SEC Can Enforce NASD Restitution Order – From SECLaw.com

   

]]> Home | Message Board Home Search Arbitration Investors Brokers Finance Law Compliance Archives SEC Can Enforce NASD Restitution Order

SEC allowed to assist in collection of NASD Restitution order by applying for court order

SEC v. Vittor, No. 02-13876 (11th Cir., 3/7/03). Enforcement Practices/Procedures * 1934 Act (§21) * Collection Issues * Statutory Definitions (“Order”).

The SEC can assist in collection of a NASD restitution order by applying for a court order directing payment.

There must be tens, if not hundreds, of millions of unpaid regulatory fines, disgorgement and restitution orders arising from the sanctions levied by SROs and securities regulators. The SEC has collection clout, but the SROs’ main leverage lies in their ability to prevent re-entry into the business.

This Opinion cites a Fifth Circuit Opinion, Lang v. French, 514 F.3d 217 (1998), which determined that an investor, claiming a right to recovery under a NASD restitution order, has no standing. Perhaps, that is why the SEC acted in this case to obtain a court order that could summarily convert a NASD restitution order into a court judgment.

To do so, the staff relies upon Section 21(d) and (e) of the Securities Exchange Act, but those provisions, while permitting the SEC to commence its own action to enforce SRO rules, anticipates the existence of a prior SEC “order,” with which compliance may be commanded. The SEC argues that such an “order” was issued when it affirmed the findings of the NASD disciplinary decisions, but Mr. Vittor argues that the SEC’s affirmance of the NASD penalty is not an “order,” for Section 21 purposes. It requires no action on his part and, therefore, a court cannot command him to comply with it.

This Court thinks it can and finds that the SEC action, after review of the NASD findings and sanctions, constitutes an “order,” under Sections 21(d) and (e). That leaves Section 21(f), which forbids SEC action under the former subsections, unless the SRO has failed or is unable to act first (or where SEC is otherwise “necessary or appropriate”). The district court found Section 21(f) inapplicable here and the majority agrees. “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.’” Here, the NASD acted and the SEC applied oversight, not independent action. Mr. Vittor is commanded to pay. (SAC Ed: The dissent thinks 21(f) is applicable, but its policy concern is that adding execution clout to the consequences one faces in pursuing review of a SRO disciplinary proceeding will further chill the right to an appeal.) (SLC Ref. No. 2003-11-05)

  

]]>


Shop at Amazon.com

 


Copyright 2003 Securities Arbitration Commentator, Inc. P.O. Box 112, Maplewood, NJ 07040; t: 973-761-5880 f: 973-761-1504. Materials denoted with a SAC Reference No. (e.g. SAC Ref. No. 99-01-001) are on hand at SAC and may be obtained by calling the Securities Arbitration Commentator, or by email to help@sacarbitration.com. The Securities Arbitration Commentator is the leading publication for securities arbitration news and information, and maintains the most complete database of arbitration awards availalble anywhere. For more information regarding their services, visit their website at www.sacarbitration.com


Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article. 


Return to The Securities Law Home Page 

Visit Beam & Astarita, LLC, securities arbitration, regulation and litigation attorneys

]]> ]]>