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Heath v. Securities and Exchange Commission

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Argued: September 16, 2009

Before STRAUB AND WESLEY, Circuit Judges AND GARDEPHE, District Judge.*fn1

Petitioner Thomas W. Heath III appeals from the Opinion and Order of the Securities and Exchange Commission (“SEC”), affirming the New York Stock Exchange LLC’s*fn2 (“NYSE”) finding that Petitioner violated NYSE Rule 476(a)(6) by disclosing a client’s confidential information to a third party.*fn3 Rule 476(a)(6) — the so-called “J&E Rule” — subjects registered members to disciplinary sanctions for engaging in “conduct or proceeding inconsistent with just and equitable principles of trade.” The NYSE found that, although Petitioner did not act in bad faith, he engaged in unethical conduct in violation of the J&E Rule.On appeal to the SEC, Petitioner argued that bad faith is required to sustain a J&E Rule violation. The SEC held that a finding of mere unethical conduct was sufficient to sustain a J&E Rule violation for a breach of confidence and affirmed the NYSE’s finding that he violated the Rule by making the disclosure. Petitioner now appeals the SEC’s Opinion and Order, principally arguing that bad faith, and not mere unethical conduct, was required to sustain the J&E Rule violation. He argues alternatively that, if the J&E Rule does in fact prohibit mere unethical conduct in this case, it failed to provide adequate notice that his conduct was sanctionable. Finally, he argues that the NYSE improvidently granted summary judgment against him by failing to resolve questions of fact and draw reasonable inferences in his favor. Because we conclude that Petitioner’s arguments lack merit, we deny the Petition.

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