September 7, 2012
By Dr. Gaytri D. Kachroo
By Dr. Gaytri D. Kachroo
THIS MATTER is before the Court on the Defendant's Motion to Dismiss the Complaint pursuant to Federal
Rule of Civil Procedure 12(b)(1) (ECF No. 12). For the reasons explained in this
Order, the Motion to Dismiss is granted in part and denied in part.
A. The Plaintiffs Have Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty to Report Stanford's Company To The Securities Investor Protection Corporation, Pursuant to 15 U.S.C. § 78eee(a)(1).
B. The Plaintiffs Have Not Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty Regarding Stanford's Company Re-Registration As an Investment Advisor, Pursuant to 15 U.S.C. § 80b-3(c).
While the determination of whether a broker/dealer is in or approaching financial difficulty is inherently discretionary, once the SEC concludes that a broker/dealer is in or approaching financial difficulty a nondiscretionay duty to report this information to the SIPC arises. However, the SEC's treatment of an investment advisor's amendment to its Section 80b-3 registration application involves an element of judgment grounded in policy considerations, and thus falls under the discretionary function exception of the FTCA.
For the reasons detailed in this Order, the Defendant's Motion to Dismiss (ECF No. 25) is DENIED in part with regard to the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 78eee(a)(1). The Motion to Dismiss is GRANTED in part regarding the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 80b-3(c). The Plaintiffs shall file an Amended Complaint on or before September 21, 2012, consistent with this Order. The Defendant's answer is due fourteen days after the Plaintiffs' Amended Complaint is filed.
A. The Plaintiffs Have Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty to Report Stanford's Company To The Securities Investor Protection Corporation, Pursuant to 15 U.S.C. § 78eee(a)(1).
B. The Plaintiffs Have Not Adequately Alleged That The Securities and Exchange Commission Failed To Comply With a Nondiscretionary Duty Regarding Stanford's Company Re-Registration As an Investment Advisor, Pursuant to 15 U.S.C. § 80b-3(c).
While the determination of whether a broker/dealer is in or approaching financial difficulty is inherently discretionary, once the SEC concludes that a broker/dealer is in or approaching financial difficulty a nondiscretionay duty to report this information to the SIPC arises. However, the SEC's treatment of an investment advisor's amendment to its Section 80b-3 registration application involves an element of judgment grounded in policy considerations, and thus falls under the discretionary function exception of the FTCA.
For the reasons detailed in this Order, the Defendant's Motion to Dismiss (ECF No. 25) is DENIED in part with regard to the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 78eee(a)(1). The Motion to Dismiss is GRANTED in part regarding the Plaintiffs' claims relating to the SEC's alleged breach of its duty under 15 U.S.C. § 80b-3(c). The Plaintiffs shall file an Amended Complaint on or before September 21, 2012, consistent with this Order. The Defendant's answer is due fourteen days after the Plaintiffs' Amended Complaint is filed.
More Info: http://sivg.org/article/2012_ORDER_DENYING_IN_PART_MTD.html
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