4th Circuit: Appeal of SEC decision dismissed as premature

Where the Securities and Exchange Commission remanded part of a decision of the Financial Industry Regulatory Authority Inc. to that body for further proceedings, this court lacked jurisdiction to review the SEC order, because it was not a “final order.”

Background

Frank Harmon Black and his securities investment firm, Southeast Investments N.C. Inc., are the respondents in an ongoing disciplinary proceeding pending before the Financial Industry Regulatory Authority Inc., or FINRA. In March 2017, FINRA decided that Black and Southeast’s conduct had contravened the FINRA rules.

Black and Southeast appealed FINRA’s resulting disciplinary decision to the Securities and Exchange Commission, or SEC, pursuant to the Securities Exchange Act. The SEC affirmed in part and remanded in part FINRA’s disciplinary decision against Black and Southeast. Relevantly here, it determined that FINRA’s failure to produce its investigatory emails was not a harmless error.

It explained that, under the circumstances, Black could be entitled to additional development of the evidence, or an adverse inference against FINRA’s enforcement staff. The SEC decision thus remanded the false testimony and fabricated documents issues to FINRA for further proceedings.

Jurisdiction

United States Courts of Appeals possess jurisdiction to review “final order[s]” of the SEC. Although the statute does not define the term “final order,” our Court has recognized that a “final order” as used therein is synonymous to the term “final agency action.” This court has routinely concluded that it lacks jurisdiction to review an agency order remanding a case, or a portion thereof, to a lower tribunal for further proceedings.

Contrary to this settled precedent, the SEC contends that the SEC decision’s partial remand “does not render the [SEC decision] unreviewable, because the issues for which the Commission issued sanctions” — that is, the supervisory and email retention violations — “may be considered a final order on their own.” In advancing its contention concerning appellate jurisdiction, the SEC urges this court to adhere to Saliba v. SEC, 47 F.4th 961 (9th Cir. 2022), which exercised final order jurisdiction over part of an SEC decision that included a partial remand order.

Unlike here, however, the reviewable portion of the SEC decision had imposed an immediately effective bar from FINRA membership, which the court  “analogized  to  an  injunction” subject to “interlocutory appeal” under 28 U.S.C. § 1292. In contrast, the sanctions imposed against Black and Southeast for the supervisory and email retention violations were not immediately effective, and they do not in any way resemble an injunction. The SEC is thus incorrect when it argues that this court possesses some type of piecemeal jurisdiction to review this allegedly “final” portion of the SEC decision.

The SEC decision does not “end [this] litigation,” and it does not “mark the consummation of the agency’s decisionmaking process.” Indeed, “it does the exact opposite by remanding the case” to FINRA, specifically “for further proceedings,” to include further record development through cross-examination and witness testimony. Black and Southeast will thus be entitled to challenge FINRA’s decision in such further proceedings — along with the sanctions for the supervisory and record retention violations — by an appeal to the SEC and then, if necessary, to this court.

The SEC decision does not impose any “obligations” or “legal consequences” upon Black or Southeast that are cognizable before this court. Unlike the order at issue in Saliba, the SEC decision actually set aside FINRA’s findings of violations and sanctions imposed against Black and Southeast “for testifying falsely and producing to FINRA fabricated documents.” All fines and sanctions imposed by FINRA have been stayed pending completion of the proceedings remanded to FINRA, subsequent administrative appeal proceedings and further judicial review.

Put simply, Black and Southeast must await the conclusion of the remand proceedings to FINRA, and only then, if they are ultimately “aggrieved” by the SEC’s “final order” resolving the entire case will they be entitled to petition for review by this court.

Petition for review dismissed.

Black v. Securities and Exchange Commission, Case No. 23-2297, Jan. 14, 2025. 4th Cir. (King), from Securities and Exchange Commission. Aditya Dynar for Petitioners. Courtney Lynn Dixon for Respondent. Amir C. Tayrani for Intervenor. 14 pp.