Court Opinion

ID: 4546597
Source: CourtListenerOpinion
Date Created: 2020-07-07 20:00:22.043091+00
Date Added: 2024-06-11T12:51:53.906039
License: Public Domain

NOT FOR PUBLICATION                        FILED
                    UNITED STATES COURT OF APPEALS                        JUL 7 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

SHAREMASTER,                                    No.    18-71485

                Petitioner,                     SEC No. 3-14104

 v.
                                                MEMORANDUM*
U.S. SECURITIES & EXCHANGE
COMMISSION,

                Respondent.

                     On Petition for Review of an Order of the
                       Securities & Exchange Commission

                          Submitted February 12, 2020**
                            San Francisco, California

Before: GOULD and MURGUIA, Circuit Judges, and FEINERMAN,*** District
Judge.

      Sharemaster, a sole-proprietor broker-dealer registered with the Financial

Industry Regulatory Authority (“FINRA”) and the Securities and Exchange

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      ***
            The Honorable Gary Feinerman, United States District Judge for the
Northern District of Illinois, sitting by designation.
Commission, seeks review of a Commission order finding that Sharemaster

improperly failed to submit financial statements certified by an accountant

registered with the Public Company Accounting Oversight Board (“PCAOB”) for

the calendar year 2009. See In re Sharemaster (“Sharemaster Order II”),

Exchange Act Release No. 34-83138, 2018 WL 2017542, at *6–8 (Apr. 30, 2018).

We have jurisdiction under 15 U.S.C. § 78y(a)(1), and we dismiss the petition for

lack of standing in part and deny the remainder on the merits.

      Much of the pertinent background is set forth in Sharemaster v. SEC, 847
F.3d 1059 (9th Cir. 2017). At all relevant times, section 15A of the Securities and

Exchange Act requires a broker-dealer registered with the Commission to

“annually file . . . a balance sheet and income statement certified by a registered

public accounting firm.” 15 U.S.C. § 78q(e)(1)(A) (2010). Because federal law

defines “registered public accounting firm” as a firm registered with the PCAOB,

see id. §§ 78c(a)(59), 7201(12), those financial statements must be certified by a

PCAOB-registered accountant. That requirement is subject to an exemption whose

details do not matter for present purposes. See 42 Fed. Reg. 23,786, 23,788 (May

10, 1977), 1977 WL 218047.

      After Sharemaster filed financial statements for the calendar year 2009 that

were not certified by a PCAOB-registered accountant, FINRA imposed a $1,000

late fee and suspended Sharemaster until it complied. Sharemaster challenged

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FINRA’s decision on the ground that it qualified for the exemption and therefore

was not required to use a PCAOB-certified accountant. A FINRA panel ruled

against Sharemaster, and Sharemaster applied for review from the Commission.

      Three days after applying for review, Sharemaster submitted 2009 financial

statements audited by a PCAOB-registered firm, prompting FINRA to lift the

suspension, and in turn the Commission to dismiss Sharemaster’s application for

review. See In re Sharemaster (“Sharemaster Order I”), Exchange Act Release

No. 34-65570, 2011 WL 4889100, at *3–4 (Oct. 14, 2011). We remanded the

matter to the Commission, holding that Sharemaster was entitled to challenge the

$1,000 late fee. Sharemaster, 847 F.3d at 1068–71. On remand, the Commission

held that Sharemaster did not qualify for the exemption but ordered FINRA to

remit the $1,000 late fee. Sharemaster Order II, 2018 WL 2017542, at *1.

Sharemaster seeks review of that order, contending, among other things, that the

Commission wrongly held that it did not qualify for the exemption.

      The Commission argues that Sharemaster lacks Article III standing to seek

review because the $1,000 late fee has been refunded. “In order to invoke the

jurisdiction of the federal courts, a plaintiff must establish ‘the irreducible

constitutional minimum of standing,’ consisting of three elements: injury in fact,

causation, and a likelihood that a favorable decision will redress the plaintiff’s

alleged injury.” Lopez v. Candaele, 630 F.3d 775, 785 (9th Cir. 2010) (quoting

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Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)).

      Sharemaster identifies four grounds on which the relief it seeks accords it

standing. The first three fail to persuade. The fourth provides a basis for standing,

but Sharemaster’s claim for that relief falters on the merits.

      First, Sharemaster argues that, upon reversing the Commission’s order, we

could “[r]einstate Sharemaster’s original 2009 annual report.” Sharemaster does

not explain, and the court cannot discern, how reinstating its original 2009 annual

report would redress any concrete injury it suffered. See Spokeo, Inc. v. Robins,

136 S. Ct. 1540, 1549 (2016) (holding that “intangible injuries” can be “concrete,”

but that a “bare [statutory] violation, divorced from any concrete harm, [does not]

satisfy the injury-in-fact requirement of Article III”); Summers v. Earth Island

Inst., 555 U.S. 488, 495 (2009) (holding that the plaintiff did not have standing

because it “identified no other application of . . . invalidated regulations that

threatens imminent and concrete harm”).

      Second, Sharemaster argues that, upon reversing the Commission’s order,

we could “[d]irect FINRA to remove” from its records “any derogatory statements

about Sharemaster.” But removing from FINRA’s records any derogatory

statements about Sharemaster would not redress any concrete injury Sharemaster

suffered. See Owner-Operator Indep. Drivers Ass’n, Inc. v. U.S. Dep’t of Transp.,

879 F.3d 339, 344 (D.C. Cir. 2018) (holding that “inaccurate information [in] a

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government database” does not qualify as a concrete injury “in light of ‘both

history and the judgment of Congress’” (quoting Spokeo, 136 S. Ct. at 1549)).

      Third, Sharemaster argues that it “will go out of business” unless we reverse

the Commission’s ruling that it did not qualify for the exemption. In so arguing,

Sharemaster forgets that the 2009 version of the exemption—the version the

Commission applied—has since been substantively amended and thus no longer

applies. See 78 Fed. Reg. 51,910, 51,990 (Aug. 21, 2013) (effective June 1, 2014),

2013 WL 4431230, amended by, 84 Fed. Reg. 27,708, 27,713 (June 14, 2019)

(effective Aug. 13, 2019), 2019 WL 2465416, amended by, 84 Fed. Reg. 68,550,

68,652 (Dec. 16, 2019) (effective Feb. 14, 2020), 2019 WL 6828542. Indeed, the

Commission made clear in its order that it was not addressing “the effect of . . .

amendment[s] on the applicability of the exemption.” Sharemaster Order II, at *8,

n.52. Accordingly, reversing the Commission’s application of the thrice-

superseded 2009 version of the exemption would have no impact on Sharemaster’s

future conduct, let alone its viability.

      Fourth, Sharemaster argues that, upon reversing the Commission’s order, we

could “[d]irect FINRA to reimburse Sharemaster’s accumulated expense for filing

annual audited reports prepared by PCAOB-registered accountants.” Sharemaster

has Article III standing to seek that remedy because: (1) financial harm is an injury

in fact, see Mazza v. Am. Honda Motor Co., 666 F.3d 581, 595 (9th Cir. 2012); (2)

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the Commission’s ruling that Sharemaster did not qualify for the 2009 version of

the exemption caused Sharemaster to incur the additional expense of retaining a

PCAOB-registered accountant; and (3) that financial injury could be redressed by a

judicial ruling requiring the Commission to reimburse Sharemaster for that

expense.

      Although Sharemaster has Article III standing to seek that relief, it is

unavailable on the merits. “Section 19(e) [of the Exchange Act] . . . governs the

scope of the Commission’s remedial authority.” Sharemaster, 847 F.3d at 1063.

Section 19(e) empowers the Commission to “set aside [a FINRA] sanction,” 15

U.S.C. § 78s(e)(1)(B), or, under certain circumstances, to “cancel, reduce, or

require the remission of . . . sanction[s],” id. § 78s(e)(2). Thus, while we could

order the Commission to vacate any sanction imposed on Sharemaster, no such

sanction remains, and we cannot order the Commission to award Sharemaster

consequential damages arising from FINRA’s and the Commission’s finding that it

did not qualify for the 2009 version of the exemption. See Sharemaster, 847 F.3d

at 1068 (“[I]f . . . FINRA imposed a disciplinary sanction but then fully retracted

the sanction by, for example, setting aside a suspension and returning any fine

levied, it would make little sense for the Commission to proceed with review.”); cf.

Z Channel L.P. v. HBO, Inc., 931 F.2d 1338, 1341 (9th Cir. 1991) (holding that the

court could order “damages for loss of [foregone] revenue” because Civil Rule

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54(c) specifically authorized that remedy). Accordingly, insofar as Sharemaster

seeks that remedy, its petition for review is denied.

      DISMISSED in part and DENIED in part.

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