UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


GURFEL, ELIEZER

v.

SEC


99-1199a

D.C. Cir. 2000


*	*	*


Silberman, Circuit Judge: Petitioner challenges an NASD  order,
affirmed by the SEC, barring him from the securities  business. He
asserts that under its bylaws the NASD had  lost authority to
adjudicate his conduct. We deny the peti- tion.


I.


The National Association of Securities Dealers (NASD) is  an
association of broker-dealers authorized under the Securi- ties
Exchange Act to develop and enforce rules of profession- al conduct
for its member firms, subject to oversight by the  SEC. See 15 U.S.C.
s 78o-3. At the time of the misconduct  that gave rise to this case,
Eliezer Gurfel was employed by  NASD member firm International Money
Management  Group, Inc. (the firm). Under the terms of his employment 
with the firm, Gurfel sold securities products to investors and  split
the commissions--Gurfel receiving 85% of the commis- sions and the
firm 15%. On four occasions between January  and March of 1993, Gurfel
received commission checks from  ITT Hartford for his sale of the
insurance company's variable  annuities. Although the checks were made
out to the firm,  Gurfel deposited them in his personal bank account,
evidently  by forging the endorsement of the firm's president, Chip 
Brittingham, on the back of the checks.1 Gurfel did not send  the firm
its 15% share of the commissions.


The firm discovered that the Hartford checks were missing.  According
to unchallenged testimony during NASD enforce-




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n 1 Gurfel protested before the NASD and SEC that he did not  forge
Brittingham's name on the checks; while he acknowledged  that he
"mistakenly" deposited the checks in his personal account,  he
professed ignorance as to how Brittingham's name came to be on  the
back of them. Since Gurfel does not contest the SEC's factual 
findings, we accept the agency's determination that Gurfel "forged  or
caused to be forged" Brittingham's name on the checks.


ment proceedings, Brittingham confronted Gurfel about the  missing
commissions, and Gurfel then admitted that he had  forged
Brittingham's name on the checks. Gurfel reimbursed  the firm for the
funds he had converted, and "resigned" from  the firm. As is required
by NASD Bylaws, Art. IV, s 3(a)  (1996),2 the firm notified the NASD
that Gurfel's association  with the firm had been terminated. The
notice of termination  was sent on November 15, 1993. The notice
indicated that  Gurfel had violated his agreement with the firm by
depositing  the checks into his personal account, but made no
reference  to the forgeries. One week after his termination, Gurfel 
began work at another NASD member firm, Van Sant and  Mewshaw
Securities, Inc. (Van Sant). His employment there  ended about a year


On November 30, 1995, the NASD's Business Conduct  Committee filed a
complaint against Gurfel alleging that he  forged or caused to be
forged the Hartford checks and  converted the proceeds for his
personal use. While Gurfel  did claim innocence of the forgery charge,
his more vigorous  defense was procedural. Article IV, Section 4 of
the NASD  Bylaws, entitled "Retention of Jurisdiction," states that:


A person whose association with a member has been  terminated and is no
longer associated with any member  of the [NASD] ... shall continue to
be subject to the  filing of a complaint ... based upon conduct which 
commenced prior to the termination ... but any such  complaint shall
be filed within:


(a) two (2) years after the effective date of termination of 
registration.... (emphasis added).


Gurfel argued that since no complaint was filed within two  years of
the date of his termination with the firm--where he  committed the
misconduct--this provision deprived the  NASD of authority to file its
complaint. The NASD respond- ed that the two-year period set forth in
section 4 began 




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n 2Article IV has since been redesignated as Article V without 
substantive change. In this opinion we refer to the bylaws in effect 
at the time the NASD's complaint against Gurfel was filed.


running not when Gurfel left the firm, but when he was  terminated from
Van Sant, at which point he left the industry.  Since the NASD filed
its action less than two years after that  later date, the complaint
was timely. The NASD's National  Adjudicatory Council rejected
Gurfel's argument and barred  Gurfel from future association with any
NASD member firm.  The SEC sustained both the NASD's interpretation of
section  4 and the sanction. In re Gurfel, Exchange Act Release No. 
41,229 (SEC Decision March 30, 1999). In his petition Gurfel  contests
only the NASD's authority to bring the enforcement  action against


II.


His argument essentially is that section 4 must be read as  if it were
analogous to a statute of limitations. The phrase  "effective date of
termination of registration"--which starts  the running of the
two-year period--therefore refers to his  initial termination from the
firm rather than his subsequent  termination from Van Sant. That is
so, it is claimed, because  the misconduct with which he is charged
took place at the  firm from which he was initially terminated.


The obvious difficulty with petitioner's argument is that  section 4
does not start the running of the two-year period of  extended NASD
authority from the date of any misconduct,  but rather from the date
of termination. And termination  could occur for a host of reasons,
including voluntary resigna- tion having nothing to do with the
person's conduct. There- fore in determining which termination begins
the two-year  period--the first or second--the place at which the
miscon- duct occurred appears irrelevant.


Petitioner attempts to tie the jurisdictional period to the 
termination from the broker-dealer at which the misconduct  took place
by referring to language later in section 4. A  member firm is
required to amend its notice of termination in  the event that "the
member learns of facts or circumstances  causing any information set
forth in said notice to become  inaccurate or incomplete." See NASD
By-Laws, Art. IV,  s 3(b). Section 4(a) addresses the effect of the


a post-termination amendment on the NASD's jurisdiction,  stating that
an NASD complaint must be filed within


two (2) years after the effective date of termination of  registration
pursuant to Section 3 above, provided, how- ever, that any amendment
to a notice of termination filed  pursuant to Section 3(b) that is
filed within two years of  the original notice which discloses that
such person may  have engaged in conduct actionable under any
applicable  statute, rule, or regulation shall operate to recommence 
the running of the two-year period under this paragraph.


NASD Bylaws, Art. IV, s 4(a) (emphasis added). Gurfel  reads the
"which" clause as referring to the original notice,  not the
amendment, and that is supposed to suggest that it is  necessarily a
person's misconduct-related termination that  triggers the
jurisdictional period. We think that reading is  plainly wrong because
as petitioner concedes there is no  necessary connection between a
termination and misconduct  that took place prior to the termination.
It is obvious then  that it is the amendment that is modified by the


Although the language of section 4 might not pass SEC  scrutiny as an
offering circular, we think the agency's reading  is correct. The
"termination" which begins the running of  the two-year period, after
which the NASD loses jurisdiction,  is the termination from a person's
last job in the industry.  After all the section is entitled in
jurisdictional terms. Its  apparent purpose is to extend coverage to
any registered  representative who worked in the industry for any
member  firm for two years after that person leaves the industry. 
That is why the section does not even apply to a person who  is
presently "associated with any member of the [NASD]."  In other words,
as petitioner concedes, a person who remains  with one firm (never
terminated) is subject to the NASD's  jurisdiction indefinitely. It is
also clear that a person who  leaves firm A to work for B and
continues working at B for,  let us say, 40 years remains subject to
NASD jurisdiction for  misconduct committed at firm A--as he is still
"associated  with" an NASD member. These examples show that section 


4's limitation on the NASD's authority to impose discipline on  a
registered representative is not focused on--indeed, it is 
indifferent to--the period of time running from the represen- tative's
misconduct. In sum, this provision merely restricts  the NASD's
authority to discipline registered representatives  to a period
necessary to protect the industry, not for the  purpose of granting a
possible wrongdoer repose.


The SEC argues that it is entitled to deference as to the  proper
interpretation of the NASD rules3 because the Com- mission must
approve and may on its own initiative modify  the NASD Bylaws, see 15
U.S.C. s 78s(b)-(c). We think that  deference would be appropriate if
we were in doubt as to the  proper interpretation of section 4, see
Arkansas v. Oklahoma,  503 U.S. 91, 110-11 (1992) (deferring to EPA's
interpretation  of state environmental regulatory standards the agency
incor- porated by reference), but we are not.


* * * *


For the reasons set forth above, we agree with the SEC's 
interpretation of section 4, and deny Gurfel's petition.


So ordered.




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n 3 That would raise an interesting question if we were faced with 
divergent interpretations from the NASD and the SEC.