Sacks v. SEC
648 F.3d 945
| 9th Cir. | 2011Background
- Sacks petitioned for review of FINRA's rule prohibiting non-attorneys who are barred from securities from representing parties in arbitration, adopted by the SEC under §78s.
- Sacks, not an attorney and previously barred by FINRA since 1991, had represented in many arbitrations, facing potential prohibition due to the new rule.
- FINRA proposed the rule in 2007; SEC approved it in October 2007 after comment period including Sacks's objections.
- Sacks challenged retroactivity and argued the rule penalized conduct occurring long before enactment.
- The district court/agency proceedings focus on whether the rule may be reviewed under the special statutory review process or the general APA route, and whether retroactivity applies.
- The court granted review, agreeing the rule cannot be applied retroactively and addressed jurisdiction and exhaustion under the special statutory review framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Retroactivity of the rule | Sacks argues retroactive penalty applies to pre-rule misconduct. | SEC/FINRA contend the rule is a contemporaneous regulatory action. | Rule cannot be applied retroactively. |
| Jurisdiction under special statutory review | Sacks can challenge under 15 U.S.C. § 78y notwithstanding lack of SEC petition. | Challenging under APA would be required if no special review applies. | Court has jurisdiction under §78y; 17 C.F.R. §201.430(c) does not apply. |
| Exhaustion requirement under §78y(c)(1) | Objected during rule-making process via comments; exhausted. | Need to file after SEC adoption as per APA-like procedures. | Exhaustion satisfied; objections raised in comment period were sufficient. |
| Conflict between §78y and §201.430(c) | General APA review could apply if no special statutory process. | §201.430(c) is prerequisite to review. | §201.430(c) does not apply due to conflict with §78y; statute controls. |
Key Cases Cited
- Koch v. SEC, 177 F.3d 784 (9th Cir. 1999) (retroactivity of new SEC provisions discussed)
- Landgraf v. USI Film Prods., 511 U.S. 244 (S. Ct. 1994) (presumption against retroactive legislation)
- Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (S. Ct. 1988) (statutory grants of rulemaking power and retroactivity limitations)
- United States v. Doe, 701 F.2d 819 (2d Cir. 1983) (conflicts between administrative regulations and statutes control)
- Blount v. SEC, 61 F.3d 938 (D.C. Cir. 1995) (exhaustion can be satisfied by urging objections during rulemaking)
- Mejia v. Gonzales, 499 F.3d 991 (9th Cir. 2007) (two-step retroactivity framework applied to immigration regulation)