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The Loan Syndications and Trading Association v. Securities and Exchange Commission

United States Court of Appeals, District of Columbia Circuit

March 18, 2016

The Loan Syndications and Trading Association, Petitioner
v.
Securities and Exchange Commission and Board of Governors of the Federal Reserve System, Respondents

Argued February 5, 2016

On Petitions for Review of a Final Order of the Securities & Exchange Commission and the Board of Governors of the Federal Reserve System

Richard D. Klingler argued the cause for petitioner. With him on the briefs were Peter D. Keisler and Jennifer J. Clark.

Carl J. Nichols, Stephen V. Carey, Kate Comerford Todd, and Steven P. Lehotsky were on the brief for amicus curiae the Chamber of Commerce of the United States in support of petitioner.

Joshua P. Chadwick, Senior Counsel, Board of Governors of the Federal Reserve System, argued the cause for respondents. With him on the brief were Richard M. Ashton, Deputy General Counsel, Katherine H. Wheatley, Associate General Counsel, Michael A. Conley, Deputy General Counsel, Securities and Exchange Commission, John W. Avery, Deputy Solicitor, Randall W. Quinn, Assistant General Counsel, and Nicholas J. Bronni, Senior Counsel.

Dennis M. Kelleher and Stephen W. Hall were on the brief for amicus curiae Better Markets, Inc. in support of respondents.

Before: Garland, Chief Judge, Brown, Circuit Judge, and Williams, Senior Circuit Judge.

OPINION

BROWN CIRCUIT JUDGE.

In the law, as in life, the simplest explanation is sometimes the best one. Cf. Commodity Futures Trading Comm'n v. Zelener, 373 F.3d 861, 868 (7th Cir. 2004) (Easterbrook, J.) ("Best to take Occam's Razor and slice off needless complexity."). So it is here. This case concerns a challenge, brought directly in this court, to a joint regulation implementing a section of the Securities Exchange Act of 1934 (Exchange Act). See 15 U.S.C. § 78o-11. Congress added that particular section to the Exchange Act in the sprawling Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). See Pub. L. No. 111-203, § 941, 124 Stat. 1376 (2010).

We have jurisdiction to hear petitions for direct review of agency action when Congress says so. See Sierra Club v. Thomas, 828 F.2d 783, 792 (D.C. Cir. 1987) ("[C]ourts have just so much jurisdiction as Congress has provided by statute."). The Exchange Act provides a limited grant of jurisdiction. Only rules implementing specific, enumerated sections of the Act are entitled to direct review. See 15 U.S.C. § 78y(b)(1). The section at issue here is not among them. Because Congress knew how to add sections to that list, but chose not to do so here, we conclude that we lack jurisdiction. See Am. Petrol. Inst. v. SEC, 714 F.3d 1329, 1333 (D.C. Cir. 2013). To escape the confines of the Exchange Act, the parties argue that other statutes with direct review provisions provide authority for parts of the rule. But whatever authority those other statutes may provide, neither party suggests those statutes could have authorized the joint rule we are asked to review.

Unable to exercise review ourselves, we transfer the petitions "in the interest of justice" to the United States District Court for the District of Columbia. See 28 U.S.C. § 1631.

I

Enacted two years after the financial crisis of 2008, the Dodd-Frank Act spelled a sea change in the regulation of the nation's financial markets. Section 941 of the Act, at issue in this case, took aim at abuses in the packaging and sale of asset-backed securities, which some in Congress considered "a major contributing factor" to the financial crisis. S. Rep. No. 111-176, at 128 (2010).

To recalibrate the incentives that fueled "excesses and abuses, " id., Congress required "securitizers"-a term of art generally referring to those who issue or organize asset-backed securities-to retain at least five percent of the underlying credit risk, see 15 U.S.C. § 78o-11(a)(3), (b)(1). Congress tasked four agencies with responsibility for implementation: the Securities and Exchange Commission (Commission), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). The agencies were required to "jointly prescribe regulations to require any securitizer to retain an economic interest in a portion of the credit risk for any asset that the securitizer, through the issuance of an asset-backed security, transfers, sells, or conveys to a third party." 15 U.S.C. § 78o-11(b)(1) (emphasis added). Pursuant to that mandate, the agencies issued the Credit Risk Retention Rule on December 24, 2014. 79 Fed. Reg. 77602, 77602 (Dec. 24, 2014).

In this petition, a trade group, the Loan Syndications and Trading Association (LSTA), challenges several aspects of the rule as contrary to law or arbitrary and capricious. LSTA takes particular issue with the agencies' decision to extend the credit risk retention requirement to managers of open market collateralized loan obligations, which are "specialized investment vehicle[s] designed to invest" in large loans issued to ...


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