Opinion ID: 802495
Heading Depth: 2
Heading Rank: 4

Heading: First Motion to Set Aside: ALJ Review

Text: On December 23, 2009, Rapoport’s new counsel entered his notice of appearance and moved to set aside the default judgment as to Rapoport pursuant to Exchange Act Rule 155(b), which allows an ALJ or the Commission to set aside a default “for good cause shown.” 17 C.F.R. § 201.155(b). Under Rule 155(b), a defaulting party’s motion must meet three requirements: it must be filed “within a reasonable time”; it 8 must state his reasons for failing to defend the underlying proceeding; and it must specify the nature of the defenses he proposes to mount against the underlying proceeding. Id. On March 22, 2010, the ALJ denied Rapoport’s motion on the grounds that Rapoport did not file his motion “within a reasonable amount of time,” nor did Rapoport adequately explain why he had failed to defend the OIP. The ALJ reviewed each of Rapoport’s proposed defenses to the OIP, including his denial of the allegations in the OIP. At this late point, the ALJ cited record evidence to show that Rapoport had in fact solicited U.S. investors without registering with the Commission. After reviewing and countering all of Rapoport’s proposed defenses, the ALJ concluded that they had “no likelihood of success under the Commission case law,” so setting aside the Default Order was not necessary to prevent injustice. As mentioned above, the ALJ did recalculate the second-tier sanctions but otherwise denied Rapoport’s motion to set aside the Order.