Appeal of SEC decision by 4th Circuit dismissed for being premature in North Carolina

The recent case of Frank Harmon Black and Southeast Investments N.C. Inc. involved a disciplinary proceeding before the Financial Industry Regulatory Authority Inc. (FINRA). In March 2017, FINRA found that Black and Southeast had violated their rules. In response, Black and Southeast appealed FINRA’s decision to the Securities and Exchange Commission (SEC) under the Securities Exchange Act.

The SEC partially upheld and partially remanded FINRA’s decision, specifically focusing on FINRA’s failure to provide investigatory emails. The SEC felt that Black might need more evidence or that an adverse inference against FINRA’s enforcement staff might be appropriate. As a result, the SEC remanded the issues related to false testimony and fabricated documents back to FINRA for further investigation.

When it comes to appellate jurisdiction, United States Courts of Appeals can review “final orders” issued by the SEC. Despite the lack of a clear definition of “final order,” the court typically considers it to be equivalent to “final agency action.” In this case, the SEC decision did not qualify as a final order because it involved a partial remand of the case to FINRA for additional proceedings.

The SEC argued that certain sanctions, such as supervisory and email retention violations, could be considered final orders on their own. They referenced a case, Saliba v. SEC, where a court granted final order jurisdiction over part of an SEC decision that included a partial remand. However, in that case, the sanctions imposed were immediately effective and resembled an injunction, unlike the sanctions against Black and Southeast, which were not immediately effective.

The SEC decision in this case did not bring the litigation to an end, as it remanded the case back to FINRA for further proceedings. Black and Southeast would have the opportunity to challenge FINRA’s decision in these additional proceedings and could then appeal to the SEC and potentially to the court if needed. Ultimately, Black and Southeast would have to wait until the conclusion of the remand proceedings to see if they could challenge the SEC’s final decision.

In summary, the petition for review was dismissed, emphasizing that Black and Southeast must await the outcome of the remand proceedings before seeking further review by the court. This case highlights the importance of understanding the jurisdictional limits when it comes to appealing SEC decisions and the significance of final orders in the process.