Alan Santos-Buch appeals from the judgment of the United States District Court for the Southern District of New York (Scheindlin, J.), granting defendant-appellee's motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim. We assume the parties' familiarity with the underlying facts, the procedural history, and the issues presented for review.
Santos-Buch worked until 1996 as a stock broker employed by firms that were members of the National Association of Securities Dealers, Inc. ("NASD"). NASD was a self-regulatory organization ("SRO") under the Securities and Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78s(a), and the Maloney Act of 1938, id. § 78o-3. NASD delegated regulatory responsibility to a subsidiary, NASD Regulation, Inc. ("NASDR").
In 1997, NASDR began disciplinary proceedings against Santos-Buch for an alleged 1994 violation of NASDR's fair practice rules. Santos-Buch and NASDR resolved the disciplinary proceedings through a settlement contract called an Acceptance, Waiver and Consent ("AWC"). In the AWC, Santos-Buch agreed to a fine of $10,000 and a 30-day suspension. The AWC also contemplated public notice of the disciplinary action, by providing that "NASDR will make such public announcement concerning this agreement and the subject matter thereof as NASDR may deem appropriate"—a provision limited only by NASD rules. (AWC ¶ 4.) Santos-Buch argues that NASD rules at the time of the AWC limited such public notice to a one-time publication of the disciplinary action.
In 2007, the Financial Industry Regulatory Authority, Inc. ("FINRA") succeeded NASD and NASDR, and assumed their self-regulatory functions. Santos-Buch alleges that FINRA currently maintains two internet databases that disclose his disciplinary history to the public: one that includes his disciplinary records pursuant to 1999 and 2009 amendments to NASD and FINRA rules ("BrokerCheck"), and the other, without authorization by any rule at all ("Web File").
Santos-Buch alleges causes of action for: publishing the 1997 disciplinary records in an internet database without authorization from the FINRA Rules, violation of due process under the Fifth Amendment, violation of the constitutional prohibition against
The district court granted FINRA's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), on the grounds that: (1) the claims for declaratory and injunctive relief were subject to the (unfulfilled) requirement that Santos-Buch exhaust his administrative remedies before filing a civil action, and (2) the claims for monetary damages were barred by FINRA's immunity to suits for damages in its regulatory capacity. On an appeal from dismissal for lack of subject matter jurisdiction, this Court reviews factual findings for clear error and legal conclusions
The doctrine of exhaustion requires a would-be plaintiff to seek available administrative remedies before seeking judicial relief "in cases where the relevant statute provides that certain administrative procedures shall be exclusive."
The exhaustion requirement bars Santos-Buch's claims for injunctive and declaratory relief with regard to publication of his disciplinary action via BrokerCheck.
While Santos-Buch's claims for injunctive and declaratory relief for publication of his disciplinary action via Web File are not subject to the Exchange Act's exhaustion requirement because they challenge neither the disciplinary action taken by FINRA, nor a FINRA rule, they were also properly dismissed. Santos-Buch alleges that the Web File publication violates his substantive due process rights, but he fails to state a due process claim because FINRA is not a state actor that can be held to constitutional standards. To the extent that his claims for injunctive and declaratory relief rest instead on FINRA's failure to comply with its own rules, as is required by statute,
Santos-Buch's claims for monetary relief are foreclosed by immunity: "an SRO and its officers are entitled to absolute immunity from private damages suits in connection with the discharge of their regulatory responsibilities."
For the foregoing reasons, and finding no merit in Santos-Buch's other arguments, we hereby