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Univ. of Toledo College of Law

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Friday, March 13, 2009

SEC Sets Aside PHLX Sanction for Member's Refusal to Pay Litigation Expenses

The SEC set aside an order of fees, expenses and sanctions imposed by the Philadelphia Stock Exchange, Inc. against Richard B. Feinberg. The PHLX had ordered Feinberg to pay $464,418.51 incurred by the PHLX in connection with a lawsuit Feinberg filed against a governor on the PHLX Board of Governors. The PHLX also ordered Feinberg's membership to be suspended if he did not pay the fees and expenses. In seeking to recoup these costs, the PHLX relied on PHLX Rule 651, which requires any member who fails to prevail in a lawsuit that is related to the business of the PHLX to reimburse the PHLX for reasonable expenses incurred in connection with that lawsuit. The Commission found that Feinberg's suit was not related to the business of the Exchange as required under Rule 651 and that to permit the PHLX to recoup litigation expenses in cases such as the one Feinberg brought would be inconsistent with purposes of the Securities Exchange Act of 1934. (Rel. 34-59577; File No. 3-13128)

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