Qualified Immunity for NASD

Federal Court Finds Immunity for NASD Staff and State Investigators

Tretiak v. Del Papa, No. 00-17248, 2001 U.S. App. LEXIS 24738 (9th Cir., 11/13/01). Enforcement Practice/Procedure – Privileges & Immunities (Absolute Immunity; Qualified Immunity) – Representation Issues – Timeliness Issues (Statutes of Limitations).

Regulators have qualified immunity against claims based on alleged violations of constitutional rights, such that plaintiffs must prove that the right was clearly established or the official did not have a reasonable belief in the lawfulness of his conduct. The Court finds this appeal suitable for decision without oral argument and its disposition inappropriate for publication, and, indeed, its primary weight rests in support of the principles of prosecutorial immunity.

The “prosecutors” named by Mr. Tretiak are a dozen individuals, apparently from the staffs of NASD Regulation, Inc., the State of Nevada Securities Division, and the California Department of Corporations, for actions relating to investigations and disciplinary actions in which he (together with related entities, Retirement Financial Centers of America, Inc. or RFCA Financial Services, Inc.) was involved.

The Court affirms dismissal of the Nevada segment of the action on statute of limitations grounds, but agrees in all cases that immunity attached for the officials’ alleged conduct. “…[A]bsolute immunity protects state agency officials who are performing functions comparable to either judges or prosecutors…, [and] NASD Regulation, Inc., when acting under the authority delegated to it by the Securities Exchange Act of 1934 … is entitled to absolute immunity from money damages.”

In the investigative arena, apparently, only qualified immunity applies, but that suffices to defeat the claims against a California official. The district court properly accorded “qualified immunity because Tretiak failed to meet his burden of showing that [the official’s] conduct violated a clearly established right.”

According to the case-law cited, Romer v. Kitsap County, 931 F.2d 624, 627 (9th Cir. 1991), such immunity attaches, “regardless of whether the constitutional violation occurred, … if the right asserted by the plaintiff was not ‘clearly established’ or the officer could have reasonably believed that his particular conduct was lawful.” (ed: The Nevada proceeding was the subject of a case synopsis in SLA 2001-21.) (SLC Ref. No. 2002-03-09)

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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.