A@P; Amr "Anthony" Elgindy Discussion; Anthony@Pacific: U.S. court rejects NASD turf challenge to SEC

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UPDATE 1-U.S. court rejects NASD turf challenge to SEC
Tue Dec 13, 2005 12:16 PM ET

(Adds court comment, background)

WASHINGTON, Dec 13 (Reuters) - A federal appeals court on Tuesday dismissed a petition from brokerages regulator NASD that represented its first-ever challenge of a Securities and Exchange Commission action on an NASD sanction.

The U.S. Court of Appeals for the District of Columbia Circuit rejected the NASD's petition, saying the regulator did not have legal standing as "a person aggrieved" to seek a review of the SEC decision.

"In short, NASD's petition for review is not only unprecedented, it is legally unsupportable," the court said.

At the heart of the dispute is a more than 5-year-old trading abuse case involving Amr Elgindy, former owner of brokerage Key West Securities Inc., and shares in firearms safety mechanisms manufacturer Saf T Lok Inc. .

NASD in March 2000 accused Elgindy of manipulative short selling in Saf T Lok shares over several weeks in 1997. In May 2003, an NASD adjudication committee barred Elgindy from the securities business, banished Key West Securities from NASD, and fined him and the firm $51,000 each.

Elgindy and Key West appealed the NASD ruling to the SEC, which oversees the NASD. The SEC is a government agency and the NASD is a self-regulatory organization to which most U.S. brokerages must belong and obey as their regulator.

In March 2004, the SEC questioned the evidence in the Saf T Lok case and overturned most of the NASD's sanctions. The agency lifted both Elgindy's industry bar and Key West's expulsion from NASD, and reduced the fines to $1,000 each.

In an unprecedented response, the NASD three months later appealed the SEC's actions to the court, arguing in September that its reputation is undermined when its attempts to regulate the Nasdaq Stock Market are challenged by the SEC.

The SEC replied that the adjudicatory process for disciplining brokers would be complicated if the NASD could get a court to overturn an SEC change to an NASD sanction.

Spokesmen for the NASD and SEC had no immediate comment.
http://today.reuters.com/investing/finan...

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-- posted by Kirk