NASD Appeal - Jurisdiction - Alleged NASD staff misconduct
Time between appeal and decision - 6 months, 3 days.
Time between last brief and decision - 5 months, 4 days.
Pages - 9
Comment
Sky Capital, a broker dealer, applied for NASD membership. The application was denied. Later, the NASD reconsidered and permitted the application with various restrictions. Over a period of years the firm expanded and alleged that the NASD staff obstructed those efforts, although its expansions were ultimately permitted. Sky Capital also complained that the NASD staff conducted eight examinations of its operations. The firm claimed that the examinations were designed to destroy it by draining its financial resources. Two of those examinations were in progress at the time of the appeal. The other six had resulted in two minor disciplinary actions, which Sky consented to. Sky Capital filed a complaint with the NASD's Office of Ombudsman alleging staff harassment. To date the NASD has not acted upon that complaint.
The Commission found that it had no jurisdiction because the NASD had not issued any formal and final disciplinary orders. "We have stated that SRO action 'is not reviewable merely because it adversely affects the applicant.'"(footnote omitted)
This is a routine matter in which the Commission applied very clear statutory jurisdictional requirements and clear precedent. One must wonder why nine pages of ink were spilled deciding this and why it took five months to issue an opinion.
Without any explanation of why, the Commission simply stated that "the decisional process would not be significantly aided by oral argument." One has to wonder what determines whether or not oral argument will take place. The explanation in this decision provides no clue as to what factors the Commission uses to make this determination.
Key Points
- Without explanation the Commission denied Sky Capital's request for oral argument stating that "[w]e have determined that the presentation in the briefs and the decisional process would not be significantly aided by oral argument."
- The SEC's authority to review NASD actions is governed by Exchange Act Section 19(d). Review of a SRO action is limited in that section to actions that: 1) impose final disciplinary action; 2) deny membership; 3) prohibit or limit access to services of the SRO; or 4) bar a person from associating with a member. Since the complaint does not allege any such jurisdictional action, the Commission found it had no jurisdiction.
- Exchange Act Section 19(f) does not provide for Commission jurisdiction in the absence of jurisdiction under Section 19(d).
- The Commission has no jurisdiction to award damages or reassign NASD staff as requested by the firm. Under Exchange Act Section 19(e), the Commission's remedies when reviewing a NASD action are limited to affirming, modifying, or setting aside NASD sanctions.
- The NASD's Office of Ombudsman is does not provide a "fundamentally important service" that is central to the function of the NASD and therefore alleged failure of that office to act does not invoke Commission jurisdiction.
