Natl Assn Sec Dlrs v. SEC

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 9, 2005 Decided December 13, 2005

NO. 04-1154

THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.,
PETITIONER

V.

SECURITIES AND EXCHANGE COMMISSION,
RESPONDENT

ANTHONY A. ELGINDY,
INTERVENOR

ON PETITION FOR REVIEW OF AN ORDER OF THE
SECURITIES AND EXCHANGE COMMISSION

Alan B. Lawhead argued the cause and filed the briefs for
petitioner.

Anthony A. Elgindy, appearing pro se, was on the brief for
intervenor.

Eric Summergrad, Deputy Solicitor, Securities and
Exchange Commission, argued the cause for respondent. With
him on the briefs were Giovanni P. Prezioso, General Counsel,
Jacob H. Stillman, Solicitor, and Christopher Paik, Special
Counsel.
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Before: TATEL and BROWN, Circuit Judges, and EDWARDS,
Senior Circuit Judge.*
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: The National Association
of Securities Dealers, Inc. (“NASD”) is the only officially
registered “national securities association” under § 15A of the
Securities Exchange Act of 1934 (“Exchange Act” or the “Act”),
15 U.S.C. § 78o-3 (2000). Domestic Sec., Inc. v. SEC, 333 F.3d
239, 242 (D.C. Cir. 2003). By virtue of its statutory authority,
NASD wears two institutional hats: it serves as a professional
association, promoting the interests of it members, see
NASD,NASD Corporate Description,
http://www.nasd.com/web/idcplg?IdcService=SS_GET_PAG
E&nodeId=1010 (last visited Nov. 28, 2005); and it serves as a
quasi-governmental agency, with express statutory authority to
adjudicate actions against members who are accused of illegal
securities practices and to sanction members found to have
violated the Exchange Act or Securities and Exchange
Commission (“SEC” or the “Commission”) regulations issued
pursuant thereto. 15 U.S.C. § 78o-3(b)(7). See Merrill Lynch
v. Nat’l Ass’n of Sec. Dealers, Inc., 616 F.2d 1363, 1367 (5th
Cir. 1980) (“As a registered securities association, [NASD] has
been ‘delegated governmental power . . . to enforce . . . the legal
requirements laid down in the Exchange Act.’”) (citation
omitted).
Disciplinary actions brought by NASD’s Department of
Enforcement against members for violations of federal securities
laws may be adjudicated before a NASD Hearing Panel. See
Rules 9212 & 9221 of NASD’s Code of Procedure (2005),

*
Senior Circuit Judge Edwards was in regular active service
at the time of oral argument.
 3

NASD Manual 9212, 9221 (LEXIS). Hearing Panel decisions
may be appealed to the National Adjudicatory Council (“NAC”),
or they may be reviewed by NAC on its own initiative. See
Rules 9311 & 9312 of NASD’s Code of Procedure, NASD
Manual 9311, 9312 (LEXIS). NASD must notify the SEC of
any final disciplinary action it takes against a member. 15
U.S.C. § 78s(d)(1). The Commission may then act sua sponte,
or pursuant to a petition from the aggrieved member, to review
NAC’s decision de novo. 15 U.S.C. § 78s(d)-(e).
A statutory system authorizing self-regulatory organizations
to act as quasi-governmental agencies in disciplining members
for federal securities law violations has existed for almost 70
years. In every statutory iteration of this authority, Congress has
specified that adjudicatory actions of self-regulatory
organizations like NASD are subject to plenary review by the
SEC. Compare 15 U.S.C. § 78s(d)-(e) (2000) (current
provisions governing SEC review of NASD disciplinary
actions), with 15 U.S.C. § 78o-3(g)-(h) (1940) (original
provisions governing SEC review of NASD disciplinary
actions). Congress has provided for judicial review of SEC
actions under § 25(a) of the Act, which enables “[a] person
aggrieved by a final order of the Commission” to obtain judicial
review. 15 U.S.C. § 78y(a) (2000).
In this case, the Commission reversed a determination by
NAC disciplining a NASD member and its owner for, among
other things, engaging in a manipulative scheme in violation of
§ 10(b) of the Exchange Act, 15 U.S.C. § 78j(b). NASD now
petitions for review under § 25(a) of the Act. The Commission
argues that the petition for review should be dismissed, because
Congress did not intend for § 25(a) to cover NASD when it is
acting in its adjudicatory capacity. In other words, according to
the Commission, NASD is not a “person aggrieved” when the
Commission reverses a NASD disciplinary decision. We agree.
 4

During the nearly 70 years that self-regulatory organizations
have been recognized under the Exchange Act, Congress has
never granted NASD a statutory right to seek judicial review of
a SEC decision reversing disciplinary action taken by NASD as
a first-level adjudicator under the statute. And no court has ever
suggested that such review is possible. Indeed, we can find no
case in which NASD, in its capacity as a first-level adjudicator
in disciplinary actions, has ever petitioned for judicial review to
challenge a SEC judgment overturning the initial decision
rendered by NASD in its adjudicative capacity. We find no
reason to allow it to do so now. We hold that the adjudicatory
arm of NASD is not “[a] person aggrieved” within the meaning
of § 25(a) of the Exchange Act when the Commission reverses
a decision it has made. We therefore dismiss NASD’s petition
for review for want of jurisdiction.
I. BACKGROUND
A. NASD as a First-Level Adjudicator Under The Exchange
Act
Two provisions of the Exchange Act define NASD’s quasi-
governmental authority to adjudicate actions against members
who are accused of unethical or illegal securities practices and
the Commission’s oversight of that authority. These are §§ 15A
and 19. Section 15A, 15 U.S.C. § 78o-3, lays out the specific
duties of a registered national securities association. It sets out
disciplinary functions which NASD, as a registered national
securities association, must perform. The organization must
first establish
rules . . . designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles
of trade, to foster cooperation and coordination with
persons engaged in regulating . . . securities, to remove
impediments to and perfect the mechanism of a free and
 5

open market and a national market system, and, in general,
to protect investors and the public interest.
15 U.S.C. § 78o-3(b)(6). Where NASD members have allegedly
violated either association rules or federal securities law, NASD
has the authority to consider disciplinary action in the first
instance. See 15 U.S.C. § 78o-3(b)(7). If NASD proceeds
against a member, it must provide a minimum level of process,
including notice of the specific charges and an opportunity to be
heard, as well as a statement of subsequent findings. See 15
U.S.C. § 78o-3(h). Fair disciplinary procedures are a
prerequisite for registration of a national securities association.
15 U.S.C. § 78o-3(b)(8).
Given the statutory requirements of § 15A, NASD has
established an elaborate adjudicative arm to address disciplinary
actions. A Code of Procedure, see NASD Manual, Rule 9000 et
seq. (2005), sets out the procedures for disciplinary actions
brought by NASD’s Department of Enforcement. Where a
complaint has been filed against members for violations of
federal securities laws, the adjudication may take place before
a NASD Hearing Panel. See Rules 9212 & 9221 of NASD’s
Code of Procedure, NASD Manual 9212, 9221 (LEXIS). As
noted above, Hearing Panel decisions may be appealed to NAC,
or they may be reviewed by NAC on its own initiative. See
Rules 9311 & 9312 of NASD’s Code of Procedure, NASD
Manual 9311, 9312 (LEXIS). Rule 9370, reflecting the
Exchange Act’s mandate, provides that “[a] Respondent
aggrieved by final disciplinary action pursuant to the Rule 9200
Series or the Rule 9300 Series may apply for review by the
Commission pursuant to Section 19(d)(2) of the Act.” NASD
Manual 9370 (LEXIS). See also Merrill Lynch, 616 F.2d at
1367 (describing NASD’s adjudicative procedures).
Section 19, 15 U.S.C. § 78s, sets out the Commission’s
supervisory duties over all “self-regulatory organizations.”
NASD is a “self-regulatory organization” by virtue of the fact
 6

that it is a “registered securities association” under § 15A. See
15 U.S.C. § 78c(a)(26) (definition of “self-regulatory
organization”). With respect to adjudications, the Commission’s
oversight begins with the obligation of self-regulatory
organizations to notify the Commission of any final disciplinary
sanction imposed on a member or associated person. 15 U.S.C.
§ 78s(d)(1). The statute also provides the Commission with
plenary review powers. 15 U.S.C. § 78s(e). Once notified, the
Commission may, on its own motion or on the application of
any person aggrieved by the association’s action, review
NASD’s disciplinary action. 15 U.S.C. § 78s(d)(2); see also
Commission Rules of Practice 420 & 421, 17 C.F.R. §§
201.420, 201.421 (2005). Section 19(e) authorizes the
Commission to make an independent determination as to
whether the violations found by the association occurred, and to
change NASD’s sanctions in whatever ways it deems
appropriate. See 15 U.S.C. § 78s(e). The Commission may base
its determination on the record compiled by the association, but
it is not limited to that record and may adduce additional
evidence. Commission Rule of Practice 452, 17 C.F.R. §
201.452. SEC’s oversight of NASD’s quasi-governmental
disciplinary functions is not limited to review of individual
disciplinary actions. Under § 19(g)(2), the Commission is
empowered to relieve NASD of any of its enforcement
responsibilities under the Exchange Act. 15 U.S.C. § 78s(g)(2).
The statutory scheme governing NASD actions parallels the
Commission’s internal adjudicative structures. The Commission
is permitted to delegate its disciplinary functions to an
Administrative Law Judge (“ALJ”). 15 U.S.C. § 78d-1(a). As
with NASD, when an ALJ exercises the Commission’s
disciplinary powers, “the Commission shall retain a
discretionary right to review the action of . . . [the]
administrative law judge . . . upon its own initiative or upon
petition of a party to or intervenor in such action.” 15 U.S.C. §
78d-1(b); see also Commission Rules of Practice 410 & 411, 17
 7

C.F.R. §§ 201.410, 201.411. In both disciplinary systems, once
the Commission takes final action, Congress has provided for
judicial review of the Commission’s action under § 25(a) of the
Act, which enables “[a] person aggrieved by a final order of the
Commission” to obtain judicial review. 15 U.S.C. § 78y(a).
The congressional scheme, in short, establishes a system in
which the Commission not only closely supervises and approves
the processes by which NASD brings disciplinary action, but in
which the Commission fully revisits the issue of liability, and
can completely reject or modify NASD’s decision as it deems
appropriate. NASD’s disciplinary process essentially supplants
a disciplinary action that might otherwise start with a hearing
before an ALJ. And NASD’s authority to discipline its
members for violations of federal securities law is entirely
derivative. The authority it exercises ultimately belongs to the
SEC, and the legal views of the self-regulatory organization
must yield to the Commission’s view of the law. This is made
clear in the legislative history of the 1975 amendments:
[C]are should be exercised, lest the use of phrases such as
“partnership” and “cooperative regulation” lead to the
impression that the industry and the government fulfill the
same function in the regulatory framework or that they
enjoy the same order of authority or deserve the same
degree of deference . . . . The self-regulatory organizations
exercise authority subject to SEC oversight. They have no
authority to regulate independently of the SEC’s control.
S. REP. NO. 94-75, at 23 (1975), as reprinted in 1975
U.S.C.C.A.N. 179, 201.
Self-regulatory organizations, such as NASD, have enjoyed
congressionally delegated quasi-governmental powers to
discipline their members for nearly 70 years. In 1938, Congress
passed the Maloney Act, Pub. L. No. 719, 52 Stat. 1070
(“Maloney Act”), which added § 15A to the Exchange Act, and
 8

is, thus, the original source of NASD’s quasi-governmental
power to discipline its members. The new section permitted a
securities association, such as NASD, to register with the SEC.
Once registered, the association was authorized to discipline its
members for violations of the organization’s rules. 15 U.S.C. §
78o-3(b)(8) (1940). “The Maloney Act expresse[d] Congress’s
thoughtful view that self-regulation is the best ‘first-line’
defense against unethical or illegal securities practices. It allows
the industry to set its own standards of proper conduct and
permits their members to discipline themselves applying their
own expertise and experience.” First Jersey Sec., Inc. v.
Bergen, 605 F.2d 690, 698 (3d Cir. 1979). Congress gave self-
regulatory organizations disciplinary power over their members,
by allowing them to levy economic sanctions and by providing
an incentive for associations to accept self-regulatory
responsibilities.
Even in 1938, however, Congress made it plain that
NASD’s disciplinary functions were subject to the plenary
supervision of the SEC. The amendments authorized the
Commission to, at its discretion, review disciplinary action taken
by NASD, and to take “further evidence if necessary” in order
to independently determine if a violation of associational rules
had occurred, and what sanctions, if any, were appropriate.
R. H. Johnson & Co. v. SEC, 198 F.2d 690, 695 (2d Cir. 1952)
(citing and explaining relevant provisions).
Every subsequent statutory iteration of this authority
specified that adjudications conducted by self-regulatory
organizations like NASD are subject to plenary review by the
SEC. In 1975, Congress again amended the Exchange Act to
ensure the continued vitality and efficiency of American
securities markets. Securities Acts Amendments of 1975, Pub.
L. No. 94-29, 89 Stat. 97. Without abandoning its commitment
to “the unique system of self-regulation in the securities
industry,” S. REP. NO. 94-75, at 2 (1975), as reprinted in 1975
 9

U.S.C.C.A.N. 179, 181, Congress specifically and importantly
modified that system to enhance the SEC’s oversight of self-
regulatory organizations. The Senate Report explained:
[The bill] would significantly amend the provisions of the
Exchange Act dealing with the powers of the self-
regulatory organizations and the oversight authority of the
SEC with respect to these organizations. The Committee
believes that self-regulation should be preserved in the
securities industry, but it also believes that the self-
regulatory organizations must display a greater
responsiveness to their statutory obligations and to the need
to coordinate their functions and activities. In the new
regulatory environment created by this bill, self-regulation
would be continued, but the SEC would be expected to play
a much larger role than it has in the past to ensure that
there is no gap between self-regulatory performance and
regulatory need . . . .
Id. (emphasis added); see also id. at 22-23, as reprinted in 1975
U.S.C.C.A.N. at 200-01.
The 1975 amendments are also significant, for our
purposes, because, for the first time, Congress explicitly
authorized NASD to adjudicate in the first instance cases in
which members had allegedly violated the Exchange Act or SEC
rules and regulations interpreting it. Compare 15 U.S.C. § 78o-
3(b)(7) (1976) with 15 U.S.C. § 78o-3(b)(9) (1970). Congress’s
1975 revisions to § 19 of the Act illustrate, however, that
Congress only envisioned NASD as the first-level adjudicator,
whose disciplinary actions would be subject to plenary review
by the Commission. The newly enacted provisions of § 19, as
discussed above, established additional formal procedures
enabling and enhancing the SEC’s review of disciplinary actions
undertaken by self-regulatory organizations. See Securities Acts
Amendments of 1975, Pub. L. No. 94-29, 89 Stat. 97, 150-52
(originally codified at 15 U.S.C. § 78s(e)-(h) (1976)). NASD
 10

currently disciplines its members within the framework put in
place in 1975, and it is within this framework that we must
decide whether NASD is “[a] person aggrieved” within the
meaning of § 25(a) of the Exchange Act when the Commission
reverses a disciplinary action it has taken as a first-level
adjudicator pursuant to the Act.
B. Procedural History of Disciplinary Action Against
Elgindy and Key West
On March 3, 2000, NASD instituted disciplinary
proceedings against Amr Anthony Elgindy and Key West
Securities, Inc. (“Key West” or the “Firm”), alleging that they
had engaged in a manipulative scheme in October and
November of 1997, in violation of § 10(b) of the Act, Exchange
Act Rule 10b-5, and a number of NASD Conduct Rules.
Compl., In re Amr Elgindy, No. CMS000015 (Mar. 3, 2000),
reprinted in Joint Appendix (“J.A.”) 26. On December 28,
2001, a NASD hearing panel concluded that the two had not
manipulated the market, but that they had violated an array of
NASD rules. Hearing Panel Decision, In re Amr Elgindy, No.
CMS000015 (Dec. 28, 2001), reprinted in J.A. 267. Both
parties appealed to NAC, and on May 7, 2003, NAC reversed,
finding that Elgindy and the Firm had engaged in a manipulative
scheme. NAC Decision, In re Amr Elgindy, No. CMS000015
(May 7, 2003), reprinted in J.A. 302. It also found that they had
violated NASD rules regarding communication with the public.
For the manipulation violation, Elgindy was barred from
association with any NASD member in any capacity, the Firm
was expelled from NASD membership, and the two were fined
$50,000, jointly and severally. In re Amr Elgindy, Exchange
Act Release No. 49,389, 2004 SEC LEXIS 555, at *2, n.3 (Mar.
10, 2004), reprinted in J.A. 365.
Elgindy and Key West sought review by the Commission of
NAC’s findings regarding manipulation. The Commission
conducted an independent review of the record and issued an
 11

Opinion and Order on March 10, 2004. It concluded that the
evidence in the record did not establish the alleged
manipulation, and it set aside NASD’s sanctions. Id. at *13-18,
reprinted in J.A. 370-74.
NASD filed a timely petition for review, invoking § 25(a)
of the Exchange Act, 15 U.S.C. § 78y(a). It seeks a reversal of
the Commission’s decision and a reimposition of the sanction.
This is the first time NASD has sought judicial review of a SEC
order overturning a disciplinary action it has taken as a first-
level adjudicator pursuant to the Act.
II. ANALYSIS
Judicial review of SEC actions is governed by § 25 of the
Exchange Act, which includes two independent provisions. One
relates to agency rulemakings and the other relates to agency
adjudications. Section 25(b) of the Act, which covers agency
rulemakings, provides:
A person adversely affected by a rule of the Commission
. . . may obtain review of this rule in the United States
Court of Appeals . . . .
15 U.S.C. § 78y(b)(1). Section 25(a), which governs agency
adjudications and controls this case, provides:
A person aggrieved by a final order of the Commission . . .
may obtain review of the order in the United States Court
of Appeals . . . .
15 U.S.C. § 78y(a)(1). The question at issue here is whether
NASD can claim to be a “person aggrieved” under § 25(a).
The Commission does not doubt that NASD can challenge
Commission rules under § 25(b). See S. REP. NO. 94-75, at 137
(1975), as reprinted in 1975 U.S.C.C.A.N. 179, 314 (“To obtain
review of an SEC rule, a self-regulatory organization, or other
person adversely affected by the Commission’s action would be
 12

required . . . .”) (emphasis added). This is hardly surprising.
The Commission frequently promulgates quasi-legislative rules
that affect NASD’s associational interests and its role in the
national securities market. It is commonplace that private
industry organizations, like NASD, participate in agency
rulemakings and seek judicial review when they are adversely
affected by an agency’s final rules. See 5 U.S.C. § 702 (2000)
(“A person suffering legal wrong because of agency action, or
adversely affected or aggrieved by agency action within the
meaning of a relevant statute, is entitled to judicial review
thereof.”); Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 43 (1983) (explaining the “arbitrary and
capricious” standard of review under 5 U.S.C. § 706(2)(A) of
the Administrative Procedure Act).
This case, however, does not involve a challenge to a rule
promulgated by the SEC. Rather, NASD seeks review under §
25(a), which relates to SEC adjudications, and it seeks review in
its role as a first-level adjudicator of disciplinary actions under
the Act. The narrowness of the interest NASD seeks to
vindicate in this lawsuit is evident from the affidavit submitted
by the association to demonstrate its standing. Aff. of Richard
G. Wallace at 3, reprinted in Br. of NASD (explaining that
NASD’s concern is that its Market Regulation Department will
be frustrated in its mission, because it will be unable to take
disciplinary action against members and associated persons,
except in the very narrow circumstances covered by the decision
of the SEC). At oral argument, counsel for NASD was asked to
explain how the Commission’s action in this case undercut
NASD’s missions beyond its statutory role as a first-level
adjudicator. He was unable to do so. See Tr. of Oral Argument
at 14-16.
Simply put, NASD appears before this court as a
disgruntled first-level tribunal, complaining because it has been
reversed by a higher tribunal. This case thus turns on one
 13

question: Whether NASD can claim to be a “person aggrieved”
under § 25(a) when the Commission reverses a disciplinary
action taken by NASD as a first-level adjudicator under the Act.
We hold that NASD has no right under the Act to bring this
petition for review.
We do not mean to suggest that NASD is totally foreclosed
from seeking review of SEC actions under § 25(a). In National
Ass’n of Securities Dealers, Inc. v. SEC, 801 F.2d 1415 (D.C.
Cir. 1986), NASD was the subject of an enforcement action
before the Commission. Following a SEC decision holding that
the association had charged an excessive fee for access to certain
computerized securities information it collects, NASD sought
judicial review. The court denied the petition for review,
concluding that the SEC’s action was not arbitrary or capricious
and was supported by substantial evidence. Obviously, in such
a situation, when NASD is the subject of an adverse SEC order
in an enforcement action, it may seek judicial review as a
“person aggrieved” under § 25(a).
Nor do we mean to suggest that, if NASD sues to vindicate
a concrete interest other than its interests as a first-level
adjudicator, it can never be a “person aggrieved” when the SEC
overturns disciplinary action NASD has taken. We leave for
another day the question of whether NASD can be a “person
aggrieved” in its capacity as a professional association with a
cognizable stake in a SEC decision overruling a NASD
disciplinary decision.
In this case, NASD has sought review solely in its
adjudicative capacity. And there is nothing in the Act indicating
that NASD, acting in its adjudicative capacity, can be a “person
aggrieved” within the meaning of § 25(a) when the Commission
acting as the higher tribunal reverses disciplinary action it has
taken. NASD argues that the Exchange Act’s definition of
“person” includes “a natural person, company, government, or
political subdivision, agency, or instrumentality of a
 14

government,” 15 U.S.C. § 78c(a)(9), and the association falls
within the compass of this statutory definition as a “company.”
This argument misses the mark. In the context of this case,
NASD appears in its adjudicative capacity as a “self-regulatory
organization,” see 15 U.S.C. § 78c(a)(26), an entity that is not
embraced by the statute’s definition of “person.” Moreover, the
important question in this case is not merely whether NASD is
a “person” under the Act. The real issue here is whether the
adjudicatory arm of NASD, the body charged by Congress to
serve as the first-level adjudicator in disciplinary actions
brought to enforce federal securities law against association
members, can plausibly be considered a “person aggrieved”
within the meaning of § 25(a) when the Commission exercises
its plenary authority and reverses an action taken by the
association. We can find nothing in the statute or its legislative
history lending support to NASD’s interpretation of § 25(a).
The most that can be said in support of NASD’s position is
that the statute is ambiguous on the point in issue. If “person
aggrieved” in § 25(a) is indeed ambiguous, we are left to resolve
that ambiguity, looking to “the broader context of § [25(a)] and
the structure of the [Exchange Act] as a whole, as well as the
contextual background against which Congress was legislating,
including relevant practices of the [SEC] which presumably
informed Congress’s decision, prior legislative acts, and
historical events. Finally, we explore the policy ramifications of
[NASD’s] suggested interpretation[] of § [25(a)].” United
States v. Wilson, 290 F.3d 347, 354 (D.C. Cir. 2002). Each of
these considerations leads us to the conclusion that NASD’s
position is meritless.
As noted above, when Congress amended the Act in 1975,
it explicitly provided for the first time that NASD could serve as
a first-level adjudicator in cases in which association members
were alleged to have violated the Exchange Act or SEC rules
and regulations interpreting it. However, Congress’s 1975
 15

revisions to § 19 of the Act make it clear that NASD’s
disciplinary actions would be subject to plenary review by the
Commission. Indeed, the Senate Report stated that, “[i]n the
new regulatory environment created by [the 1975 legislation],
self-regulation would be continued, but the SEC would be
expected to play a much larger role than it has in the past to
ensure that there is no gap between self-regulatory performance
and regulatory need.” S. REP. NO. 94-75, at 2 (1975), as
reprinted in 1975 U.S.C.C.A.N. 179, 181.
Long before the 1975 amendments to the Act, Congress had
specified that the adjudications conducted by self-regulatory
organizations like NASD were subject to plenary review by the
Commission. And during the nearly 40 years after Congress
passed the Maloney Act of 1938, which was the original source
of NASD’s quasi-governmental power to discipline its members,
Congress never authorized a self-regulatory organization to seek
judicial review of a SEC decision reversing a disciplinary action
of the organization. The 1975 amendments were enacted with
these prior legislative acts and historical events in the record
before Congress. The 1975 amendments gave NASD authority
to discipline its members for violations of federal securities law,
but this authority is entirely derivative. The authority that
NASD exercises in this realm as a first-level adjudicator of
disciplinary actions ultimately belongs to the SEC. Congress
was clear in 1975 that “self-regulatory organizations exercise
authority subject to SEC oversight. They have no authority to
regulate independently of the SEC’s control.” S. REP. NO. 94-
75, at 23 (1975), as reprinted in 1975 U.S.C.C.A.N. 179, 201.
In other words, the 1975 amendments reaffirmed the existing
relationship between the Commission and self-regulatory
organizations.
Nothing much changed after Congress passed the 1975
amendments to the Act. NASD continued to be subject to the
Commission’s plenary review when it adjudicated disciplinary
 16

actions against its members, and the association never sought
judicial review to challenge a Commission reversal of one of its
disciplinary actions. In their arguments to this court, both
NASD and the Commission confirmed that this is the first case
in nearly 70 years in which NASD has sought judicial review of
a SEC order when the association is acting in its adjudicatory
capacity.
The Supreme Court has noted that:
Authority actually granted by Congress of course cannot
evaporate through lack of administrative exercise. But just
as established practice may shed light on the extent of
power conveyed by general statutory language, so the want
of assertion of power by those who presumably would be
alert to exercise it, is equally significant in determining
whether such power was actually conferred.
Fed. Trade Comm’n v. Bunte Bros., Inc., 312 U.S. 349, 352
(1941). Similarly, in BankAmerica Corp. v. United States, 462
U.S. 122, 131 (1983), the Court found that “the Government’s
failure for over 60 years to exercise the power it now claims . . .
strongly suggests that it did not read the statute as granting such
power.” Although we are not legally bound by NASD’s past
practices under the Act, “it is surely noteworthy that [those
practices] do not in any way endorse the current position of
[NASD].” Ry. Labor Executives’ Ass’n v. Nat’l Mediation Bd.,
29 F.3d 655, 670 (D.C. Cir. 1994) (en banc). The parties’
“longstanding practice” under the Exchange Act “makes it clear
that, until recently, there never has been even the slightest
confusion” over the fact that Congress never meant to authorize
self-regulatory organizations to seek judicial review of SEC
decisions reversing disciplinary actions of such organizations.
Id.
It is not surprising that there is neither evidence of
congressional intent to allow judicial review in a case such as
 17

this, nor a practice of judicial review. American jurisprudence
does not typically indulge the notion that a lower tribunal can be
legally aggrieved by a decision of a higher tribunal. For
example, it would be unheard of for an Administrative Law
Judge who served as the first-level hearing officer in a federal
agency adjudication to seek judicial review of the agency’s final
order in the case. “The right to review of agency action is
usually restricted to persons whom the agency regulates and
affects adversely,” Lee v. Civil Aeronautics Bd., 225 F.2d 950,
951 (D.C. Cir. 1955), not to first-level adjudicators. In light of
this norm of appellate practice, we are unwilling to embrace
NASD’s position, which finds no support in the statute, in the
parties’ practices over the past 70 years, or in judicial decisions
construing the Exchange Act. As we have said in the past,
“‘Congress is unlikely to intend any radical departures from past
practice without making a point of saying so.’” Wilson, 290
F.3d at 360 (quoting Jones v. United States, 526 U.S. 227, 234
(1999)).
In short, NASD’s petition for review is not only
unprecedented, it is legally insupportable. NASD, acting in its
adjudicative capacity, as the lower tribunal subject to SEC
plenary review of its disciplinary decisions, is not an “aggrieved
person” within the meaning of § 25(a) when the Commission
acting as the higher tribunal reverses disciplinary action it has
taken. When NASD adjudicates to enforce federal securities
law, it does so pursuant to the Exchange Act, which authorizes
it to act as a first-level adjudicator under the SEC’s plenary
supervision. In its adjudicative capacity, NASD is the private
equivalent of an ALJ, and it has no more authority than would
an ALJ to seek review of a Commission decision under § 25(a).
III. CONCLUSION
For the reasons stated above, the petition for review is
hereby dismissed for want of jurisdiction. NASD’s articulated
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interest in this lawsuit is insufficient to make it “a person
aggrieved” within the meaning of § 25(a) of the Exchange Act.