Opinion ID: 2816868
Heading Depth: 2
Heading Rank: 3

Heading: applicability of dodd–frank act

Text: Koch’s final argument is that the Commission could not use the remedial provisions of the 2010 Dodd–Frank Act to 17 punish him for conduct that took place in 2009. Doing so, he claims, is impermissibly retroactive. We agree that the Commission impermissibly applied the Dodd–Frank Act retroactively by barring Koch from associating with municipal advisors and rating organizations.3 “[T]he presumption against retroactive legislation is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic.” Landgraf, 511 U.S. at 265. It generally requires “that the legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took place.” Id. But retroactive legislation is not per se unlawful. Indeed, “[r]etroactivity provisions often serve entirely benign and legitimate purposes.” Id. at 267–68. Absent a constitutional violation, “the potential unfairness of retroactive civil legislation is not a sufficient reason for a court to fail to give a statute its intended scope.” Id. at 267. Nevertheless, to lessen the inherent unfairness of retroactive application, courts do not enforce a statute retroactively unless the “Congress first make[s] its intention clear.” Id. at 268. Our first task, then, is to 3 Koch also argues that applying the Dodd–Frank Act to him is impermissibly retroactive because it changed the Commission’s procedures for imposing sanctions. It is true that under the Act, the SEC may bar Koch from associating with all industries in the securities market in one proceeding, whereas before the Act the Commission had to initiate “follow-on proceeding[s]” for separate industries in the securities market. See Lawton, 2012 WL 6208750, at . This change in procedure, however, does not give rise to retroactivity concerns. See Landgraf v. USI Film Prods., 511 U.S. 244, 275 (1994) (“Because rules of procedure regulate secondary rather than primary conduct, the fact that a new procedural rule was instituted after the conduct giving rise to the suit does not make application of the rule at trial retroactive.”). 18 determine “whether Congress has expressly prescribed the statute’s proper [temporal] reach.” Id. at 280. The provision of the Dodd–Frank Act permitting the Commission to bar an individual from associating with municipal advisors or rating organizations contains no mention of retroactive application. See Pub. L. No. 111-203, § 925(a). The closest the Act comes is its generic statement that “[e]xcept as otherwise specifically provided in this Act,” the Act’s provisions “shall take effect 1 day after the date of enactment.” Id. § 4. But this language says nothing about retroactivity. As the Court noted in Landgraf, “A statement that a statute will become effective on a certain date does not even arguably suggest that it has any application to conduct that occurred at an earlier date.” 511 U.S. at 257. Because the Dodd–Frank Act does not expressly authorize retroactive application, we must determine whether applying it to Koch “would impair rights [he] possessed when he acted, increase [his] liability for past conduct, or impose new duties with respect to transactions already completed.” Id. at 280. At the time Koch engaged in manipulative conduct, that is, from September through December 2009, the SEC could not bar an individual or entity from associating with municipal advisors or rating organizations. See Lawton, 2012 WL 6208750, at  (noting those remedies “[were] not . . . available under the securities laws” before Dodd–Frank Act). The Commission’s decision to nevertheless apply the Act’s new penalty to Koch “attach[ed] a new disability to conduct over and done well before [its] enactment.” Vartelas v. Holder, 132 S. Ct. 1479, 1487 (2012) (quotation marks omitted). Indeed, by including additional associations from which one could be barred, the Act enhanced the penalties for a violation of the securities laws. The result is the same even if we ask the slightly different question “whether the new provision 19 attaches new legal consequences to events completed before its enactment.” Landgraf, 511 U.S. at 270. Applying the Act to Koch “attache[d] new legal consequences” to his conduct by adding to the industries with which Koch may not associate. Id. The additional prohibitions are legally enforceable and thereby create new legal consequences for past conduct. Hence, applying the Dodd–Frank Act’s enhanced penalties to Koch is impermissibly retroactive. The SEC identifies two cases that purportedly suggest the Dodd–Frank Act is not impermissibly retroactive. See Kansas v. Hendricks, 521 U.S. 346 (1997); Boniface v. DHS, 613 F.3d 282 (D.C. Cir. 2010). Both cases, however, held that there was no retroactivity problem because each subsequently enacted provision created only an evidentiary presumption. Hendricks, 521 U.S. at 371 (“To the extent that past behavior is taken into account, it is used, as noted above, solely for evidentiary purposes.”); Boniface, 613 F.3d at 288 (regulation only creates “an evidentiary presumption that an applicant with a disqualifying conviction in his past poses a security threat in the present; the applicant may rebut that presumption through the waiver process” (quotation marks omitted)). Here, by contrast, Koch’s past conduct automatically triggered additional legal consequences, not existing at the time his conduct took place, that prevent him from associating with rating organizations or municipal advisors. Accordingly, we conclude that the Commission cannot apply the Dodd–Frank Act to bar Koch from associating with municipal advisors and rating organizations because such an application is impermissibly retroactive. This holding does not apply to the other securities industries with which Koch may not associate. 20