Court Opinion

ID: 899700
Source: CourtListenerOpinion
Date Created: 2013-06-11 23:40:31.524313+00
Date Added: 2024-06-11T09:06:15.101262
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 9, 2013                 Decided June 11, 2013

                         No. 10-1195

                     JOHN M.E. SAAD,
                       PETITIONER

                             v.

         SECURITIES AND EXCHANGE COMMISSION,
                      RESPONDENT

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

    Steven N. Berk argued the cause for petitioner. With him
on the briefs was Matthew J. Bonness. Michael S. Gulland
entered an appearance.
    Christopher Paik, Special Counsel, Securities and
Exchange Commission, argued the cause for respondent. With
him on the brief were Michael A. Conley, Deputy General
Counsel, and John W. Avery, Deputy Solicitor.
   Before: HENDERSON and ROGERS, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
   Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
     EDWARDS, Senior Circuit Judge: This case involves a
disciplinary action brought against John M.E. Saad by the
                              2
Financial Industry Regulatory Authority, Inc. (“FINRA”),
which is the successor to the National Association of
Securities Dealers (“NASD”). From January 2000 to October
2006, Saad was a regional director in the Atlanta, Georgia,
office of Penn Mutual Life Insurance Company (“Penn
Mutual”). He was also registered with Penn Mutual’s broker-
dealer affiliate, Hornor, Townsend & Kent, Inc. (“HTK”),
which is a FINRA-member firm. In September 2007, FINRA
filed a complaint with its Office of Hearing Officers charging
that, in July 2006, Saad had violated FINRA rules by
submitting false expense reports for reimbursement for
nonexistent business travel and for a fraudulently purchased
cellular telephone. After a hearing, the Hearing Panel found
that Saad had violated NASD Conduct Rule 2110 and
sanctioned him with a permanent bar against his association
with a member firm in any capacity. This sanction was
affirmed by FINRA’s National Adjudicatory Counsel
(“NAC”) and by the U.S. Securities and Exchange
Commission (“SEC” or “Commission”).
     In his petition for review to this court, Saad does not
contest his culpability, but instead argues only that the SEC
abused its discretion in upholding the lifetime bar. In
reviewing a disciplinary sanction imposed by FINRA, the
SEC must determine whether, with “due regard for the public
interest and the protection of investors,” that sanction “is
excessive or oppressive.” 15 U.S.C. § 78s(e)(2). As part of
that review, the SEC must carefully consider whether there
are any aggravating or mitigating factors that are relevant to
the agency’s determination of an appropriate sanction. See
PAZ Sec., Inc. v. SEC, 494 F.3d 1059, 1065 (D.C. Cir. 2007)
(“PAZ I”). This review is particularly important when the
respondent faces a lifetime bar, which is “the securities
industry equivalent of capital punishment.” Id.
                               3
     Saad has consistently advanced a number of mitigating
factors that he claims should militate against a lifetime bar.
The SEC addressed several of these factors and chose not to
credit them. However, the agency plainly ignored two
important considerations: (1) the extreme personal and
professional stress that Saad was under at the time of his
transgressions; and (2) the fact that Saad’s misconduct
resulted in his termination before FINRA initiated
disciplinary proceedings. The latter consideration is
particularly significant because it is specifically listed in
FINRA’s Sanction Guidelines as a potential mitigating factor.
SANCTION        GUIDELINES      7     (2011)     available     at
http://www.finra.org. In light of this record, we agree with
Saad that the SEC abused its discretion in failing to
adequately address all of the potentially mitigating factors that
the agency should have considered when it determined the
appropriate sanction. We take no position on the proper
outcome of this case. That is for the SEC to consider in the
first instance, after it has assessed all potentially mitigating
factors that might militate against a lifetime bar. We therefore
remand to the SEC for further consideration of its sanction in
light of this opinion.
                        I. Background
A. Regulatory Overview
     FINRA is an association of securities broker-dealers
registered with the Commission pursuant to Section 15A(a) of
the Securities Exchange Act of 1934. 15 U.S.C. § 78o-3(a). It
is a self-regulatory organization empowered to adopt rules
governing the conduct of its members and of persons
associated with its members, such as Saad. FINRA enforces
compliance with the Securities Exchange Act, SEC
regulations, and FINRA’s own rules. See id. § 78o-3(b)(2).
FINRA does so by bringing disciplinary proceedings to
adjudicate violations, which are subject to review by the
                              4
Commission. FINRA brought such a proceeding against Saad
based on his conduct in 2006 and 2007.
     During 2006 and much of 2007, Saad’s activities as a
securities dealer were subject to regulation by the NASD.
However, by the time Saad’s disciplinary proceeding was
formally initiated in September 2007, the SEC had approved
the consolidation of NASD with certain functions of the New
York Stock Exchange to create a new self-regulatory
organization: FINRA. Thus, while Saad’s misconduct
occurred prior to the creation of FINRA, FINRA’s
Department of Enforcement with the FINRA Office of
Hearing Officers initiated proceedings against Saad.
     Generally, the references to NASD and FINRA are
interchangeable throughout this opinion. The charge against
Saad was for a violation of NASD Conduct Rule 2110, which
requires that members “observe high standards of commercial
honor and just and equitable principles of trade.” See John
M.E. Saad, S.E.C. Release No. 62178, 2010 WL 2111287, at
*4 (May 26, 2010). NASD Conduct Rule 2110 is comparable
to the current, superseding FINRA Conduct Rule 2010. See
NASD TO FINRA CONVERSION CHART SPREADSHEET,
available at http://www.finra.org. In sanctioning Saad,
FINRA and the SEC applied the FINRA Sanction Guidelines,
as opposed to the predecessor NASD Sanction Guidelines.
See Saad, 2010 WL 2111287, at *4.
B. Facts
     The facts in this case are undisputed. Br. of Pet’r at 17.
At the relevant time, Saad was employed by Penn Mutual and
registered with its broker-dealer affiliate HTK, a FINRA-
member firm. Saad was registered as an investment company
products and variable contracts limited representative, a
general securities representative, and a general securities
principal.
                               5
     This case centers on Saad’s submission of several false
expense claims to his employer and Saad’s subsequent
attempts to conceal his misconduct. In July 2006, when a
scheduled business trip from his home base in Atlanta to
Memphis, Tennessee, was cancelled, instead of staying home,
Saad checked into an Atlanta hotel for two days. He later
submitted to his employer a false expense report claiming
expenses for air travel to Memphis and a two-day hotel stay in
that city. Saad forged an airline travel receipt and a Memphis
hotel receipt and attached those receipts to his expense report.
Saad also submitted another false expense claim, unrelated to
the fictional Memphis trip. He claimed an expense for the
replacement of his business cellular telephone when in fact he
had not replaced his own telephone but rather had purchased a
telephone for an insurance agent who was employed at
another firm. Saad testified at the disciplinary hearing that his
employer probably would not have approved his purchase of a
cell phone if he had submitted an accurate expense claim. See
Saad, 2010 WL 2111287, at *2.
     At his disciplinary hearing, Saad also explained that this
conduct occurred during a period when he was under a great
deal of professional and personal stress. Toward the end of
2005, Saad’s sales declined and he virtually halted business
travel, which was considered a significant aspect of his
professional responsibilities. In June 2006, Saad’s superiors at
Penn Mutual issued a production warning to him and
admonished him to increase his sales of Penn Mutual
products. During this same time period, Saad and his wife
were caring for one-year old twins, one of whom had
undergone surgery and was frequently hospitalized for a
significant stomach disorder.
     Saad’s false travel expense report was discovered by the
Atlanta office administrator, who noticed that Saad had
attached to the report an unaltered receipt for four drinks
                               6
purchased at an Atlanta hotel lounge on the same day when,
according to the expense report, Saad was supposed to be in
Memphis. When the office administrator questioned him
about the receipt for the drinks, Saad withdrew the receipt and
threw it away. The office administrator retrieved the receipt
from the trash and submitted it to Penn Mutual’s home office,
thus alerting Saad’s employer to the falsity of the travel
expense report. In September 2006, Saad was discharged by
both Penn Mutual and HTK for his misdeeds.
C. Proceedings Below
     Approximately two months after Saad was terminated,
NASD investigators questioned him about the reasons for his
discharge and his false expense reports. During this
investigation, Saad repeatedly attempted to mislead NASD by
providing investigators with false information. In a November
2006 email, Saad told NASD that the expenses claimed on the
fabricated trip report were “for a business trip that had yet to
occur,” although in fact the expenses were for a trip that had
been cancelled and had not been rescheduled. Saad, 2010 WL
2111287, at *3. In April 2007, Saad misrepresented to a
FINRA examiner that he did not know the person for whom
he had purchased a cell phone. Id. And in testimony delivered
in May 2007, Saad contended that he could not recall whether
he had purchased a plane ticket for the July 2006 trip to
Memphis. John M. Saad, Compl. No. 2006006705601, 9
(NAC Oct. 6, 2009) (“NAC Decision”), reprinted in Deferred
Joint Appendix (“D.A.”) 206, 214.
    FINRA brought a disciplinary proceeding against Saad in
September 2007, alleging “Conversion of Funds” in violation
of NASD Conduct Rule 2110. A disciplinary hearing before a
FINRA Hearing Panel was held in April 2008. The Hearing
Panel found that Saad had deliberately deceived his employer
both with regard to the travel report and the cell phone
purchase; that this deception constituted conversion of his
                             7
employer’s funds; and that this misconduct violated NASD
Conduct Rule 2110. The Hearing Panel assessed costs against
Saad and imposed a permanent bar against his association
with a member firm in any capacity, noting that “according to
the FINRA Sanction Guidelines, a bar is standard for
conversion regardless of the amount converted.” John M.E.
Saad, Compl. No. 2006006705601, 8 (Office of Hr’g Officers
Aug. 19, 2008), reprinted in D.A. 189, 196.
     Saad appealed to the NAC, which affirmed the Hearing
Panel. However, the NAC characterized Saad’s actions as
“misappropriation” of his employer’s funds, not “conversion.”
The NAC found that there were no mitigating factors and that
there were a number of aggravating factors, including “the
intentional and ongoing nature of Saad’s misconduct, Saad’s
efforts to deceive HTK and Penn Mutual, [and] Saad’s initial
instinct to conceal the extent of his actions from state and
FINRA examiners.” NAC Decision at 10, reprinted in D.A.
215. Because there is no specific sanction guideline for
misappropriation, the NAC applied the guideline for
conversion or improper use of funds and found that a
permanent bar was an appropriate sanction.
     On its review, the Commission agreed that Saad, by
intentionally falsifying receipts, submitting a fraudulent
expense report, and accepting reimbursement to which he was
not entitled, had misappropriated his employer’s funds in
violation of NASD Conduct Rule 2110. The Commission
found that Saad’s dishonesty with his employer “reflect[ed]
negatively on both Saad’s ability to comply with regulatory
requirements and his ability to handle other people’s money.”
Saad, 2010 WL 2111287, at *5. The Commission also
rejected Saad’s claims that the sanction against him, a
permanent bar, was improper because (a) there were
inconsistencies between the sanction here and FINRA
sanctions in other cases; (b) FINRA had employed the wrong
                               8
sanction guideline; (c) there were mitigating circumstances;
and (d) the sanction was unduly punitive rather than remedial
in nature. Instead, the Commission found that the sanction
was appropriate because it was not “excessive or oppressive.”
15 U.S.C. § 78s(e)(2).
     With regard to the contention that there were
inconsistencies between the sanction here and the sanctions
applied in other cases, the Commission stated that “[i]t is well
established . . . that the appropriateness of a sanction depends
on the facts and circumstances of each particular case and
cannot be precisely determined by comparison with action
taken in other proceedings.” Saad, 2010 WL 2111287, at *6.
Likewise, the Commission declined to credit Saad’s argument
that FINRA applied the wrong provisions of its Sanction
Guidelines, noting, inter alia, that the Guidelines “merely
provide a starting point in the determination of remedial
sanctions.” Id.
     The Commission also rejected Saad’s claim that there
existed circumstances sufficient to mitigate Saad’s
misconduct, noting that the Hearing Panel and the NAC had
addressed and specifically rejected many of Saad’s mitigation
claims, including the claims that his misconduct was a one-
time lapse in judgment, that he had an otherwise clean
disciplinary history, and that his wrongdoing did not involve
customer funds or securities. See Saad, 2010 WL 2111287, at
*7. With respect to the allegedly “aberrant” nature of Saad’s
conduct, the SEC explained that its focus was less on the short
time period during which the expense reports were submitted,
than on Saad’s “ongoing and intentional charade in support of
which he fabricated documents.” Id. The SEC referred to the
NAC decision, which recounts Saad’s conduct in submitting
the expense reports in July 2006 and then repeatedly
misleading investigators over the course of several months.
Id. (citing NAC Decision at 9, reprinted in D.A. 214).
                               9
     The SEC refused to be swayed by Saad’s years of honest
service because, the SEC explained, “an otherwise clean
disciplinary history [is] not mitigating.” Id. (citing Daniel D.
Manoff, S.E.C. Release No. 46708, 2002 WL 31769236, at *5
(Oct. 23, 2002)). The SEC also referenced the NAC’s
discussion of this factor, which explained that a violator
“should not be rewarded because he may have previously
acted appropriately as a registered person.” Id. (citing D.A.
213).
     The SEC additionally declined to credit Saad’s argument
that his conduct did not affect customers. The SEC relied on
FINRA’s conclusion that “[a]lthough Saad’s wrongdoing in
this instance did not involve customer funds or securities,
Saad’s willingness to lie . . . and obtain funds to which he was
not entitled indicates a troubling disregard for fundamental
ethical principles which, on other occasions, may manifest
itself in a customer-related or securities-related transaction.”
Id. The SEC decision then cited cases in which the
Commission rejected assertions by respondents who sought
mitigation because their wrongful conduct had not directly
targeted customers. See id. at *7 n.30 (collecting cases).
     The Commission further found that the sanction imposed
had a remedial purpose that served the public interest. The
Commission explained that a lifetime bar was warranted to
protect customers from any future misconduct by Saad. See
id. at *7-8. The Commission believed that Saad’s conduct
“raises serious doubts about his fitness to work in the
securities industry, a business that is rife with opportunities
for abuse.” Id. at *8. His actions “reveal a willingness to
construct false documents and then lie about them,” all of
which “suggests that his continued participation in the
securities industry poses an unwarranted risk to the investing
public.” Id. The SEC also believed that his behavior,
particularly his repeated efforts to conceal his misconduct,
                             10
“provides no assurance he will not repeat his violations.” Id.
The Commission also briefly explained that Saad’s
punishment was intended “as a deterrent to others in the
securities industry who might engage in similar misconduct.”
Id.
                        II. Analysis
A. Standard of Review
      “The SEC reviews sanctions imposed by the NASD to
determine whether they ‘impose[] any burden on competition
not necessary or appropriate’ or are ‘excessive or
oppressive.’” Siegel v. SEC, 592 F.3d 147, 155 (D.C. Cir.
2010) (quoting 15 U.S.C. § 78s(e)(2)); see also PAZ I, 494
F.3d at 1065-66. “This court reviews the SEC’s conclusions
regarding sanctions to determine whether those conclusions
are arbitrary, capricious, or an abuse of discretion.” Siegel,
592 F.3d at 155; see also PAZ Sec., Inc. v. SEC, 566 F.3d
1172, 1174 (D.C. Cir. 2009) (“PAZ II”). “The agency’s
choice of remedy is peculiarly a matter for administrative
competence, and we will reverse it only if the remedy chosen
is unwarranted in law or is without justification in fact.”
Siegel, 592 F.3d at 155. Nevertheless, this court is bound to
reverse an administrative action if the agency has “entirely
failed to consider an important aspect of the problem” or has
“offered an explanation for its decision that runs counter to
the evidence before the agency.” Motor Vehicle Mfrs. Ass’n of
U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983); see also Allentown Mack Sales & Serv., Inc. v. NLRB,
522 U.S. 359, 374-75 (1998) (discussing the importance of
“reasoned decisionmaking” in the review of agency
adjudications).
                              11
B. The Sanction Guidelines
      Saad argues that the SEC erred when it sustained a
lifetime bar from the securities industry predicated on an
application of the wrong FINRA sanction guideline. FINRA’s
most recent Sanction Guidelines were issued in 2006 “for use
by the various bodies adjudicating disciplinary decisions . . .
in determining appropriate remedial sanctions.” SANCTION
GUIDELINES 1 (2011), available at http://www.finra.org. The
Guidelines include specific provisions covering conversion or
improper use of funds or securities and for forgery and/or
falsification of records. The former contains two prongs: one
for conversion, which advises adjudicators to “[b]ar the
respondent regardless of amount converted,” and one for
improper use, which advises them to “[c]onsider a bar.” Id. at
36. The guideline for forgery and/or falsification advises
adjudicators to “consider” a bar in “egregious cases.” Id. at
37.
     Saad claims that the SEC improperly applied the
guideline for conversion or improper use, rather than the
guideline for forgery and/or falsification. Saad contends that
the SEC’s reliance on the guideline for conversion or
improper use was inappropriate for two reasons. First he
argues that, because the SEC found him guilty of
misappropriation, the guideline’s conversion prong was
inapposite. Second, he argues that the guideline’s improper
use prong applies only to the misuse of customer funds, not an
employer’s funds. Therefore, Saad continues, the Commission
should have considered only the guideline for forgery and/or
falsification, pursuant to which a lifetime bar would be
inappropriate. Saad’s arguments are unpersuasive.
     The SEC did not err when it upheld a sanction pursuant
to the guideline for conversion or improper use. The FINRA
Sanction Guidelines do not purport to “prescribe fixed
sanctions for particular violations.” Id. at 1. “Rather, they
                              12
provide direction for Adjudicators in imposing sanctions
consistently and fairly.” Id. The Guidelines do not enumerate
sanctions for every conceivable securities-industry violation;
they merely address sanctions for “some typical securities-
industry violations.” Id. The SEC’s decision correctly notes
that the Guidelines “are not intended to be absolute” and,
“[f]or violations that are not addressed specifically,
Adjudicators are encouraged to look to the guidelines for
analogous violations.” Saad, 2010 WL 2111287, at *6
(quoting SANCTION GUIDELINES 1). The SEC reasonably
concluded that “misappropriation is doubtless analogous to
conversion.” Br. of SEC at 19. Because the Guidelines do not
list a particular sanction for misappropriation, it was not
arbitrary and capricious for the Commission to analogize to
the guideline’s conversion prong in this way. This is wholly
consistent with the SEC’s repeatedly stated view that the
Guidelines do not specify required sanctions but “merely
provide a ‘starting point’ in the determination of remedial
sanctions.” Saad, 2010 WL 2111287, at *6 & n.23 (quoting
Hattier, Sandford & Reynoir, S.E.C. Release No. 39543, 1998
WL 7454, at *4 n.17 (Jan. 13, 1998)), aff’d, 163 F.3d 1356
(5th Cir. 1998).
     Saad is similarly unpersuasive in his assertion that the
guideline’s improper use prong only applies to the misuse of
customer funds – and thus would not apply to Saad’s
misconduct      which     involved     claiming     fraudulent
reimbursements from his employer. The guideline for
conversion and improper use refers to several FINRA and
NASD rules, including FINRA Conduct Rule 2010 (the
successor to NASD Conduct Rule 2110 at issue here). See
SANCTION GUIDELINES 36. Saad points out that, “[w]ith the
exception of FINRA Rule 2010 . . . each of the referenced
rules concerns the improper use of (and potentially the
conversion of) customers’ funds or securities.” Br. of Pet’r at
25. This assertion obviously does not advance Saad’s position
                              13
because it acknowledges that FINRA Conduct Rule 2010 is
not limited to misconduct relating to customer funds.
Although Saad’s briefing on this point is far from clear, he
seems to make a sort of in pari materia argument that, in light
of the other rules referenced, the SEC was required to import
the “customers’ funds” limitation into FINRA Conduct Rule
2010. The argument is patently flawed, and Saad cites no
authority to support his claim. We therefore reject it.
     Even if we were to accept Saad’s argument that the SEC
should have applied the guideline for forgery and/or
falsification, that error by itself would not require a reversal
or remand. The Commission reasonably concluded that
“FINRA’s decision to impose a bar is consistent with either
guideline.” Saad, 2010 WL 2111287, at *7. Indeed, both
guidelines suggest that FINRA at least consider a bar. See
SANCTION GUIDELINES 36-37. Saad objects because the
guideline for conversion or improper use “emphasizes a
permanent bar, while the sanction guideline for Forgery
and/or Falsification emphasizes suspension.” Br. of Pet’r at 23
(emphasis added). But the fact remains – as the SEC correctly
noted – both guidelines expressly contemplate the possibility
of a lifetime bar. Given the deference that we owe to SEC
sanction decisions, see Siegel, 592 F.3d at 155, we decline to
disturb the SEC’s decision on this basis.
C. The Lifetime Bar
     Saad also argues that the Commission abused its
discretion when it affirmed FINRA’s imposition of a lifetime
bar. He contends that the SEC failed to consider certain
mitigating factors and to articulate a remedial rather than
punitive purpose for the sanction. As a result, in Saad’s view,
the SEC erred by upholding a sanction that was “excessive or
oppressive.” 15 U.S.C. § 78s(e)(2). The Commission responds
that it considered all of the necessary factors and reasonably
concluded that a lifetime bar was appropriate under the
                              14
circumstances. For reasons described below, we agree with
Saad that the Commission abused its discretion in failing to
address several potentially mitigating factors.
     Under 15 U.S.C. § 78s(e)(2), the Commission reviews a
disciplinary sanction imposed by FINRA to determine
whether, “having due regard for the public interest and the
protection of investors,” that sanction “is excessive or
oppressive.” See also PAZ I, 494 F.3d at 1064 (SEC reviews
NASD sanctions de novo). In our review of SEC actions,
“[w]e do not limit the discretion of the Commission to choose
an appropriate sanction so long as its choice meets the
statutory requirements that a sanction be remedial and not
‘excessive or oppressive.’” PAZ II, 566 F.3d at 1176. The
SEC’s burden is to provide a convincing explanation of its
rationale in light of the governing law. As we explained in
PAZ I:
    When evaluating whether a sanction imposed by
    [FINRA] is excessive or oppressive, as we have stated
    before, the Commission must do more than say, in effect,
    petitioners are bad and must be punished; at the least it
    must give some explanation addressing the nature of the
    violation and the mitigating factors presented in the
    record. The Commission must be particularly careful to
    address potentially mitigating factors before it affirms an
    order . . . barring an individual from associating with
    a[] . . . member firm – the securities industry equivalent
    of capital punishment.
494 F.3d at 1064-65 (citations omitted).
    Furthermore, the Commission may approve “expulsion
not as a penalty but as a means of protecting investors . . . .
The purpose of the order [must be] remedial, not penal.” Id. at
1065. If the Commission upholds a sanction as remedial, it
must explain its reasoning in so doing; “as the circumstances
                              15
in a case suggesting that a sanction is excessive and
inappropriately punitive become more evident, the
Commission must provide a more detailed explanation linking
the sanction imposed to those circumstances.” Id. at 1065-66.
That is not to say, however, that the Commission is under any
obligation to explain why it found a lesser sanction
inappropriate. See Siegel, 592 F.3d at 157 (“[B]eyond
mak[ing] the necessary findings regarding the protective
interests to be served by expulsion, the agency need not state
why a lesser sanction would be insufficient.”).
     After careful review of the record before us, we conclude
that the case must be remanded for further consideration by
the SEC. Remand is warranted because the decision of the
Commission – as well as those of the FINRA Hearing Panel
and the NAC – ignores several potentially mitigating factors
asserted by Saad and supported by evidence in the record. We
have previously cautioned that the SEC “must be particularly
careful to address potentially mitigating factors” before
affirming a permanent bar. PAZ I, 494 F.3d at 1065. The SEC
has failed to do so in this case. In particular, Saad correctly
notes that FINRA and the SEC failed to consider that “Mr.
Saad’s firm, HTK[,] disciplined him by terminating his
employment in September of 2006, prior to regulatory
detection.” Br. of Pet’r at 34; see also Reply Br. at 12-13.
Under the FINRA Sanction Guidelines, number fourteen of
the “Principal Considerations in Determining Sanctions” is
“[w]hether the member firm with which an individual
respondent is/was associated disciplined the respondent for
the same misconduct at issue prior to regulatory detection.”
SANCTION GUIDELINES 7. The SEC’s decision acknowledges
this argument: “[Saad] claims FINRA also failed to consider
that HTK had fired him before FINRA detected his
misconduct . . . .” Saad, 2010 WL 2111287, at *7. However,
the SEC’s decision says nothing more regarding this issue,
nor do the decisions issued by the Hearing Panel and the
                              16
NAC. When questioned about this point at oral argument,
SEC counsel mistakenly argued that the termination was
“irrelevant” because it occurred after the violation. See Oral
Arg. at 19:45 - 23:40. The Guidelines say otherwise.
     Similarly, the SEC’s decision noted, but did not address,
Saad’s argument that “he was under severe stress with a
hospitalized infant and a stressful job environment.” Saad,
2010 WL 2111287, at *7. The Guidelines do not expressly
mention personal stress as a mitigating factor, but they are by
their own terms “illustrative, not exhaustive; as appropriate,
Adjudicators should consider case-specific factors in addition
to those listed.” SANCTION GUIDELINES 6.
     In response to Saad’s argument that the SEC ignored
these potentially mitigating factors, the Commission weakly
responds that it “implicitly denied that they were [mitigating]
when it stated that it denied all arguments that were
inconsistent with the views expressed in the decision.” Br. of
SEC at 24. This contention is not an acceptable explanation
for the SEC’s failure to provide “reasoned decisionmaking” in
support of a lifetime bar. See Allentown Mack, 522 U.S. at
374-75.
     When we explained in PAZ I that the SEC “must be
particularly careful to address potentially mitigating factors,”
we meant that the Commission should carefully and
thoughtfully address each potentially mitigating factor
supported by the record. The Commission cannot use a
blanket statement to disregard potentially mitigating factors –
especially those, like an employee’s termination, that are
specifically enumerated in FINRA’s own Sanction
Guidelines. Because the SEC failed to address potentially
mitigating factors with support in the record, it abused its
discretion by “fail[ing] to consider an important aspect of the
problem.” See State Farm, 463 U.S. at 43. We must remand
on that basis.
                             17
    We take no position on the proper outcome of this case.
We leave it to the Commission in the first instance to fully
address all potentially mitigating factors that might militate
against a lifetime bar.
                      III. Conclusion
     The petition for review is granted. The case is remanded
to the Commission for further consideration consistent with
this opinion.