Source: https://law.justia.com/cases/federal/appellate-courts/F3/323/930/575832/
Timestamp: 2019-11-18 21:50:38
Document Index: 688475656

Matched Legal Cases: ['§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 78', '§ 21', '§ 21', '§ 21', '§ 21', '§ 21', '§ 21', '§ 17']

United States Securities and Exchange Commission, Plaintiff-appellee, v. Glen T. Vittor, Defendant-appellant, 323 F.3d 930 (11th Cir. 2003) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Eleventh Circuit › 2003 › United States Securities and Exchange Commission, Plaintiff-appellee, v. Glen T. Vittor, Defendant-a...
United States Securities and Exchange Commission, Plaintiff-appellee, v. Glen T. Vittor, Defendant-appellant, 323 F.3d 930 (11th Cir. 2003)
US Court of Appeals for the Eleventh Circuit - 323 F.3d 930 (11th Cir. 2003) March 7, 2003
Vittor appealed the MSC's decision to the NASD's appellate body, the National Business Conduct Committee ("NBCC"). In March 1994, the NBCC issued a decision reducing the fines against Vittor and Falcon and ruling that the amount of restitution Vittor and Falcon paid should be offset by any amounts paid to Paine Webber and Lehman Brothers pursuant to any arbitration order or settlement. Pursuant to 15 U.S.C. § 78s(d), Vittor and Falcon appealed the NASD decision to the SEC. In its opinion, the SEC stated that Vittor and Falcon's actions warranted the NASD's sanctions. Contemporaneous with its opinion, the SEC issued an "order" sustaining the NASD's disciplinary action and assessment of costs. Vittor and Falcon appealed the SEC's decision to the United States Court of Appeals for the District of Columbia. See 15 U.S.C. § 78y(a) (1). The circuit court denied the petition for review. The court determined that the SEC did not abuse its discretion in affirming the NASD's decision, which denied Vittor and Falcon's request for a continuance of the NASD hearing, and that a quorum of commissioners lawfully rendered the SEC's decision. Falcon Trading Group, Ltd. v. SEC, 102 F.3d 579 (D.C. Cir. 1996).
In December 2000, the SEC filed an application in federal district court seeking enforcement of the SEC order affirming the NASD imposed sanctions. In its application, the SEC invoked only section 21(e) (1) of the Securities Exchange Act, 15 U.S.C. § 78u(e) (1). Vittor opposed the SEC's application, arguing that section 21(f) barred the relief the SEC sought under section 21(e) (1). He also argued that the SEC's order could not be enforced under section 21(e) (1) because it did not command Vittor to do anything — it simply sustained the NASD's sanctions against him. The district court entered a final order granting the SEC's application under section 21(e) (1). Recognizing that whether section 21(f) applied to the SEC's application was a close question, the district court concluded that section 21(f) barred the SEC from bringing an original action against Vittor for violations of NASD rules. The court concluded, however, that "once the SEC has affirmed an NASD decision regarding such violations, the SEC has the authority under [s]ection 21(e) to seek an order commanding compliance with the SEC affirmance, regardless of [s]ection 21(f)." Dist. Ct. Order at 3. The district court expressly declined to reach the issue of whether the SEC had met either exception to Section 21(f).
1. Whether, under section 21(e) (1) of the Securities Exchange Act, 15 U.S.C. § 78u(e) (1), the SEC may enforce an SEC order affirming sanctions that the NASD imposed for violation of NASD rules.
This court reviews de novo the district court's order discussing the scope of sections 21(e) (1) and (f) because it involves pure legal questions of statutory construction. See Estate of Shelfer v. C.I.R., 86 F.3d 1045, 1046 (11th Cir. 1996).
Section 21(d) permits the SEC to sue for injunctive relief in federal court and to obtain civil money penalties. 15 U.S.C. § 78u(d) (1), (2). The section provides in pertinent part that
15 U.S.C. § 78u(d) (1). Subsection (2) provides for civil money penalties and describes the procedure that the SEC can use to collect them. Thus, because the NASD is a "registered securities association of which [Vittor was] a member," section 21(d) permits the SEC to commence its own action against Vittor for violating NASD rules, unless the limitation of 21(f), discussed infra, applies.
Section 21(e) (1), the provision under which the SEC proceeded in this case, provides federal district courts with jurisdiction over certain SEC actions.
Vittor contends that section 21(e) (1) does not permit the SEC to apply to the federal district court for enforcement of an SEC order affirming NASD sanctions. To support his contention, Vittor argues that the SEC's affirmance of NASD sanctions is not an "order" within the meaning of section 21(e) (1). Vittor asserts that the district court failed to consider the ordinary meaning of the word "order." Moreover, Vittor contends that the SEC's "order" simply sustains the NASD's disciplinary action; the "order" does not command, direct, or instruct Vittor to do anything.
Vittor also argues that when the words of section 21(e) (1) are considered in context, that section clearly does not permit the SEC to file an application with the district court for enforcement of an SEC order affirming NASD sanctions. Section 21(e) (1) provides federal district courts with jurisdiction over SEC applications to enforce "the provisions of this chapter, the rules, regulations, and orders thereunder, [or] the rules of a national securities exchange or registered securities association...." 15 U.S.C. § 78u(e) (1). In construing the term "order," Vittor contends that the district court should have considered the phrase in which it appears. He argues that each term refers to statutes or rules of widespread applicability; they do not refer to a single decision in a specific case. Thus, the word "order" in this context has a meaning akin to "rule" or "regulation."
Vittor urges us to decline to follow Lang v. French, 154 F.3d 217 (5th Cir. 1998), upon which the district court relied, in construing the word "order" in section 21(e) (1).
After reviewing the record, and contrary to Vittor's arguments, we conclude that the SEC's order sustaining the NASD's disciplinary sanctions was unquestionably an order. An "order" is defined as " [a] command, direction, or instruction;" or " [a] written direction or command delivered by a court or judge." Black's Law Dictionary (7th ed.1999). Section 19(e) requires the SEC to issue an "order" when it affirms a final disciplinary sanction imposed by a self-regulatory organization ("SRO") such as the NASD. 15 U.S.C. § 78s(e) (stating that if, upon review of an SRO's "final disciplinary sanction," the SEC confirms the SRO's findings of misconduct, the SEC "by order, shall so declare and, as appropriate, affirm the sanction imposed by the self-regulatory organization."). Additionally, when Vittor petitioned the D.C. Circuit for review of the SEC's order, it was pursuant to section 25(a) (1), which applies exclusively to reviews of a "final order of the Commission." Although the SEC order does not expressly command Vittor to pay the monetary sanctions, the order sustained the NASD's disciplinary action against Vittor and effectively commanded him to pay the restitution, fines, and costs. Thus, the SEC's order sustaining the NASD's disciplinary sanctions against Vittor was an "order" within the meaning of section 21(e) (1).
Moreover, we find the Fifth Circuit's decision in Lang persuasive. In Lang, a private litigant brought suit in federal district court seeking to enforce an NASD restitution order that the SEC affirmed. The court held that the plaintiff's reliance on the jurisdictional grant embodied in section 27 as the statutory basis for his private enforcement suit was misplaced. In so concluding, the court noted that " [s]ection 21(e) (1),... expressly vests only the SEC with authority to apply to the district court for orders commanding compliance with the SEC's orders." Lang, 154 F.3d at 223. The plaintiff asked the court to infer from the language of section 27 a parallel authority for private litigants to apply to the district court for enforcement of SEC orders. The court found that " [s]uch an inference is implicitly foreclosed, though, by the plain language of section 21(e) (1), which names the SEC as the only authorized applicant for judicial enforcement of SEC orders." Id. The court viewed section 21(e) (1) "as manifesting a congressional intent to reserve exclusively to the SEC the authority to seek district court enforcement of such orders." Id. Thus, as the Lang court found, under the plain language of section 21(e) (1), the SEC may apply to the district court for an order enforcing the SEC's affirmance of NASD sanctions. See also SEC v. McCarthy, 322 F.3d 650 (9th Cir. 2003).
Vittor argues that if this court determines that the SEC's affirmance of the NASD's sanctions was an "order" within the meaning of section 21(e) (1), then we must decide whether the SEC's action is subject to the limits of section 21(f). That provision permits the SEC to initiate an action against violators of the NASD rules only if the NASD is unable or unwilling to do so, or an SEC action is otherwise necessary or appropriate for the public interest or for the protection of investors. 15 U.S.C. § 78u(f). The district court concluded that section 21(f) did not apply in this case. Vittor contends that the district court's analysis is contrary to well-established principles of statutory construction.
We agree with the district court and conclude that section 21(f) has no application here. This section applies only when the SEC initiates its own enforcement "action... for violation of, or to command compliance with, the rules of a self-regulatory organization." 15 U.S.C. § 78u(f). In the present case, the SEC did not bring its own action against Vittor for alleged violations of NASD rules. Instead, pursuant to section 21(e) (1), the SEC made application to the district court for an order to compel compliance with an SEC order sustaining an NASD disciplinary action. Although Vittor contends that the district court's characterization of section 21(f) is "overly technical," the SEC asserts that the plain language of the statute makes it clear that section 21(f) limits only a part of section 21(e).
We have found no cases in which an appellate court has considered the applicability of § 21(f) to SEC actions to enforce orders affirming a SRO's disciplinary judgment. In fact, not until 1998 did any appellate court rule on the SEC's ability to invoke federal jurisdiction under § 21(e) to enforce a SEC order See Lang v. French, 154 F.3d 217 (5th Cir. 1998) (finding the SEC had the authority under § 21(e) to seek enforcement of an order, but not addressing the effect of § 21(f) on the SEC's action). This was over 20 years after the enactment of § 21(f) and the relevant portions of § 21(e). See Securities Acts Amendments of 1975, Pub. L. No. 94-29, § 17, 89 Stat. 154 (1975).