Justia Government & Administrative Law Opinion Summaries

The Goldmans, proceeding before an arbitration panel operating under the auspices of the Financial Industry Regulatory Authority (FINRA), alleged that their financial advisor and Citigroup had violated federal securities law in their management of the Goldmans’ brokerage accounts. The district court dismissed their motion to vacate an adverse award for lack of subject-matter jurisdiction, stating the Goldmans’ motion failed to raise a substantial federal question. The Third Circuit affirmed. Nothing about the Goldmans’ case is likely to affect the securities markets broadly. That the allegedly-misbehaving arbitration panel happened to be affiliated with a self-regulatory organization does not meaningfully distinguish this case from any other suit alleging arbitrator partiality in a securities dispute. The court noted “the flood of cases that would enter federal courts if the involvement of a self-regulatory organization were itself sufficient to support jurisdiction.” View "Goldman v. Citigroup Global Mkts., Inc" on Justia Law

Witter contends that in August 2007 he telephoned Skelton, an employee of his broker, TransAct, with instructions to cancel several standing orders. Skelton did not do so, and Witter lost $23,000 on the resulting market position. Skelton claims that Witter never told him to cancel all seven of the working orders at issue. Witter filed a complaint with the Commodity Futures Trading Commission, 7 U.S.C. 18(a), which found no violation. The judgment officer refused to draw an adverse inference based on TransAct’s failure to produce a recording of the “one crucial conversation” because TransAct was not required to record the call; he found that Skelton’s version was more plausible and Witter had a “propensity to confuse trading terms” like “position” and “order.” The Seventh Circuit affirmed, finding the Commission’s decision was supported by the evidence. Federal regulations require that, before buying or selling a commodity, a merchant must receive either “specific authorization” or “authorization in writing,” 17 C.F.R. 166.2. No regulation requires the merchant to record phone calls to cancel previously authorized orders to buy or sell. View "Witter v. Commodity Futures Trading Comm'n" on Justia Law

The SEC created a new class of securities offerings freed from federal-registration requirements so long as the issuers of these securities comply with certain investor safeguards (Regulation A-Plus). Petitioners, the chief securities regulators for Massachusetts and Montana, seek review of Regulation A-Plus. The court concluded that, because Regulation A-Plus does not conflict with Congress’s unambiguous intent, it does not falter at Chevron Step 1. Furthermore, because the Commission’s qualified-purchaser definition is not “arbitrary, capricious, or manifestly contrary to the statute,” it does not fail Chevron Step 2. By providing a reasoned analysis of how its qualified-purchaser definition strikes the “appropriate balance between mitigating cost and time demands on issuers and providing investor protections,” the court concluded that the Commission has complied with its statutory obligation under the Administrative Procedure Act, 5 U.S.C. 702. Accordingly, the court denied the consolidated petitions for review. View "Lindeen v. SEC" on Justia Law

The Commodity Futures Trading Commission regulates contracts concerning commodities for future delivery when offered on margin or another form of leverage, 7 U.S.C. 2(c)(2)(D), with an exception for contracts that “results in actual delivery within 28 days or such other longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved”. The CFTC began investigating whether Monex's precious-metals business was within this exception. Monex refused to comply with a subpoena, arguing that since 1987, when it adopted its current business model, the CFTC has deemed its business to be in compliance with all federal rules and that, because it satisfies the exception, the Commission lacked authority even to investigate. The district court enforced the subpoena. Monex turned over the documents. Monex appealed, seeking their return and an injunction to prevent the CFTC from using them in any enforcement proceeding. The Seventh Circuit affirmed, stating that Monex was impermissibly using its opposition to the subpoena to get a judicial decision on the merits of its statutory argument, before the CFTC makes a substantive decision. The propriety of an agency’s action is reviewed after the final administrative decision. Contesting the agency’s jurisdiction does not change the rules for determining when a subpoena must be enforced. View "Commodities Futures Trading Comm'n v. Monex Deposit Co." on Justia Law

The Commodity Futures Trading Commission (CFTC) filed this commodity trading fraud action against John B. Wilson and JBW Capital LLC, alleging that Defendants were liable under the Commodity Exchange Act for failing to register with the CFTC and for violating two commodity fraud provisions. The CFTC moved for summary judgment requesting a permanent injunction, restitution, and civil monetary penalties. The district court granted the CFTC’s request for a finding of liability and imposed injunctive relief and civil penalties but declined to award restitution. Both sides appealed. The First Circuit affirmed the district court’s grant of summary judgment and the relief it ordered, holding that the district court did not err in (1) finding that Wilson was liable for failure to register as a commodity pool operator; (2) granting summary judgment on the commodity fraud provisions; and (3) concluding that restitution was unavailable. View "Commodity Futures Trading Comm’n v. Wilson" on Justia Law

Plaintiff filed a qui tam suit on behalf of himself and the State under the California False Claims Act (CFCA), Gov. Code, 12650 et seq., alleging that ClubCorp had defrauded the State by failing to escheat the unclaimed initiation deposits of ClubCorp’s members and former members. The trial court granted the State's motion to dismiss, concluding that plaintiff's qui tam action was based on business practices ClubCorp had previously disclosed in publicly available filings with the SEC and thus precluded by CFCA's public disclosure bar. The court concluded that the trial court erred in dismissing the qui tam complaint as barred by the public disclosure provision in former subdivision (d)(3)(A) where an SEC filing is not one of the disclosures identified in that subdivision as barring a qui tam action. Accordingly, the court reversed and remanded for further proceedings. View "State of California ex rel. Bartlett v. Miller" on Justia Law

Defendants are national securities exchanges registered with the U.S. Securities and Exchange Commission (SEC) and operate as self‐regulatory organizations that regulate markets in conformance with securities laws under the Securities Exchange Act of 1934, 15 U.S.C. 78a. Plaintiffs are securities firms and members of the defendant exchanges. They compete for customer order flow by displaying buy and sell quotations for particular stocks. Between at least January 2004 and June 2011, each defendant charged “payment for order flow” (PFOF) fees. Each defendant exchange imposes PFOF fees when a trade is made for a customer; however, these fees are not imposed for proprietary “house trades,” where a firm trades on its own behalf. The Seventh Circuit affirmed dismissal of plaintiffs’ suit, in which they sought to recover PFOF fees they claim were improperly charged. The district court lacked subject matter jurisdiction based on plaintiffs’ failure to exhaust administrative remedies before the SEC. View "Citadel Sec., LLC v. Chicago Bd. Options Exch., Inc." on Justia Law

James Hopkins and John Flannery, two former employees of State Street Bank and Trust Company, were charged with violations of 15 U.S.C. 77q(a), 15 U.S.C. 78j(b), and 17 C.F.R. 240.10b-5 for engaging making material misrepresentations and omissions that misled investors about two State Street-managed funds. The United States Securities and Exchange Commission’s (SEC) Chief Administrative Law Judge (ALJ) dismissed the proceeding, finding that neither defendant was responsible for or had ultimate authority over the documents at issue and that these documents did not contain materially false or misleading statements or omissions. The SEC reversed the ALJ with regard to a slide that Hopkins used at a presentation to a group of investors and two letters that Flannery wrote or had seen before they were sent to a investors. The Commission imposed cease-and-desist orders on both defendants, suspended them from association with any investment adviser or company for one year, and imposed civil monetary penalties. The First Circuit vacated the Commission’s order, holding that the Commission’s findings were not supported by substantial evidence. View "Flannery v. Securities & Exchange Comm’n" on Justia Law

Greyfield Capital was a defunct Canadian company. Two "con-men" found a signature stamp belonging to the company's former president, and used it as an officially-sanctioned "seal" to appoint themselves corporate officers, issue millions of unregistered shares in their names. The men then took the unregistered, issued shares to create a penny stock "pump-and-dump" scheme. Regulators began looking for those who had helped facilitate the sale of Greyfield's unregistered shares. Regulators were led to petitioners ACAP and Gary Hume. ACAP was a penny stock brokerage firm in Salt Lake City, and Gary Hume was its head trader and compliance manager. Petitioners did not dispute their liability stemming from the Greyfield scheme, rather, they disputed the sanctions they received. FINRA decided to fine ACAP $100,000 and Mr. Hume $25,000, and to suspend Hume from the securities industry for six months. The Securities and Exchange Commission (SEC) reviewed and sustained these sanctions. ACAP and Hume then petitioned the Tenth Circuit to appeal the SEC's decision. After review, the Tenth Circuit could not "see how [it] might overturn the agency's decision." Accordingly, the Court affirmed the SEC's decision. View "ACAP Financial v. Securities & Exchange Comm'n" on Justia Law

The Securities Administrator of the Office of Securities revoked the securities licenses of North Atlantic Securities, LLC, a licensed broker-dealer, Michael J. Dell’Olio & Associates, a licensed investment adviser, and Michael Dell’Olio. Dell’Olio was an investment advisor representative of Michael J. Dell’Olio, an agent of North Atlantic, and an owner exercising control in both firms. The revocations resulted from transactions through which Dell’Olio, his son, and the two entities under Dell’Olio’s control received over $200,000 in loans from Dell’Olio’s mother-in-law, most of which were not repaid. The business and consumer docket affirmed the revocation of Appellants’ securities licenses. The Supreme Court affirmed, holding (1) the charges arising from transactions that occurred in 2006 were not time-barred; (2) the administrative record supported the Administrator’s factual findings; (3) the Administrator’s decision was not affected by structural or actual bias; and (4) despite the severity of the penalty imposed, the Administrator did not abuse her discretion in revoking the licenses. View "N. Atlantic Secs., LLC v. Office of Secs." on Justia Law