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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, February 23, 2011

FINRA NAR Rule Impermissibly Retroactive as Applied to Banned Broker

The Ninth Circuit held that a FINRA rule that prohibited non-attorneys who have been banned from the securities industry from representing parties in securities arbitrations was impermissibly retroactive as applied to Richard Sacks, who was banned from the securities industry in 1991.  Since then, according to Sacks, he has represented parties in over 1,300 securities arbitrations.  Sacks v. SEC (No. 07-74647 02/22/11)(Download SacksvSEC).

The Ninth Circuit emphasized the "deeply rooted" presumption against retroactivity in U.S. jurisprudence, based on concerns about fairness.  Relying on its precedent, Koch v. SEC, 177 F.3d 784 (9th Cir. 1999) (finding SEC rule banning participation in penny stock offerings impermissibly retroactive as applied to previously barred broker), it found that the FINRA rule imposed a "new and grave consequence" on Sacks' prior conduct.  The court did not explicitly address FINRA's interest in protecting investors and its forum, although it noted that the rule bars Sacks from participating in activity in which he had previously engaged.

http://lawprofessors.typepad.com/securities/2011/02/finra-nar-rule-impermissibly-retroactive-as-applied-to-banned-broker.html

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