Wednesday, August 16, 2017

Revised opinion expands list of vacated pre-Dodd-Frank bars

A petition for rehearing by the SEC has resulted in the 11th Circuit vacating and revising a month-old opinion. The panel had previously denied an unregistered broker's petition for review of a lifetime bar from the securities industry imposed by the Commission. The court also vacated, at the Commission's request, a portion of the order imposing two industry bars based on pre-Dodd-Frank conduct. In the revised, unpublished opinion, the court vacated a total of five industry bars in order to avoid impermissible retroactive effects of the Dodd-Frank Act (Imperato v. SEC, August 11, 2017, per curiam).

Bar orders. In 2012, the Commission filed a complaint against broker Daniel Imperato charging 17 violations of the securities laws and associated regulations. A district court granted summary judgment in favor of the Commission on all counts, and the Eleventh Circuit later affirmed this judgment. While the appeal was pending, the SEC brought an administrative proceeding to determine whether to impose additional sanctions. The ALJ permanently barred Imperato "from associating with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in an offering of penny stock."

On appeal of the SEC's order, the appellate court concluded that the Commission's imposition of the bar was not a gross abuse of discretion. The findings were supported by substantial evidence, the panel said, and each of the six factors considered by the SEC weighed against Imperato and substantially in favor of the imposition of a lifetime industry-wide bar. Imperato's other arguments, based on due process and the statute of limitations were also without merit.

The court went on to grant the SEC’s request to vacate the portion of the Commission's order barring Imperato from association with municipal advisors and NRSROs. The Commission noted that these bars were based on conduct before the passage of the Dodd-Frank Act and that the bars could have an impermissible retroactive effect, since the Act itself gave the authority to impose the bars.

Vacated and revised. After considering a petition for rehearing filed by the Commission, the court vacated the June 30 opinion and issued a revised opinion in its stead. The bulk of the opinion, finding no merit in Imperato's petition for review, is unchanged. The panel, however, added three more industry bars to the previous list and vacated that portion of the SEC’s order that imposed the five industry bars prohibiting Imperato from associating with investment advisors, municipal securities dealers, transfer agents, municipal advisors, and NRSROs.

The case is No. 15-11574.