Justia Securities Law Opinion Summaries

The United States Court of Appeals for the District of Columbia Circuit granted petitions for review as to two order issued by the Securities and Exchange Commission (Commission) aimed at consolidating existing national market system (NMS) plans governing the dissemination of equity market data into a single, consolidated plan (CT Plan) and modifying the governance structure to increase efficiencies and facilitate greater involvement by non-exchange stakeholders (Governance Plan), holding that Petitioners' petitions were granted as to one challenged provision.Petitioners, a group of national securities exchanges, brought this action challenging the Commission's orders, arguing that several of the provisions were arbitrary and capricious or were contrary to the the text and goals of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. Specifically, Petitioners challenged a provision of the final Commission-approved CT Plan that included representatives that did not belong to "self-regulatory organizations" (SROs) as voting members of the CT Plan's operating committee. The District of Columbia Circuit granted Petitioners' petitions as to the non-SRO representation provision and denied them in all other respects, holding that the provision including non-SROs on the CT Plan's operating committee as voting members was invalid. View "Nasdaq Stock Market LLC v. Securities & Exchange Comm'n" on Justia Law

Appellant appealed a United States Securities and Exchange Commission (SEC or Commission) order denying his application for a whistleblower award resulting from a successful SEC enforcement action. He contends that he voluntarily provided original information to the SEC that led to the successful enforcement action as set forth by the governing statute, 15 U.S.C. Section 78u-6(b)(1), but that the Commission erroneously rejected his award application based on its improper definitions of key statutory terms, see 17 C.F.R. Section 240.21F-4(a) (defining “[v]oluntary submission of information”), (b) (defining “[o]riginal information”).   The DC Circuit affirmed the district court’s order denying Appellant's application for a whistleblower award. The court held that because Appellant failed to satisfy the statutory requirements for “original information,” the court need not address his challenge to the SEC’s definition of “voluntary.” The court reasoned that the SEC properly denied Appellant’s award application, which was based on information submitted to the Commission before July 21, 2010. Congress expressly and unambiguously excluded from the definition of “original information” submissions provided to the Commission before this date, the statute’s date of enactment. 15 U.S.C. Section 78u-7(b); see id. Section 78u-6(a)(3). Further, because Appellant failed to satisfy one of the statutory requirements for whistleblower award eligibility, the court did not address his challenge to the Commission’s interpretation of “voluntary” set forth in 17 C.F.R. Section 240.21F-4(a) or its denial of Appellant’s request to exempt him from the requirement that the information be submitted voluntarily. View "Eugene Ross v. SEC" on Justia Law

In 2005, the Securities and Exchange Commission adopted “Regulation NMS” to promote the availability of market data to investors and other market participants. Regulation NMS allowed for investors to obtain "core data" from a centralized securities-information processor, which receives certain data, compiles it, and then transmits it to subscribers. However, to receive additional data, market participants must subscribe to the exchanges’ own proprietary data feeds. This generates significant revenue for the exchanges.Due to changes in the securities market since 2005, the proprietary data feeds have become "vastly more useful." As a result, the Commission determined, there was an information asymmetry in the marketplace for securities data — those market participants relying on the core data feed were at a significant informational disadvantage to participants that could afford to subscribe to the exchanges’ comprehensive proprietary products. In response, the SEC adopted the Market Data Infrastructure Rule in 2020, which promotes the development of new data distribution methods. Various exchanges challenged the Market Data Infrastructure Rule, claiming it was arbitrary and capricious.The D.C. Circuit denied the exchanges' petitions, noting that the Market Data Infrastructure Rule promotes the Commission’s stated goals and is grounded in the record. The court also held that the rule was warranted, given changes in the securities market. View "The Nasdaq Stock Market LLC v. SEC" on Justia Law

The DC Circuit denied petitions for review of petitioners' applications for whistleblower awards resulting from a successful SEC enforcement action. The court concluded that the SEC properly denied petitioners' award applications under its reasonable and longstanding interpretation of the relevant regulation, which sets forth three scenarios allowing for the issuance of a whistleblower award—none of which encompasses the additional scenario proposed by petitioners. In this case, the SEC's interpretation reflects it authoritative and official position; the interpretation implicates the Commission's substantive expertise in implementing the whistleblower program; and the SEC's reading reflects its fair and considered judgment. Therefore, given that the text of Rule 21F-4(c) is genuinely ambiguous, the SEC’s interpretation is entitled to deference pursuant to the interpretive guideposts announced by the Supreme Court in Kisor v. Wilkie, 139 S. Ct. 2400, 2415–16 (2019). The court also concluded that petitioners' additional arguments are either forfeited or meritless. View "Doe v. Securities and Exchange Commission" on Justia Law

Five registered national securities exchanges filed proposed rules with the SEC to establish fee schedules for Wireless Bandwidth Connections, which connect a customer’s equipment located on the premises of a petitioner-exchange with the customer’s equipment located on the premises of a third-party data center, and Wireless Market Data Connections, which connect a customer to the proprietary data feed of a petitioner-exchange. SEC’s Final Order asserted jurisdiction over the services and approved the proposed rules.The exchanges argued that the SEC’s assertion of jurisdiction over the services was based upon an erroneous interpretation of the statutes that define “exchange” and “facility,” that SEC arbitrarily and capriciously ignored the effect of the Final Rule upon the ability of the wireless services to compete, and that SEC ignored regulations defining “exchange” and arbitrarily departed from relevant agency precedents.The D.C. Circuit upheld the order. The Connections are subject to the SEC’s jurisdiction as “facilities” of an exchange--a market facility maintained by an exchange for bringing together purchasers and sellers of an exchange. The SEC correctly concluded that the fee schedules for the Connections had to be filed as “rules of an exchange,” consistent with SEC regulations and precedent. View "Intercontinental Exchange, Inc v. Securities and Exchange Commission" on Justia Law

Defendants who enter into SEC consent decrees gain certain benefits: they may settle a complaint without admitting the SEC’s allegations, and often receive concessions. The SEC does not permit a defendant to consent to a judgment or order that imposes a sanction while denying the allegations, 17 C.F.R. 202.5(e)). Cato alleged that SEC defendants are, therefore, unable to report publicly that the SEC threatened them with unfounded charges or otherwise coerced them into entering into consent decrees, impermissibly stifling public discussion of the SEC’s prosecutorial tactics. Cato has not entered into any SEC consent decree but alleges that it has contracted to publish a manuscript written by someone who is subject to such a consent decree and has been contacted by other such individuals, who would otherwise participate in panel discussions hosted by Cato on the topic of the SEC’s prosecutorial overreach, and allow Cato to publish their testimonials.Cato’s complaint invoked the First Amendment and the Declaratory Judgment Act. The D.C. Circuit affirmed the dismissal of Cato’s complaint for lack of standing. Cato’s alleged injury is not redressable through this lawsuit; the no-deny provisions that bind the SEC defendants whose speech Cato wishes to publish would remain unable to allow Cato to publish their speech, given their consent decrees. View "Cato Institute v. Securities and Exchange Commission" on Justia Law

Thirteen nationally registered stock exchanges sought review of four orders issued by the Securities and Exchange Commission concerning national market system plans that govern the collection, processing, and distribution of stock quotation and transaction information. Under the Securities Exchange Act, a final order of the Commission must be challenged “within sixty days after the entry of the order,” 15 U.S.C. 78y(a)(1).The exchanges filed their challenges 65 days after the orders were entered, arguing that the challenged orders are not actually orders but rather rules, which are subject to a different filing deadline. The D.C. Circuit dismissed the petitions as untimely. Instead of focusing on the amendment’s substance or the procedure used to effectuate it, the court gave conclusive weight to the Commission’s designation. Construing section 78y(a)(1)’s use of “order” to mean “order identified as such” promotes predictability and clarity. Deferring to the Commission’s designation affects only the deadline by which the Amendments can be challenged, not the Amendments’ judicial reviewability or the substantive legal standard applicable to their merits. View "New York Stock Exchange LLC v. Securities and Exchange Commission" on Justia Law

The DC Circuit dismissed, based on lack of jurisdiction, petitions for review of the SEC's order directing stock exchanges to submit a proposal to replace three plans that govern the dissemination of certain types of data with a single, consolidated plan. The exchanges specifically challenge provisions of the order requiring them to include three features relating to plan governance.The court concluded that the Commission has yet to decide whether the challenged features will make it into the new plan, and that section 25(a) of the Securities Exchange Act confers authority on the courts of appeals to review only final orders. In this case, although the Governance Order was definitive on the question whether the three challenged plan elements had to be included in the proposal, it was not a "definitive statement of position" on the question the Commission had initiated proceedings to answer—whether the three features should be included in the eventual plan. View "The Nasdaq Stock Market LLC v. Securities and Exchange Commission" on Justia Law

This appeal arose from petitioner's mismanagement of two related businesses, Commonwealth Capital and Commonwealth Securities. After FINRA determined that petitioner misused investor funds and tried to cover it up, FINRA barred petitioner from the securities industry, fined her, and ordered her to disgorge certain misused expenses. The SEC affirmed the industry bar and disgorgement order.The DC Circuit affirmed, concluding that petitioner's ambitious constitutional arguments are futile for a simple reason: Congress has prohibited the court from considering issues not raised before the SEC. Furthermore, petitioner has not provided any reasonable grounds that would excuse her failure to exhaust her constitutional claims before the Commission. Nor has there been an intervening change in law that might have excused her failure to press these contentions below. The court also concluded that Saad v. SEC, 980 F.3d 103 (D.C. Cir. 2020), foreclosed petitioner's argument that her lifetime bar is impermissibly punitive. In this case, the SEC's remedial justification finds adequate support in the record. The court rejected petitioner's assertion that continuing education expenses misallocated to the funds—rather than to her companies—were not "net profit," and thus not appropriate for remedial disgorgement after Liu v. SEC, 140 S. Ct. 1936 (2020). Rather, by paying for continuing education expenses out of the funds, instead of her wholly-owned business, the court concluded that petitioner enriched herself by the amount of the savings. View "Springsteen-Abbott v. Securities and Exchange Commission" on Justia Law

Petitioner, a broker-dealer, twice misappropriated his employer's funds and then unsuccessfully tried to cover his tracks by falsifying documents. FINRA permanently barred him from membership and from associating with any FINRA member firm.The DC Circuit held that the Supreme Court's recent decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017), which held that SEC disgorgement constitutes a penalty within the meaning of 28 U.S.C. 2462, does not have any bearing in petitioner's case. The court explained that binding circuit precedent establishes that the Commission may approve expulsion not as a penalty but as a means of protecting investors. In this case, the Commission did precisely that. Because this court has already held that the Commission appropriately concluded that petitioner's bar was not excessive or oppressive in any other respect, that ends the court's inquiry. View "Saad v. Securities and Exchange Commission" on Justia Law