Sacks v. Securities & Exchange Commission
648 F.3d 945
| 9th Cir. | 2011Background
- FINRA proposed a rule barring non-attorneys banned from securities activity from representing parties in securities arbitration.
- Sacks, a non-attorney barred in 1991, had represented parties in hundreds of arbitrations since then.
- Sacks submitted a comment opposing the proposed rule; the SEC adopted the rule on October 3, 2007, asserting investor protection goals.
- Sacks challenged the rule as impermissibly retroactive; the SEC defended it as a prospective measure balancing investor protection with access to representation.
- This petition for review proceeds under the special statutory review provisions of 15 U.S.C. § 78y; the court addresses exhaustion and jurisdiction, and ultimately the rule’s retroactivity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Retroactive effect of the rule | Sacks argues the rule penalizes conduct prior to enactment. | FINRA/SEC contend the rule is a standard-preservation measure for investors. | Rule cannot be applied retroactively. |
| Jurisdiction and exhaustion under § 78y | Sacks exhausted by raising the issue in comments to the SEC. | Agency review scheme requires compliance with specific exhaustion procedures. | Court has jurisdiction; exhaustion satisfied. |
| Application of 17 C.F.R. § 201.430(c) vs. § 78y | Section 201.430(c) prerequisites may bar review. | Exclusive review for rules adopted under § 78s lies in § 78y; § 201.430(c) does not apply here. | § 201.430(c) does not apply; § 78y governs jurisdiction and review. |
Key Cases Cited
- Koch v. SEC, 177 F.3d 784 (9th Cir. 1999) (retroactivity framework; life-long penalties require clear congressional intent)
- Landgraf v. USI Film Prods., 511 U.S. 244 (U.S. 1994) (presumption against retroactive legislation; two-step retroactivity analysis)
- Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (U.S. 1988) (statutory grants of rulemaking authority require express terms for retroactivity)
- Blount v. SEC, 61 F.3d 938 (D.C. Cir. 1995) (exhaustion requirement satisfied when objections raised during rulemaking)
- Steadman v. SEC, 450 U.S. 91 (U.S. 1981) (exhaustion principles under APA framework)
- Schiller v. Tower Semiconductor Ltd., 449 F.3d 286 (2d Cir. 2006) (informational context on statutory review and agency action)
- In re SEC ex rel. Glotzer, 374 F.3d 184 (2d Cir. 2004) (APA applicability where no special statutory review exists)
- W. Watersheds Project v. Kraayenbrink, 632 F.3d 472 (9th Cir. 2011) (context on statutory interpretation and review procedures)