The D.C. Circuit issued an unpublished disposition concluding that a case brought by the Securities Industry and Financial Markets Association was moot because SIFMA’s petition for review was filed out of time. SIFMA had alleged that a temporary conditional exemption (TCE) issued by the SEC to provide relief to municipal advisers during the COVID-19 pandemic unlawfully put registered broker-dealers at a competitive disadvantage and ignored formal agency rulemaking procedures. The petition, however, could not meet exceptions to the mootness rules and, as a result, the panel dismissed SIFMA’s petition for review as moot (Securities Industry and Financial Markets Association v. SEC, February 18, 2022, per curiam).
The appellate court’s disposition noted the similarities and dissimilarities between traditional broker-dealers and municipal advisors and the uncertainties around what activities municipal advisors can and cannot do and whether they must be registered with the Commission. The court also briefly outlined the rationale for the Commission’s temporary order that allowed municipal advisors to directly solicit some types of investments without registering as broker-dealers.
Specifically, the Commission was concerned that the then-emerging COVID-19 pandemic could jeopardize many municipalities’ funding options, so the Commission granted municipal advisors temporary exemption from the registration requirement in order for them to facilitate municipal transactions. Under the TCE, registered municipal advisers could solicit banks (and certain bank subsidiaries) as well as credit unions in connection with direct placements of securities issued by their municipal issuer clients. The TCE was to be effective from June 16, 2020, until December 31, 2020.
With respect to SIFMA’s legal challenge of the TCE, the court began by explaining that, although SIFMA filed its petition for review in August 2020, while the TCE was in effect, the TCE expired at the end of 2020, thus mooting SIFMA’s petition for review. In the court’s words, “[t]hat expiration provided the Association with the relief it sought.”
The court, however, went on to address SIFMA’s argument that its petition for review should be kept alive because two exceptions to the mootness rules apply. The court first addressed the voluntary-cessation doctrine. That doctrine holds that a defendant’s voluntary action does not necessarily deprive a court of its power to decide a matter, but the doctrine may not apply if a matter is conceptually outside of the doctrine. The D.C. Circuit explained that the Commission’s fixing of the TCE’s expiration date before SIFMA filed its petition for review rendered SIFMA’s voluntary cessation theory conceptually inconsistent with the voluntary-cessation doctrine. Citing another D.C. Circuit case, the court said, “[N]on reenactment of a one-time condition that expired of its own terms cannot be viewed as cessation of conduct.”
The court also rejected SIFMA’s theory based on the capable-of-repetition-yet-evading-review doctrine, which often is applied to events giving rise to litigation that may result in litigation being mooted because of the passage of time. The court emphasized that the doctrine requires an act that is of short enough duration that the legal dispute over that act likely would not be “fully live” at the time of adjudication. The court explained that the TCE was not short in duration and the Commission did not have a demonstrated record of issuing similar short-term orders nor were any such orders limited in duration by the federal securities laws.
The case is No. 20-1306.
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