November 21st, 2024
Dear ICAN Partners,
As we look ahead to 2025, with a new Administration in Washington, some anticipate that the regulatory landscape will dramatically shift. However, if my decades of experience with the SEC–as senior trial counsel with the regulatory agency and then as an attorney defending clients against SEC action—have taught me anything, it is that meaningful reform is going to require more than just political change at the top.
Like all government agencies, the SEC's bureaucratic momentum transcends political appointments and administrations. Consider, for example, the SEC's ongoing case against Ripple Labs, which began during the previous Trump administration and will continue on appeal despite significant setbacks in the district court. This high-profile case is by no means unusual. The thousands of SEC cases slowly grinding their way through the courts, and through the agency’s regulatory labyrinth, will not simply disappear on January 20. No matter who sits in the White House or on Capitol Hill—or even who sits in the SEC Chair’s seat—SEC regulatory enforcement will continue pushing forward under its own momentum, entangling more and more small investors and entrepreneurs in its web of regulation.
Halting that forward momentum will require not only a commitment to meaningful change at the top but also a willingness to continue challenging the SEC juggernaut at every turn and every opening it seeks to push through. That’s where ICAN comes in. By empowering small investors and entrepreneurs to stand up and challenge SEC overreach in strategically selected cases, we're establishing lasting precedents that protect investors and entrepreneurs regardless of who’s in power. And we are offering a fighting chance to people who are, in too many cases, facing personal and financial ruin - like the client we are writing about in today’s newsletter.
At the same time, in the coming weeks, ICAN will outline a roadmap that those seeking to meaningfully reform the SEC can look to for practical ideas to rein in the government agency’s power, unleashing the full potential of American markets and the small investors and entrepreneurs whose energy and creativity help to drive a healthy, robust economy.
As the only national public interest law firm solely focused solely on this important mission, ICAN is well positioned to help make lasting reform a reality. And it is your continued support that makes that possible.
With appreciation for your partnership in this crucial work,
Nick Morgan
Founder and President of ICAN
At 74, A Life's Work Hangs in Administrative Limbo
Paul Spitzer spent decades building a successful investment advisory practice, serving clients faithfully while maintaining an unblemished regulatory record. Today, at 74, he and his wife face financial ruin—not because of fraud or client harm, but because of an SEC administrative settlement that has spiraled far beyond its intended scope. After depleting their home equity, retirement savings, and life's assets dealing with a three-year SEC investigation, the Spitzers now wait in an administrative purgatory, facing an agency that has refused for years to even respond to his request.
What began as the regulatory equivalent of a traffic ticket—a technical supervision violation with no investor losses—has morphed into what amounts to a professional life sentence.
How Did We Get Here?
The story begins in 2021, when Spitzer, then 71, faced SEC claims for allegedly failing to supervise an employee who had deliberately deceived him. Despite maintaining his lack of knowledge of the employee's misconduct, Spitzer made the difficult decision to settle the SEC’s claims without admitting or denying those claims. With his resources exhausted and facing mounting legal costs, he accepted a settlement that limited his supervisory activities—but crucially, one that would still allow him to work as an investment adviser under supervision. The settlement he agreed to also explicitly permitted him to apply to the Commission to resume his ability to act in a supervisory capacity.
The SEC staff assured him this arrangement would preserve his ability to continue in the investment adviser space. However, the reality proved devastatingly different. Major investment platforms began denying Spitzer access, effectively preventing him from servicing his clients even under supervision. His attempts to resolve this unintended consequence through informal channels with the SEC staff proved futile.
Eighteen Months of Silence
In December 2022, Spitzer filed a formal motion to dismiss the supervisory bar. The motion was fully briefed by February 2023. Then... nothing. No hearing date. No decision. Not even an acknowledgment from the Commission. For eighteen months, the SEC has maintained complete silence while Spitzer's savings dwindle and his ability to support himself and his wife hangs in the balance.
This is why ICAN, working with pro bono partners at Mitchell Silberberg & Knupp, has filed a petition for writ of mandamus with the Ninth Circuit Court of Appeals, demanding the SEC fulfill its basic duty to act on Spitzer's motion. As our brief notes:
“The relief that Spitzer seeks from the SEC is vital to ensure that he and his wife have the financial resources needed to survive. Now in his mid-70s, Spitzer no longer has time to waste as the SEC continues to procrastinate in setting his motion for hearing and decision.”
A Pattern of "Forever Bars"
Spitzer's case exemplifies a troubling pattern in SEC enforcement. As then SEC Commissioner Michael Piwowar once warned, "the reinstatement process, even if successful, can take years to complete... and the right to apply for reinstatement can be illusory." Through administrative inaction, the SEC effectively converts limited sanctions into "forever bars," devastating careers and livelihoods without due process.
The numbers tell a stark story. The SEC's own rules suggest appeals from some administrative orders should be decided within 10 months. Yet Spitzer's straightforward motion to resume acting in a supervisory capacity has languished for 18 months—and counting. This delay is particularly egregious given his advanced age and dire financial circumstances.
Why This Case Matters to All Market Participants
While Spitzer's story is compelling on its own, the implications of his case extend far beyond one individual. The SEC's use of administrative delays and inaction to extend sanctions beyond their intended scope creates uncertainty and risk for all market participants. It raises fundamental questions about due process and the proper bounds of regulatory authority.
Cases like Spitzer's serve as a warning for small market participants who lack the resources to wage prolonged battles against regulatory overreach. Without change, any market participant could find themselves trapped in similar circumstances.
Building a Bulwark Against Regulatory Overreach
Paul Spitzer's case represents both a personal tragedy and a vital opportunity to challenge a pattern of regulatory abuse through delay and inaction that threatens all market participants. By taking on his case, we're not just fighting for one man's right to work—we're establishing precedents that will protect countless others from similar bureaucratic limbo.
But we can't do this alone. ICAN's ability to take on these landmark cases depends on supporters like you. Your donation directly funds our pro bono representation of clients like Paul Spitzer, helping us build the legal foundation necessary to ensure fair treatment for all market participants. Each case we litigate brings us closer to our goal of meaningful SEC reform.
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Are you a member of the press interested in featuring this story? Paul Spitzer's case exemplifies how regulatory overreach can devastate lives and careers while exacerbating America's growing shortage of financial professionals. Contact us at info@icanlaw.org to learn more about this case and its broader implications for the financial services industry.
Together, we can ensure that regulatory power is exercised within proper bounds and with due respect for individual rights.
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