Standard Investment Chartered, Inc. v. National Ass'n of Securities Dealers, Inc.
2011 U.S. App. LEXIS 3458
2d Cir.2011Background
- Standard Investment Chartered, Inc. was an NASD member and filed suit against NASD, NYSE Group, Inc., and NASD officers.
- NASD and NYSE Group merged to form FINRA, with the consolidation regulated by SEC oversight.
- Plaintiffs allege misstatements in a 2006 proxy solicitation to amend NASD bylaws in connection with the consolidation.
- The proxy sought to move from a one member, one vote regime to a size-based voting regime and to authorize a one-time $35,000 special member payment.
- The district court granted 12(b)(6) dismissal, holding SROs and officers have absolute immunity for proxy-related regulatory actions, including the bylaws amendments.
- Appellant challenges the scope of immunity and whether the proxy was incident to the SROs' regulatory power.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NASD and NYSE Group officers enjoy absolute immunity for the proxy solicitation. | Standard asserts immunity applies to regulatory acts. | Immunity extends to actions in service of regulatory functions. | Yes; immunity applies to the proxy solicitation. |
| Whether bylaws amendments were incident to regulatory power and thus protected. | Amendments were necessary for consolidation, affecting bylaws not policy. | Amendments fall within SRO's rulemaking authority. | Yes; amendments were incident to regulatory power and immune. |
| Whether the regulatory framework and SEC oversight support immunity for the challenged conduct. | Immunity should not cover non-discretionary acts. | SEC approval and delegated powers confirm immunity. | Court affirms district court on immunity analysis. |
Key Cases Cited
- DL Capital Group, LLC v. Nasdaq Stock Mkt., Inc., 409 F.3d 93 (2d Cir. 2005) (absolute immunity for regulatory functions; includes omissions.)
- NYSE Specialists Sec. Litig., 503 F.3d 89 (2d Cir. 2007) (immunity for regulatory interpretation and enforcement roles.)
- D'Alessio v. NYSE, Inc., 258 F.3d 93 (2d Cir. 2001) (immunity covers regulatory duties and referrals.)
- Barbara v. NYSE, 99 F.3d 49 (2d Cir. 1996) (immunity for regulatory actions against members.)
- Forrester v. White, 484 U.S. 219 (1988) (functional test: whether action is within regulatory function.)
- Barrett v. United States, 798 F.2d 565 (2d Cir. 1986) (immunity described as rare and exceptional; case-by-case.)