Kimberly Springsteen-Abbott v. SEC, 989 F.3d 4

Background

Petitioner Kimberly Springsteen‑Abbott was sole shareholder and CEO/CCO of Commonwealth Capital and its subsidiary Commonwealth Securities, which managed and sold pooled equipment-lease funds.
She charged business and personal expenses to a single Commonwealth AmEx account and alone allocated charges among the funds, the companies, or herself.
FINRA alleged improper allocation of 1,840 charges totaling $208,954.44, found a pattern of purposeful misallocation (including control-person expenses), barred her from the securities industry, fined her $50,000, and ordered disgorgement of $36,225.85 based on 84 proven charges.
The SEC affirmed the industry bar and disgorgement as remedial but vacated the fine as excessive under FINRA guidance.
Springsteen‑Abbott petitioned for review, raising constitutional (Appointments Clause and Due Process) claims, arguing the lifetime bar was punitive, and disputing disgorgement of continuing-education expenses.
The D.C. Circuit dismissed or denied relief: constitutional claims forfeited for failure to raise them before the SEC; industry bar upheld as remedial; disgorgement of continuing-education charges sustained.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Exhaustion of constitutional claims before SEC	Springsteen‑Abbott contends constitutional defects (Appointments, Due Process) may be raised in court without having been pressed before the SEC	SEC contends 15 U.S.C. §78y(c)(1) requires issues be urged before the Commission absent reasonable excuse	Forfeited: petitioner failed to raise these claims before the SEC; Jarkesy controls that constitutional challenges must be exhausted absent reasonable ground
Whether lifetime industry bar is punitive	Bar is excessive and constitutes punishment rather than remedial relief; Kokesh/Liu implications	SEC argues bar is remedial when imposed to protect the public and is supported by record of intentional misconduct and deceit	Upheld: industry bar is remedial to protect investors and thus permissible under Saad III and precedent
Disgorgement of continuing-education expenses after Liu	Continuing-education charges aren’t "net profit" and thus not proper for equitable disgorgement under Liu	SEC argues paying those expenses from fund assets instead of the wholly owned company enriched petitioner by the savings, so disgorgement approximates wrongful gain	Upheld: disgorgement reasonable as it captured petitioner’s enrichment from misallocating expenses; Liu allows treating certain "expenses" as wrongful gains
Vacatur of FINRA fine	Petitioner argued all sanctions were improper	SEC explained fine was excessive given bar and disgorgement under FINRA Sanction Guidelines	Affirmed partial relief: SEC permissibly vacated the fine as excessive given other sanctions

Key Cases Cited

Jarkesy v. SEC, 803 F.3d 9 (D.C. Cir. 2015) (constitutional challenges must generally be presented to the Commission before judicial review)
Saad v. SEC, 980 F.3d 103 (D.C. Cir. 2020) (industry bar is remedial when aimed at protecting the public)
Kokesh v. SEC, 137 S. Ct. 1635 (2017) (characterized disgorgement as a penalty for statute-of-limitations purposes)
Liu v. SEC, 140 S. Ct. 1936 (2020) (equitable disgorgement limited to wrongdoer’s net gains; expenses may, in some circumstances, constitute wrongful gains)
Meredith Corp. v. FCC, 809 F.2d 863 (D.C. Cir. 1987) (agencies generally do not declare statutes unconstitutional)
Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994) (limits on administrative agencies’ ability to decide constitutional questions)
Stoiber v. SEC, 161 F.3d 745 (D.C. Cir. 1998) (holding that asserting a constitutional claim does not automatically excuse failure to raise it administratively)