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United States Court of Appeals for the District of Columbia Circuit
December 1, 2020, Argued; February 26, 2021, Decided
[**157] [*6] Silberman, Senior Circuit Judge: The Financial Institutions Regulatory Authority ("FINRA") determined that Petitioner Kimberly Springsteen-Abbott misused investor funds and tried to cover it up. FINRA therefore [**158] barred Petitioner from the securities industry, fined her, and ordered her to disgorge certain misused expenses. The SEC affirmed the industry bar and disgorgement order. Petitioner now challenges the SEC's decision, but her constitutional arguments are forfeited, and the others are meritless.
This appeal arises from Springsteen-Abbot's mismanagement of two related businesses, Commonwealth Capital and Commonwealth Securities. Commonwealth Capital funds equipment leases and then bundles the leases into investment funds. Commonwealth Securities (a subsidiary [***2] of Commonwealth Capital) manages those funds and sells their securities to investors through a network of retail broker-dealers. Petitioner is the sole shareholder of Commonwealth Capital. She also served as the Chair, CEO, and Chief Compliance Officer of both companies.
Petitioner charged both her business and personal expenses to a single American Express account issued to Commonwealth Capital. Under what Springsteen-Abbott admits was an "outdated" accounting system, Petitioner Br. 5, Petitioner had the sole responsibility for later determining whether the charges should be allocated to the investor funds, her businesses, or (if personal expenses) herself. FINRA received tips that expenses were being improperly allocated at Petitioner's businesses, and it initiated an investigation.
FINRA alleged that Petitioner improperly assigned 1,840 charges to investor funds amounting to $208,954.44. According to FINRA's Enforcement Department, this misuse violated FINRA Rule 2010, which requires FINRA members and associated persons (like Petitioner) to "observe high standards of commercial honor and just and equitable principles of trade." FINRA's National Adjudicatory Council agreed, concluding that [***3] the evidence demonstrated Petitioner's "purposeful pattern and practice of improperly allocating expenses to the Funds." J.A. 7. FINRA based its conclusion on specific proof offered for 109 of the expenses as well as an unquantified number of control person expenses.1 As a result, FINRA [*7] barred Petitioner from the securities industry, imposed a fine of $50,000, and ordered disgorgement of $36,225.85 based on 84 of the specifically proven charges. Petitioner appealed FINRA's decision to the SEC. See 15 U.S.C. § 78s(d)(2).
The SEC first sustained the industry bar. Reviewing the FINRA record, the SEC agreed that, in violation of FINRA Rule 2010, Springsteen-Abbott
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
989 F.3d 4 *; 451 U.S. App. D.C. 155 **; 2021 U.S. App. LEXIS 5724 ***; 2021 WL 744504
KIMBERLY SPRINGSTEEN-ABBOTT, PETITIONER v. SECURITIES AND EXCHANGE COMMISSION, RESPONDENT
Prior History: [***1] On Petition for Review of an Order of the Securities & Exchange Commission.
expenses, disgorgement, funds, investors, charges, challenges, reply, fine
Securities Law, US Securities & Exchange Commission, Judicial Review, Exhaustion of Remedies, Civil Procedure, Pleading & Practice, Motion Practice, Content & Form, Appeals, Reviewability of Lower Court Decisions, Preservation for Review, Administrative Law, Constitutional Controls, Authority to Adjudicate, Validity of Legislation, Reviewability, Jurisdiction & Venue, Banking Law, Regulators, US Federal Deposit Insurance Corporation, Enforcement Powers, Civil Liability Considerations, Remedies, Equitable Relief