*1 Before GORSUCH MURPHY , and MORITZ , Circuit Judges.
GORSUCH , Circuit Judge.
Greyfield Capital was a defunct Canadian company. That is, until a couple of con men got their hands on a signature stamp belonging to the company’s former president. The men made liberal use of that stamp, employing it to appoint themselves corporate officers, issue millions of unregistered shares in their names, and then embark on a classic penny stock pump-and-dump scheme. They issued press releases touting Greyfield as a “premium automobile dealership” experiencing “explosive growth” and “quickly becoming the largest . . . in western Canada” — even though they never owned more than two used car lots between them. For a while the scheme worked well: the stock’s price rose and the con men made out selling their shares to the public. But as these things usually go, the truth couldn’t be kept at bay forever and when it emerged the stock’s value dropped, investors lost out, and authorities stepped in.
While the Greyfield culprits faced their problems, the investigation didn’t end with them. Regulators began looking for those who had helped facilitate the sale of Greyfield’s unregistered shares. And that eventually brought them to ACAP and Gary Hume. ACAP is a penny stock brokerage firm in Salt Lake City and Gary Hume was its head trader and compliance manager. Those behind the Greyfield scheme kept accounts at ACAP and used the firm to sell their shares and make their ill-gotten gains. The Financial Industry Regulatory Authority (FINRA), a quasi-governmental agency responsible for overseeing the securities brokerage industry, was none too pleased. Normally, a securities dealer may not *3 sell a company’s stock to the public unless a registration statement disclosing the details of its financial condition is first on file with the Securities and Exchange Commission. See 15 U.S.C. §§ 77d-77g, 77aa. Of course, exceptions exist. Sometimes, for example, a company may sell unregistered shares to “accredited investors” considered sophisticated enough by virtue of their assets and experience that they don’t need so much protection. Id. §§ 77b(a)(15), 77d(a)(5). But, FINRA found, no exception to the registration requirement applied here so the sales of unregistered Greyfield securities violated federal law. And, as securities industry professionals, ACAP and Mr. Hume violated FINRA rules by failing to take sufficient steps to guard against the firm’s involvement in the unlawful trading of unregistered shares. See NASD Conduct R. 2110, 3010 (rules in effect at the time of the violation).
ACAP and Mr. Hume don’t dispute their liability: the only questions
before us relate to remedy. After consulting its administrative “Sanction
Guidelines,” FINRA decided to fine ACAP $100,000 and Mr. Hume $25,000, and
to suspend Mr. Hume from the securities industry for six months.
See
FINRA,
Sanction Guidelines
(2011). For its part, the SEC reviewed and sustained these
sanctions.
See ACAP Fin., Inc.
, Exchange Act Release No. 70046, 2013 WL
3864512 (SEC July 26, 2013);
see also
15 U.S.C. § 78s(d). Now ACAP and Mr.
Hume ask us to undo the decision. That is of course their right, though under
current law our review is seriously circumscribed. It’s sometimes said that we
*4
may “interfere with” a sanction imposed by the SEC pursuant to its statutory
authority only if it is “beyond the law,” “unsupported factually,” or “completely
lack[ing] reasonableness such that it is an abuse of the SEC’s discretion.”
Rooms
v. SEC
,
Instead, ACAP and Mr. Hume argue that they can satisfy them because
FINRA’s Sanction Guidelines reserve a six-month, all-capacity suspension like
Mr. Hume’s for “egregious” cases.
Sanction Guidelines supra
, at 103. And, as
ACAP and Mr. Hume tell it, the SEC has defined “egregious” conduct to denote
the intentional or knowing violation of a regulatory duty or the breach of a
fiduciary duty — something that didn’t happen here. It’s an argument that sounds
promising on first encounter. After all, courts routinely fault agencies for
“arbitrary and capricious” decisionmaking when they change an administrative
policy without explanation.
See
5 U.S.C. § 706(2)(A);
FCC v. Fox Television
Stations, Inc.
,
But it’s an argument that fails in this case in its essential premise. ACAP
and Mr. Hume do not identify any administrative rule or decision indicating that
the SEC has ever concluded that intentional or knowing violations, or breaches of
fiduciary duties, are
necessary
to a finding of “egregious” conduct. Instead, the
*5
administrative cases they cite suggest such behavior is
sufficient
to trigger that
vituperative epithet’s application. The agency’s case law leaves more than
enough room for the possibility that other forms of misbehavior might qualify as
“egregious.” And that means the petitioners’ argument fails on its own terms for
they cannot show that the agency has changed preexisting policy.
See, e.g. SEC
v. First Pac. Bancorp
,
Confirming our conclusion on this score is
World Trade Financial Corp.
,
Exchange Act Release No. 66114,
Reading ACAP and Mr. Hume’s opening brief at times we wondered
whether they meant to pursue not only this argument but broader ones as well. In
places their brief appears to fault the SEC for having failed to give sufficient
content to the term “egregious” in past adjudicative proceedings, leaving
members of the securities industry without fair warning about when their conduct
might invite the epithet’s application. Certainly close cousins in the law’s large
clan of vituperative epithets (“wanton,” “wicked,” and “gross” come quickly to
mind) have proven anything but self-defining. ,
Steamboat New World v.
King
,
But in their reply brief ACAP and Mr. Hume clarify that they aren’t seeking to pursue any argument along these lines — and they even disclaim the attempt. In their reply, they concede that the agency is permitted to flesh out the meaning of the term “egregious” in successive adjudications; that its administrative case law already “ has fleshed out the contours of what constitutes ‘egregious’ conduct”; and that the SEC simply applied the epithet in this case in a manner at odds with that definition. Pet’rs’ Reply Br. 3. So it is we are left with no occasion to pass on any of the meatier arguments we imagined might be before us and all that remains is the claim that the SEC has defined “egregious” to require a showing of intentional or knowing misconduct or a breach of a fiduciary duty and deviated from that definition here — a claim that as we’ve seen is easily dispelled.
Attempting a different tack, ACAP and Mr. Hume next suggest that the
SEC acted arbitrarily by failing to consider certain mitigating factors identified in
FINRA’s Sanction Guidelines. And here again, in principle at least, they might
*8
have something: an agency’s unexplained failure to consult its own decisional
guidelines can be the makings of a claim of arbitrary decisionmaking and the
basis for reversal. ,
Cotton Petroleum Corp. v. U.S. Dep’t of the Interior
,
But in this instance it’s the record that stands in the way. Before the SEC, ACAP and Mr. Hume pursued five mitigating arguments so we must limit our analysis to them. See 15 U.S.C. § 78y(c)(1). And the record reveals that the SEC considered them all. Take ACAP and Mr. Hume’s argument that they accepted responsibility for their actions and implemented enhanced compliance procedures. These are indeed listed as mitigating factors in the Sanction Guidelines. But the SEC found that the petitioners accepted responsibility and sought to ensure compliance only after FINRA launched disciplinary proceedings against them. Meanwhile, the guidelines instruct the agency to ask whether a party took steps toward responsibility and remediation “ prior to detection.” Sanction Guidelines , supra , at 6 (emphasis added). ACAP and Mr. Hume next point to the low price at which the Greyfield stocks sold and the low value of the commissions the sales generated, also mitigating factors mentioned in the guidelines. But the SEC reasoned that these relatively modest figures were outweighed by the danger posed by the large quantity of unregistered shares traded without supervision — *9 an aggravating factor mentioned in the guidelines too. Id. at 24 (listing the “[s]hare volume” as a relevant consideration); see also id. at 6 (noting that the factors listed in the guidelines can be aggravating, mitigating, or both, and directing adjudicators to weigh them as appropriate). Finally, ACAP suggests it can’t afford the fines imposed on it. Yet the SEC rejected this argument because ACAP didn’t provide the agency information about its financial circumstances.
Of course, the SEC didn’t buy the petitioners’ mitigation arguments. But the duty to hear an argument doesn’t entail the duty to swallow it. Neither do ACAP and Mr. Hume suggest that the agency should be forbidden from “balancing” competing mitigating and aggravating sentencing factors and assigning one or another greater or lesser weight (as it did here in deciding, for example, that the quantity of shares involved outweighed their dollar value). Nor do the petitioners argue that the agency is forbidden from making its balancing judgments retroactively applicable to litigants like them. Instead and again, ACAP and Mr. Hume present us only with a narrow challenge, disputing whether the SEC offered a reasoned explanation for its decision to reject their mitigation arguments. At least that much the agency did.
The cases on which ACAP and Mr. Hume most seek to rely underscore the
point. In
PAZ Securities, Inc. v. SEC
,
Moving to their final argument, ACAP and Mr. Hume suggest that the
remedies the SEC endorsed were too harsh. By statute, the SEC must set aside or
reduce any FINRA sanction that is “not necessary or appropriate in furtherance of
the purposes of [the act] or is excessive or oppressive.” 15 U.S.C. § 78s(e)(2).
For his part, Mr. Hume contends that the SEC’s decision to impose a six-month,
all-capacity suspension was inappropriate because his violations occurred only in
his role as a supervisor. But given the unrebutted evidence of extensive
supervisory failures in this case the agency concluded that Mr. Hume’s conduct
went so far as to cast doubt on his ability to carry out his obligations as a
securities professional in any capacity. No one before us disputes this much can
sometimes happen.
See, e.g.
,
Horning v. SEC
,
Turning to the fines, ACAP and Mr. Hume argue that the amounts imposed were excessive because they outstrip the commissions the firm earned on its unlawful Greyfield sales. The problem here is that the profit to the firm or individual under investigation is, once more, only one factor among many that the SEC balances when fashioning a remedial sanction:
The seriousness of the offense, the corresponding harm to the trading public, the potential gain to the broker for disobeying the rules, the potential for repetition in light of the current regulatory and enforcement regime, and the deterrent value to the offending broker and others are all relevant factors to be considered in deciding whether the sanction is appropriately remedial and not excessive and punitive.
McCarthy v. SEC
,
No doubt the open-ended nature of the multi-factor balancing tests the SEC uses when setting sanctions could be attacked on a variety of potential grounds. But the petitioners before us have repeatedly demurred when presented with the opportunity to challenge the propriety of the SEC’s decisionmaking processes, asking us only to decide much narrower questions — such as the consistency of the results reached here with those in earlier cases. And when it comes to those narrower questions, we are unable to discern any basis on which we might deem the agency’s decision impermissible under the standards of review that cabin our involvement in this case. The petition for review is denied.