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Gentile v. SEC

United States Court of Appeals for the Third Circuit

January 15, 2020, Argued; September 10, 2020, Filed

No. 19-2252

Opinion

OPINION OF THE COURT

PHIPPS, Circuit Judge.

Congress often confers significant investigative powers upon administrative agencies, such as the Securities and Exchange Commission. Those powers commonly include the ability to seek testimony and documents through administrative subpoena. In this case, Guy Gentile asserts that the SEC abused its investigative authority through several unauthorized administrative subpoenas, to the detriment of his businesses. He sues under the Administrative Procedure Act (APA) to hold unlawful and set aside the SEC's investigation under which the subpoenas were issued. But his suit cannot proceed because sovereign immunity shields federal agencies from suit. ] And although the APA broadly waives sovereign immunity, that waiver does not extend to challenges [*2]  to an agency's decision to investigate. For that reason, on de novo review, we will affirm the order dismissing Gentile's complaint for lack of subject matter jurisdiction.

Guy Gentile and the Securities and Exchange Commission are not strangers. Their acquaintance dates back to 2012 when the SEC investigated Gentile for his role in a penny-stock manipulation scheme in 2007-08. Later, the SEC civilly sued Gentile, and he was indicted for securities fraud violations. Gentile challenged both suits, leading to their dismissals on timeliness grounds, but this Court reinstated the SEC's civil suit. See SEC v. Gentile, 939 F.3d 549, 552-53, 566 (3d Cir. 2019).

This case involves a separate SEC investigation, one related to securities transactions through an unregistered broker-dealer in violation of Section 15 of the Securities and Exchange Act of 1934. See 15 U.S.C. § 78o(a). The subject of that investigation — Traders Café LLC, a day-trading firm — maintained an account with Gentile's Bahamian broker-dealer, which was not registered in the United States. The SEC issued a Formal Order of Investigation into Traders Café on November 25, 2013. But later, without issuing a new Formal Order of Investigation, the SEC informed Gentile that he was a target in that investigation. [*3] 

As part of its investigation, the SEC has twice subpoenaed Gentile for testimony — once in March 2016 and again in December 2017. He refused to comply with those subpoenas, and despite having the ability under the Exchange Act to initiate an action to enforce those subpoenas, see 15 U.S.C. § 78u(c), the SEC has not done so.

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2020 U.S. App. LEXIS 28629 *

GUY GENTILE, Appellant v. SECURITIES & EXCHANGE COMMISSION

Prior History:  [*1] On Appeal from the United States District Court for the District of New Jersey. (D.C. No. 2-19-cv-05155). District Judge: Honorable Jose L. Linares.

Gentile v. SEC, 2019 U.S. Dist. LEXIS 81012, 2019 WL 2098832 (D.N.J., May 14, 2019)

CORE TERMS

subpoenas, sovereign, proviso

Administrative Law, Sovereign Immunity, Torts, Public Entity Liability, Immunities, Securities Law, Postoffering & Secondary Distributions, Scope of Provisions, Limitations on Remedies, Civil Procedure, Discovery & Disclosure, Discovery, Subpoenas, Constitutional Law, State Sovereign Immunity, Waiver, Interstate Commerce, Governments, Federal Government, Claims By & Against, Judicial Review, Reviewability, Standing, Preclusion, Reviewable Agency Action, Domestic Security