Sharemaster v. Ussec

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 7 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
SHAREMASTER, No. 18-71485
Petitioner, SEC No. 3-14104
v.
MEMORANDUM*
U.S. SECURITIES & EXCHANGE
COMMISSION,
Respondent.
On Petition for Review of an Order of the
Securities & Exchange Commission
Submitted February 12, 2020**
San Francisco, California
Before: GOULD and MURGUIA, Circuit Judges, and FEINERMAN,*** District
Judge.
Sharemaster, a sole-proprietor broker-dealer registered with the Financial
Industry Regulatory Authority (“FINRA”) and the Securities and Exchange
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Gary Feinerman, United States District Judge for the
Northern District of Illinois, sitting by designation.
Commission, seeks review of a Commission order finding that Sharemaster
improperly failed to submit financial statements certified by an accountant
registered with the Public Company Accounting Oversight Board (“PCAOB”) for
the calendar year 2009. See In re Sharemaster (“Sharemaster Order II”),
Exchange Act Release No. 34-83138, 2018 WL 2017542, at *6–8 (Apr. 30, 2018).
We have jurisdiction under 15 U.S.C. § 78y(a)(1), and we dismiss the petition for
lack of standing in part and deny the remainder on the merits.
Much of the pertinent background is set forth in Sharemaster v. SEC, 847
F.3d 1059 (9th Cir. 2017). At all relevant times, section 15A of the Securities and
Exchange Act requires a broker-dealer registered with the Commission to
“annually file . . . a balance sheet and income statement certified by a registered
public accounting firm.” 15 U.S.C. § 78q(e)(1)(A) (2010). Because federal law
defines “registered public accounting firm” as a firm registered with the PCAOB,
see id. §§ 78c(a)(59), 7201(12), those financial statements must be certified by a
PCAOB-registered accountant. That requirement is subject to an exemption whose
details do not matter for present purposes. See 42 Fed. Reg. 23,786, 23,788 (May
10, 1977), 1977 WL 218047.
After Sharemaster filed financial statements for the calendar year 2009 that
were not certified by a PCAOB-registered accountant, FINRA imposed a $1,000
late fee and suspended Sharemaster until it complied. Sharemaster challenged
2
FINRA’s decision on the ground that it qualified for the exemption and therefore
was not required to use a PCAOB-certified accountant. A FINRA panel ruled
against Sharemaster, and Sharemaster applied for review from the Commission.
Three days after applying for review, Sharemaster submitted 2009 financial
statements audited by a PCAOB-registered firm, prompting FINRA to lift the
suspension, and in turn the Commission to dismiss Sharemaster’s application for
review. See In re Sharemaster (“Sharemaster Order I”), Exchange Act Release
No. 34-65570, 2011 WL 4889100, at *3–4 (Oct. 14, 2011). We remanded the
matter to the Commission, holding that Sharemaster was entitled to challenge the
$1,000 late fee. Sharemaster, 847 F.3d at 1068–71. On remand, the Commission
held that Sharemaster did not qualify for the exemption but ordered FINRA to
remit the $1,000 late fee. Sharemaster Order II, 2018 WL 2017542, at *1.
Sharemaster seeks review of that order, contending, among other things, that the
Commission wrongly held that it did not qualify for the exemption.
The Commission argues that Sharemaster lacks Article III standing to seek
review because the $1,000 late fee has been refunded. “In order to invoke the
jurisdiction of the federal courts, a plaintiff must establish ‘the irreducible
constitutional minimum of standing,’ consisting of three elements: injury in fact,
causation, and a likelihood that a favorable decision will redress the plaintiff’s
alleged injury.” Lopez v. Candaele, 630 F.3d 775, 785 (9th Cir. 2010) (quoting
3
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)).
Sharemaster identifies four grounds on which the relief it seeks accords it
standing. The first three fail to persuade. The fourth provides a basis for standing,
but Sharemaster’s claim for that relief falters on the merits.
First, Sharemaster argues that, upon reversing the Commission’s order, we
could “[r]einstate Sharemaster’s original 2009 annual report.” Sharemaster does
not explain, and the court cannot discern, how reinstating its original 2009 annual
report would redress any concrete injury it suffered. See Spokeo, Inc. v. Robins,
136 S. Ct. 1540, 1549 (2016) (holding that “intangible injuries” can be “concrete,”
but that a “bare [statutory] violation, divorced from any concrete harm, [does not]
satisfy the injury-in-fact requirement of Article III”); Summers v. Earth Island
Inst., 555 U.S. 488, 495 (2009) (holding that the plaintiff did not have standing
because it “identified no other application of . . . invalidated regulations that
threatens imminent and concrete harm”).
Second, Sharemaster argues that, upon reversing the Commission’s order,
we could “[d]irect FINRA to remove” from its records “any derogatory statements
about Sharemaster.” But removing from FINRA’s records any derogatory
statements about Sharemaster would not redress any concrete injury Sharemaster
suffered. See Owner-Operator Indep. Drivers Ass’n, Inc. v. U.S. Dep’t of Transp.,
879 F.3d 339, 344 (D.C. Cir. 2018) (holding that “inaccurate information [in] a
4
government database” does not qualify as a concrete injury “in light of ‘both
history and the judgment of Congress’” (quoting Spokeo, 136 S. Ct. at 1549)).
Third, Sharemaster argues that it “will go out of business” unless we reverse
the Commission’s ruling that it did not qualify for the exemption. In so arguing,
Sharemaster forgets that the 2009 version of the exemption—the version the
Commission applied—has since been substantively amended and thus no longer
applies. See 78 Fed. Reg. 51,910, 51,990 (Aug. 21, 2013) (effective June 1, 2014),
2013 WL 4431230, amended by, 84 Fed. Reg. 27,708, 27,713 (June 14, 2019)
(effective Aug. 13, 2019), 2019 WL 2465416, amended by, 84 Fed. Reg. 68,550,
68,652 (Dec. 16, 2019) (effective Feb. 14, 2020), 2019 WL 6828542. Indeed, the
Commission made clear in its order that it was not addressing “the effect of . . .
amendment[s] on the applicability of the exemption.” Sharemaster Order II, at *8,
n.52. Accordingly, reversing the Commission’s application of the thrice-
superseded 2009 version of the exemption would have no impact on Sharemaster’s
future conduct, let alone its viability.
Fourth, Sharemaster argues that, upon reversing the Commission’s order, we
could “[d]irect FINRA to reimburse Sharemaster’s accumulated expense for filing
annual audited reports prepared by PCAOB-registered accountants.” Sharemaster
has Article III standing to seek that remedy because: (1) financial harm is an injury
in fact, see Mazza v. Am. Honda Motor Co., 666 F.3d 581, 595 (9th Cir. 2012); (2)
5
the Commission’s ruling that Sharemaster did not qualify for the 2009 version of
the exemption caused Sharemaster to incur the additional expense of retaining a
PCAOB-registered accountant; and (3) that financial injury could be redressed by a
judicial ruling requiring the Commission to reimburse Sharemaster for that
expense.
Although Sharemaster has Article III standing to seek that relief, it is
unavailable on the merits. “Section 19(e) [of the Exchange Act] . . . governs the
scope of the Commission’s remedial authority.” Sharemaster, 847 F.3d at 1063.
Section 19(e) empowers the Commission to “set aside [a FINRA] sanction,” 15
U.S.C. § 78s(e)(1)(B), or, under certain circumstances, to “cancel, reduce, or
require the remission of . . . sanction[s],” id. § 78s(e)(2). Thus, while we could
order the Commission to vacate any sanction imposed on Sharemaster, no such
sanction remains, and we cannot order the Commission to award Sharemaster
consequential damages arising from FINRA’s and the Commission’s finding that it
did not qualify for the 2009 version of the exemption. See Sharemaster, 847 F.3d
at 1068 (“[I]f . . . FINRA imposed a disciplinary sanction but then fully retracted
the sanction by, for example, setting aside a suspension and returning any fine
levied, it would make little sense for the Commission to proceed with review.”); cf.
Z Channel L.P. v. HBO, Inc., 931 F.2d 1338, 1341 (9th Cir. 1991) (holding that the
court could order “damages for loss of [foregone] revenue” because Civil Rule
6
54(c) specifically authorized that remedy). Accordingly, insofar as Sharemaster
seeks that remedy, its petition for review is denied.
DISMISSED in part and DENIED in part.
7