STANDARD INVESTMENT CHARTERED, INC., on Behalf of Itself and All Others Similarly Situated, Plaintiff-Appellant, v. NATIONAL ASSOCIATION OF SECURITIES DEALERS, INCORPORATED, AKA NASD, NYSE Group, Inc., Mary L. Schapiro, Richard F. Brueckner, Babara Z. Sweeney, Financial Industry Regulatory Authority, Incorporated, T. Grant Callery, Todd Diganci and Howard M. Schloss, Defendant-Appellees

STANDARD INVESTMENT CHARTERED, INC., on Behalf of Itself and All Others Similarly Situated, Plaintiff-Appellant, v. NATIONAL ASSOCIATION OF SECURITIES DEALERS, INCORPORATED, AKA NASD, NYSE Group, Inc., Mary L. Schapiro, Richard F. Brueckner, Babara Z. Sweeney, Financial Industry Regulatory Authority, Incorporated, T. Grant Callery, Todd Diganci and Howard M. Schloss, Defendant-Appellees

The proxy solicitation to amend NASD’s bylaws was an act incident to NASD’s delegated regulatory functions and a necessary prerequisite to consolidation into FINRA; because bylaw amendment falls within SRO rulemaking authority subject to SEC oversight, absolute immunity applies and bars the plaintiff’s private...

Source-derived case information.

Citation
637 F.3d 112; 2011 U.S. App. LEXIS 3458; 2011 WL 590139
Parties
Plaintiff Appellant: Standard Investment Chartered, Inc.; Defendant Appellee: National Association of Securities Dealers, Inc. (NASD); Defendant Appellee: NYSE Group, Inc.; Defendant Appellee (officer): Mary L. Schapiro; Defendant Appellee (officer): Richard F. Brueckner; Defendant Appellee (officer): Barbara Z. Sweeney; Defendant Appellee: Financial Industry Regulatory Authority, Inc. (FINRA); Defendant Appellee (officer): T. Grant Callery; Defendant Appellee (officer): Todd Diganci; Defendant Appellee (officer): Howard M. Schloss
Court
Court of Appeals for the Second Circuit
Jurisdiction
United States
Judgment Date
22 February 2011
Case Number
Docket 10-945-cv
Procedural Posture
Civil Appeal / Appeal From District Court Judgment Granting Rule 12(b)(6) Motion to Dismiss
Outcome
Affirmed
Legal Topics
Absolute Immunity, Self Regulatory Organizations (sros), Proxy Solicitation, Bylaw Amendments, Consolidation of Sros, SEC Rulemaking and Approval
Source Language
english
Securities Law Administrative Law Immunity Doctrine Civil Procedure Absolute Immunity Self Regulatory Organizations (sros) Proxy Solicitation Bylaw Amendments +2 more

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Parties

Standard Investment Chartered, Inc.

Plaintiff Appellant

National Association of Securities Dealers, Inc. (NASD)

Defendant Appellee

NYSE Group, Inc.

Defendant Appellee

Mary L. Schapiro

Defendant Appellee (officer)

Richard F. Brueckner

Defendant Appellee (officer)

Barbara Z. Sweeney

Defendant Appellee (officer)

Financial Industry Regulatory Authority, Inc. (FINRA)

Defendant Appellee

T. Grant Callery

Defendant Appellee (officer)

Todd Diganci

Defendant Appellee (officer)

Howard M. Schloss

Defendant Appellee (officer)

Procedural Posture

Civil Appeal / Appeal From District Court Judgment Granting Rule 12(b)(6) Motion to Dismiss

Legal Issues

  1. 1 Whether SROs and their officers are absolutely immune from private damages suits for alleged misstatements in a proxy solicitation to amend bylaws related to consolidation
  2. 2 Whether amendment of an SRO’s bylaws in connection with consolidation is incident to regulatory functions and thus protected by absolute immunity
  3. 3 Whether the SEC’s statutory framework for SRO rulemaking (including Section 19 and Rule 19b-4) supports immunity for the proxy solicitation

Ratio Decidendi

The proxy solicitation to amend NASD’s bylaws was an act incident to NASD’s delegated regulatory functions and a necessary prerequisite to consolidation into FINRA; because bylaw amendment falls within SRO rulemaking authority subject to SEC oversight, absolute immunity applies and bars the plaintiff’s private damages claims.

Court Disposition

Affirmed

Orders

  • Affirmed the district court judgment dismissing the complaint under Rule 12(b)(6)