## Facts

- Steven Altman, a New York-licensed attorney, represented a client subpoenaed in an SEC enforcement investigation.
- While negotiating the client’s severance with the client’s former employer, Altman spoke with the employer’s counsel, who secretly recorded their conversations.
- In the recorded discussions, Altman suggested the client’s cooperation with (or resistance to) the SEC subpoena could be influenced by the severance terms and additional payment.
- The SEC instituted an administrative proceeding alleging professional misconduct.
- An ALJ found Altman violated three New York attorney disciplinary rules and imposed a nine-month suspension from appearing or practicing before the SEC.
- On review, the SEC agreed with the misconduct findings but increased the sanction to a permanent bar, characterizing the violations as egregious, recurrent, and showing a high degree of scienter.
- Altman petitioned for judicial review of the permanent bar and the SEC’s denial of reconsideration and a stay.

## Issues

1. Whether the SEC may discipline an attorney under Rule 102(e)(1)(ii) and Exchange Act § 4C based on the SEC’s own finding that the attorney violated state bar disciplinary rules, even without prior state discipline.
2. Whether due process required clearer notice that state disciplinary action was not a prerequisite and that state ethics rules could supply the standard for “improper professional conduct.”
3. Whether substantial evidence supported the SEC’s findings that Altman engaged in improper professional conduct.
4. Whether imposing a permanent bar, rather than the ALJ’s nine-month suspension, was arbitrary, capricious, or an abuse of discretion.

## Decision

- The court denied the petition for review and affirmed the SEC’s orders.
- The SEC had authority to determine that violations of applicable state ethics rules constituted “improper professional conduct” under Rule 102(e)(1)(ii) and Exchange Act § 4C, without awaiting state disciplinary action.
- Altman had constitutionally sufficient notice because the relevant state rules were public and applicable to him, and the SEC’s reliance on such standards was foreseeable under the governing provisions.
- Substantial evidence supported the SEC’s findings, including the recorded conversations and reasonable inferences drawn from the administrative record.
- The permanent bar was within the SEC’s discretion given the agency’s findings of egregious, recurrent misconduct and high scienter.

## Legal Principles

- Under Rule 102(e)(1)(ii) and Exchange Act § 4C, the SEC may deny professionals the privilege of practicing before the Commission upon a finding of “improper professional conduct.”
- The SEC may use generally applicable state attorney disciplinary rules as a benchmark for determining “improper professional conduct,” and it need not rely on prior or parallel state disciplinary proceedings.
- Due process notice is satisfied where the standard of conduct derives from publicly available professional rules applicable to the practitioner and the agency’s enforcement approach is reasonably foreseeable from the regulatory text and established practice.
- On judicial review, SEC factfinding is upheld if supported by substantial evidence, and agency sanctions are upheld unless arbitrary, capricious, or an abuse of discretion.

## Conclusion

The D.C. Circuit upheld the SEC’s permanent bar of an attorney for attempting to trade a client’s cooperation with an SEC subpoena for private severance benefits, holding that the SEC could independently rely on state ethics rules, that notice was adequate, that the findings were supported by substantial evidence, and that the sanction was not an abuse of discretion.


Altman v. SEC, 666 F.3d 1322 (D.C. Cir. 2011)