposed a permanent bar from associating with any FINRA member firm.
- The SEC sustained the bar; the D.C. Circuit remanded once for the SEC to consider mitigating factors and later remanded again to ask whether Kokesh v. SEC impacted the punitive/remedial analysis.
- On remand the SEC concluded Kokesh did not alter its conclusion; the D.C. Circuit denied Saad’s petition for review, upholding the SEC's ruling that the bar was remedial and not excessive or oppressive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Kokesh’s penalty/remedial framework (Kokesh v. SEC) alters the Exchange Act §78s(e)(2) review so FINRA bars are impermissibly punitive | Kokesh’s principles distinguish punitive vs. remedial sanctions and thus bars like Saad’s are punitive and impermissible | Kokesh was limited to disgorgement/§2462; established D.C. Circuit precedent treats bars as potentially remedial to protect investors; Liu confirms Kokesh’s limited reach | Kokesh does not apply to the §78s(e)(2) review here; SEC reasonably treated the FINRA bar as remedial; petition denied |
Key Cases Cited
- Kokesh v. SEC, 137 S. Ct. 1635 (2017) (held SEC disgorgement is a "penalty" for §2462 limitations analysis)
- Liu v. SEC, 140 S. Ct. 1936 (2020) (held limited disgorgement can be equitable relief; declined to extend Kokesh’s framework broadly)
- Saad v. SEC, 873 F.3d 297 (D.C. Cir. 2017) (prior D.C. Cir. decision remanding for Kokesh consideration)
- Saad v. SEC, 718 F.3d 904 (D.C. Cir. 2013) (remanded for SEC to consider mitigating factors)
- Johnson v. SEC, 87 F.3d 484 (D.C. Cir. 1996) (applied §2462 penalty analysis to suspension but limited that inquiry in other contexts)
- PAZ Securities, Inc. v. SEC, 566 F.3d 1172 (D.C. Cir. 2009) (upheld lifetime bar as remedial to protect investors)
- Siegel v. SEC, 592 F.3d 147 (D.C. Cir. 2010) (approved suspensions as remedial measures)
- McCurdy v. SEC, 396 F.3d 1258 (D.C. Cir. 2005) (sanctions must serve remedial, not punitive, purposes)
- Huntington v. Attrill, 146 U.S. 657 (1892) (definition of "penalty" relied on in Kokesh)