FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

RICHARD L. SACKS, 

Petitioner, No. 07-74647

v. SEC No.  34-56540 SECURITIES AND EXCHANGE

COMMISSION, OPINION

Respondent. 

On Petition for Review of an Order of the

Securities & Exchange Commission

Argued and Submitted

November 30, 2010—San Francisco, California

Filed February 22, 2011

Before: Mary M. Schroeder, Sidney R. Thomas, and

Ronald M. Gould, Circuit Judges.

Opinion by Judge Thomas

2741
COUNSEL

Timothy A. Canning, Arcata, California, for the petitioner. 

Brian G. Cartwright, General Counsel, Andrew N. Vollmer,

Deputy General Counsel, Jacob H. Stillman, Solicitor, Mark

Pennington, Assistant General Counsel, Washington, D.C.,

for the respondent.

OPINION

THOMAS, Circuit Judge:

Richard Sacks filed a petition for review challenging a rule

proposed by the Financial Industry Regulatory Authority and

adopted by the Securities and Exchange Commission. The

rule prohibits non-attorneys who have been banned from the

securities industry from representing parties in securitiesSACKS v. SEC 2743
related arbitration. Sacks argues the rule is impermissibly

retroactive. We agree and hold that the rule cannot be applied

retroactively.

I

The Financial Industry Regulatory Authority1 (“FINRA”) is

a “self-regulatory organization” under the Securities

Exchange Act. See 72 Fed. Reg. 42169 (Aug. 1, 2007); 15

U.S.C. §§ 78c(a)(26), 78s(b). It is “responsible for regulatory

oversight of all securities firms that do business with the public; professional training, testing and licensing of registered

persons; [and] arbitration and mediation . . . .” Id. at 42170.

To achieve its objectives, FINRA may propose rules aimed at

governing its member firms and associated individuals. See

15 § 78s(b)(1). The proposed rules are subject to approval by

the Securities and Exchange Commission’s Division of Market Regulation. See id.; 17 C.F.R. § 200.30-3(a)(12).

On April 13, 2007, FINRA proposed a rule prohibiting

non-attorneys who have been banned from the securities

industry from representing parties in securities-related arbitration. 72 Fed. Reg. 18703 (Apr. 13, 2007). Richard Sacks submitted a comment letter to FINRA on May 3, 2007,

challenging the proposed rule. Sacks, who is not an attorney,

was banned from the securities industry by FINRA in 1991.

However, he was not barred from representing parties in

securities-related arbitration. Sacks claims that, since 1991, he

has represented parties in over 1,300 arbitration claims, tried

300 or so cases to a decision, and mediated another 250 or so

claims to a settlement. The rule, though, would prevent him

1FINRA was created in 2007 through the consolidation of the National

Association of Securities Dealers, Inc. and the member regulation,

enforcement, and arbitration operations of the New York Stock Exchange.

See Press Release, FINRA, NASD and NYSE Member Regulation Combine to Form the Financial Industry Regulation Authority—FINRA (July

30, 2007), http://www.finra.org/Newsroom/ NewsReleases/2007/P036329.

2744 SACKS v. SEC
from continuing to represent parties in securities-related arbitration.

Among other things, Sacks claimed in his comment letter

that the rule was impermissibly retroactive and constituted an

additional sanction for conduct that occurred more than 16

years ago. The SEC’s Division of Market Regulation rejected

Sacks’ protest. It adopted the rule on October 3, 2007, and

commented:

[FINRA’s] rules must be designed to prevent fraudulent and manipulative acts and practices, to promote

just and equitable principles of trade, and, in general,

to protect investors and the public interest. The

Commission believes that the proposed rule change

meets this standard by balancing the needs of investors to have access to representation, particularly in

small cases, with [FINRA’s] responsibility to protect

investors, the integrity of its forum, and the public

interest.

72 Fed. Reg. 56410, 56411 (Oct. 3, 2007). Sacks filed a petition for review with us on November 13, 2007, without first

petitioning the SEC.

II

We have jurisdiction over Sacks’ petition, even though he

did not first seek relief from the SEC after it adopted the rule.

Where Congress has enacted a special statutory review process for administrative action, that process applies to the

exclusion of the Administrative Procedure Act (“APA”) or

other general exhaustion principles. See 5 U.S.C. § 703;

Bowen v. Massachusetts, 487 U.S. 879, 903 (1988); Steadman

v. SEC, 450 U.S. 91, 105 (1981) (“[T]he general provisions

of the APA are applicable only when Congress has not

intended that a different standard be used in the administration of a specific statute.” (Powell, J., concurring)); W. WaterSACKS v. SEC 2745
sheds Project v. Kraayenbrink, Nos. 08-35359, 08-35360, __

F.3d __, 2011 WL 149363, at *20 (9th Cir. Jan. 19, 2011)

(citing Bennett v. Spear, 520 U.S. 154, 164 (1997)); Turtle

Island Restoration Network v. U.S. Dep’t of Commerce, 438

F.3d 937, 947 (9th Cir. 2006). With respect to exhaustion,

specifically, the United States Supreme Court has held: 

“[A]ppropriate deference to Congress’ power to prescribe the basic procedural scheme under which a

claim may be heard in a federal court requires fashioning of exhaustion principles in a manner consistent with congressional intent and any applicable

statutory scheme.”

Darby v. Cisneros, 509 U.S. 137, 153 (1993) (quoting

McCarthy v. Madigan, 503 U.S. 140, 144 (1992)).

[1] Our jurisdiction arises under the special statutory

review process set out in 15 U.S.C. § 78y, which governs our

review of rules proposed by self-regulating organizations,

such as FINRA, and adopted by the SEC under § 78s.2 Section 78y(b)(1) provides:

A person adversely affected by a rule of the Commission promulgated pursuant to section . . . 78s of

this title may obtain review of this rule in the United

States Court of Appeals for the circuit in which he

resides or has his principal place of business or for

the District of Columbia Circuit, by filing in such

court, within sixty days after the promulgation of the

rule, a written petition requesting that the rule be set

aside.

15 U.S.C. § 78y(b)(1). There is no dispute here that Sacks

was adversely affected by the rule, that he filed his petition

2

In its description of the rule, FINRA remarked that it was proposing

the rule under 15 U.S.C. § 78s(b)(1). 72 Fed. Reg. at 18703 n.1. 

2746 SACKS v. SEC
with the appropriate circuit court, and that he filed his petition

within 60 days after the SEC issued the order adopting the

rule. 

[2] Section 78y(c)(1) sets out the exhaustion requirement

for this special statutory review process:

No objection to an order or rule of the Commission,

for which review is sought under this section, may

be considered by the court unless it was urged before

the Commission or there was reasonable ground for

failure to do so.

15 U.S.C. § 78y(c)(1). We agree with the D.C. Circuit that a

party has sufficiently “urged” his objection to the SEC by

raising his objection to the rule during the rule-making process. See Blount v. SEC, 61 F.3d 938, 940 (D.C. Cir. 1995).

In other words, a petitioner need not have filed a petition for

review with the SEC after it has adopted a rule in order to

have sufficiently “urged” his objection. As the D.C. Circuit

reasoned, this exhaustion requirement “is presumably aimed

only at assuring that the Commission have had a chance to

address claims before being challenged on them in court.” Id.

at 940.

[3] Here, Sacks met the exhaustion requirement in

§ 78y(c)(1). Sacks raised his objection to the rule in his comment letter to the SEC, and the SEC responded to his objection in its approval order. The SEC acknowledged that Sacks

and three others commented:

The proposed rule change would penalize retroactively those persons who are currently suspended or

barred from the securities industry by prohibiting

them from representing a party in an arbitration or

mediation proceeding. In their view, it would impose

a new penalty on those who have had their misconduct adjudicated and sanctions imposed.

SACKS v. SEC 2747
72 Fed. Reg. at 56411. This is the same claim that Sacks

raises in his petition before us. And the SEC responded to

Sacks’s claim:

[FINRA] indicated that the rule is “designed to protect investors” and that at a minimum a non-attorney

representative should not be “a person whom a regulatory body has suspended or barred from representing clients or conducting securities business with the

public.”

Id. Sacks provided the SEC “a chance to address [his] claims

before being challenged on them in court[,]” see Blount, 61

F.3d at 940, and it rejected them. Therefore, he sufficiently

“urged” his objection before the SEC. 15 U.S.C. § 78y(c)(1).

[4] We have jurisdiction over Sacks’ petition because he

has met all of the jurisdictional requirements under the special

statutory review process set out in 15 U.S.C. § 78y, including

its exhaustion requirement.

The SEC argues we lack jurisdiction under 17 C.F.R.

§ 201.430(c). That regulation states:

Prerequisite to judicial review. Pursuant to Section

704 of the Administrative Procedure Act, 5 U.S.C.

704, a petition to the Commission for review of an

action made by authority delegated in §§ 200.30-1

through 200.30-18 of this chapter is a prerequisite to

the seeking of judicial review of a final order entered

pursuant to such an action. . . .

17 C.F.R. § 201.430(c). Under § 201.430(b)(1), the party

must either:

fil[e] a written notice of intention to petition for

review within five days after actual notice of the

action to that party or aggrieved person, or 15 days

2748 SACKS v. SEC
after publication of the notice of action in the Federal Register, or five days after service of notice of

the action on that party or aggrieved person pursuant

to § 201.141(b), whichever is the earliest.

17 C.F.R. § 201.430(b)(1).

The SEC argues that it approved the rule through delegated

authority under 17 C.F.R. § 200.30-3(a)(12)3 and that Sacks

did not timely file a petition with the SEC. However, the regulation does not apply here because 15 U.S.C. § 78y sets out

the exclusive procedure for judicial review of rules that are

proposed by self-regulating organizations and adopted by the

SEC under § 78s. See Bowen, 487 U.S. at 903; Steadman, 450

U.S. at 105; W. Watersheds Project, 2011 WL 149393, at *20.

As a result, neither the APA nor a regulation of general applicability promulgated under the APA—such as 17 C.F.R.

§ 201.430(c)—applies here.4

Of course, nothing in our decision precludes 17 C.F.R.

§ 201.430(c) from being applied in the absence of a special

statutory review process. As the Second Circuit explained: 

To be sure, [15 U.S.C. § 78y] provides for judicial

review of rules promulgated pursuant to §§ 78f,

78i(h)(2), 78k, 78k-1, 78o(c)(5) or (6), 78o-3, 78q,

78q-1, or 78s of Title 15. This judicial review provision makes no mention, however, of rules promulgated pursuant to [other sections of the Exchange

Act]. Nevertheless, in the absence of authorization of

3The SEC, through 17 C.F.R. § 200.30-3(a)(12), has delegated its

authority to approve rules proposed by self-regulatory organizations (such

as FINRA) to the SEC’s Division of Market Regulation. See, e.g., 72 Fed.

Reg. at 18707 n.21. 

4Further, to the extent that a regulation of general applicability conflicts

with a specific statute, the statute controls. See United States v. Doe, 701

F.2d 819, 823 (9th Cir. 1983) (“Where an administrative regulation conflicts with a statute, the statute controls.”). 

SACKS v. SEC 2749
“special statutory review” under the Exchange Act,

there is still “general statutory review” under the

APA, which authorizes us to review “final agency

action for which there is no other adequate remedy

in a court.”

Schiller v. Tower Semiconducter, Ltd., 449 F.3d 286, 292-93

(2d Cir. 2006) (citations omitted); see also In re SEC ex rel.

Glotzer, 374 F.3d 184, 189 (2d Cir. 2004) (holding that, when

the APA applies, “compliance with [17 C.F.R. § 201.430] is

mandatory”). Thus, 17 C.F.R. § 201.430(c), which was promulgated under the APA, would presumably apply to “action[s] made by authority delegated in §§ 200.30-1 through

200.30-18” that are not subject to a special statutory review

process, such as 15 U.S.C. § 78y. 17 C.F.R. § 201.430(c).

Because our jurisdiction over Sacks’ petition is governed

by 15 U.S.C. § 78y and 17 C.F.R. § 201.430(c) does not

apply, we have jurisdiction to address the merits of the petition.

III

Sacks argues the rule at issue here is impermissibly retroactive. We agree and hold that it cannot be applied retroactively.

Our standard of review is governed by Section 78y:

[We] shall affirm and enforce the rule unless the

Commission’s action in promulgating the rule is

found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege, or

immunity; in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; or without observance of procedure required by law.

15 U.S.C. § 78y(b)(4). Sacks argues the rule here fails under

this standard for several reasons, but because we conclude

2750 SACKS v. SEC
that it cannot be applied retroactively, we need only address

that issue. See Koch v. SEC, 177 F.3d 784, 789 (9th Cir.

1999).

[5] “[T]he presumption against retroactive legislation . . .

is deeply rooted in our jurisprudence.” Id. at 785 (quoting

Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994)). We

“disfavor retroactive laws based on concerns about fairness:

‘elementary considerations of fairness dictate that individuals

should have an opportunity to know what the law is and to

conform their conduct accordingly; settled expectations

should not be lightly disrupted.’ ” Id. (quoting Landgraf, 511

U.S. at 265). We only apply a statute or regulation retroactively if there is “clear congressional intent” that it should be

applied retroactively. Id. at 786 (quoting Landgraf, 511 U.S.

at 268; see also Bowen v. Georgetown Univ. Hosp., 488 U.S.

204, 208 (1988) (“[A] statutory grant of legislative rulemaking authority will not, as a general matter, be understood to

encompass the power to promulgate retroactive rules unless

that power is conveyed by Congress in express terms.”).

Before applying a statute or regulation retroactively, we

first apply a two-step framework to determine if, indeed, it

has a retroactive effect. See Mejia v. Gonzales, 499 F.3d 991,

997 (9th Cir. 2007) (analyzing the retroactive effect of a an

immigration regulation) (citing Landgraf, 511 U.S. 244).

First, we determine whether the statute or regulation clearly

expresses that the law is to be applied retroactively. Id. (citing

Landgraf, 511 U.S. at 280). If not, we consider whether application of the regulation would have a retroactive effect by “attach[ing] new legal consequences to events completed before

its enactment.” Id. (quoting INS v. St. Cyr, 533 U.S. 289, 321

(2001)). If, under this second step, the statute or regulation

has retroactive effect, “it does not govern absent clear congressional intent favoring such a result.” Koch, 177 F.3d at

786 (quoting Landgraf, 511 U.S. at 280) (emphasis added);

see Bowen, 488 U.S. at 208. 

SACKS v. SEC 2751
We addressed the retroactive effect of SEC statutes and

sanctions in Koch. Koch concerned the retroactivity of a

newly-added provision (italicized below) in 15 U.S.C.

§ 78o(b)(6):

With respect to any person who is associated, who

is seeking to become associated, or, at the time of the

alleged misconduct, who was associated or was

seeking to become associated with a broker or

dealer, or any person participating, or, at the time of

the alleged misconduct, who was participating, in an

offering of any penny stock, the Commission, by

order, shall censure, place limitations on the activities or functions of such person, or suspend for a

period not exceeding 12 months, or bar such person

from being associated with a broker or dealer, or

from participating in an offering of penny stock, if

the Commission finds, on the record after notice and

opportunity for a hearing, that such censure, placing

of limitations, suspension, or bar is in the public

interest and that such person [has been convicted of

securities fraud or enjoined against conduct in violation of the securities laws].5

5The previous version of 15 U.S.C. § 78o(b)(6) read: 

The Commission, by order, shall censure or place limitations on

the activities or functions of any person associated, seeking to

become associated, or, at the time of the alleged misconduct,

associated or seeking to become associated with a broker or

dealer, or suspend for a period not exceeding twelve months or

bar any such person from being associated with a broker or

dealer, if the Commission finds, on the record after notice and

opportunity for hearing, that such censure, placing of limitations,

suspension, or bar is in the public interest and that such person

[has been convicted of securities fraud or enjoined against conduct in violation of the securities laws]. 

15 U.S.C. § 78o(b)(6) (1990). 

2752 SACKS v. SEC
Id. (quoting 78o(b)(6)(A)(I) (1994) (emphasis added)).

The petitioner, Koch, had previously been barred under

§ 78o(b)(6) from associating with any broker, dealer, investment adviser, investment company, or municipal securities

dealer. Id. at 785 n.2; see supra note 5. After he had been

barred, Congress enacted the Securities Enforcement Remedies and Penny Stock Reform Act of 1990, Pub. L. No. 101-

429, 104 Stat 931. The Act added the penny-stock-bar provision to § 78o(b)(6). Id. at 786. In light of this new provision,

the SEC attempted to permanently bar Koch from participating in penny-stock offerings, even though his misconduct

occurred prior to enactment of the provision. Id. 

We concluded that the penny-stock provision could not be

applied retroactively. Id. at 787. Koch’s new “life-long ban on

penny stock dealing attach[ed] new and grave consequences

to [Koch’s] pre-Act conduct.” Id. The Act “gave the SEC

authority it did not previously have: the power to bar unfit

individuals from participation in any penny stock offering,

regardless of whether those individuals are currently associated, or are seeking to become associated, with brokerdealers.” Id. at 788. Consequently, we “conclude[d] that barring Koch from trading in Penny Stocks for the rest of his life

increases the consequences of such pre-Act conduct. Our

‘presumption against statutory retroactivity’ comes into full

force under these circumstances.” Id. at 789 (quoting Landgraf, 511 U.S. at 273). 

[6] For all intents and purposes, Koch is indistinguishable

from the facts here. Like Koch, Sacks was barred by the SEC

from engaging in certain securities-related activities. And,

like Koch, Sacks was confronted with the consequences of a

new statute or regulation as a result of prior misconduct—the

new rule here bars Sacks, like Koch, from participating in a

securities-related activity in which he had previously been

allowed to participate. Based on the reasoning in Koch, as

well as the “deeply rooted” ”presumption against retroactiviSACKS v. SEC 2753
ty,” Koch, 177 F.3d at 785, we hold that the rule here cannot

be applied retroactively.

IV

For the reasons above, we grant Sacks’ petition for review

and hold that the SEC may not retroactively apply the rules

it adopted at 72 Fed. Reg. 56410-12. We need not and do not

reach any other issues urged by the parties. 

PETITION FOR REVIEW GRANTED.

2754 SACKS v. SEC