## Facts

- Warren E. Turk was a former NYSE member and specialist associated with Van der Moolen Specialists USA LLC.
- NYSE Enforcement investigated alleged improper specialist trading practices from 1999 to 2003 and requested Turk’s testimony under NYSE Rule 477.
- Turk initially agreed to testify, and NYSE scheduled his testimony for November 22, 2004.
- The SEC separately subpoenaed Turk in a related investigation; Turk testified before SEC staff on November 8, 2004.
- Turk’s firm removed him from the trading floor on November 12, 2004; Turk asserted the action was at the request of the U.S. Attorney’s Office for the Southern District of New York.
- After learning he was a target of a federal criminal investigation, Turk informed NYSE Enforcement that he would assert the Fifth Amendment and would not provide NYSE testimony.
- NYSE charged Turk with violating Rule 477 (failure to provide requested testimony) and imposed sanctions: censure and a permanent bar from NYSE membership and association with member organizations.
- Turk applied to the SEC for review, arguing the NYSE’s demand and sanctioning decision were constitutionally infirm because the NYSE allegedly acted in concert with federal authorities.

## Issues

1. Whether Turk’s refusal to provide testimony to NYSE Enforcement, after invoking the Fifth Amendment, constituted a sanctionable violation of NYSE Rule 477.
2. Whether the NYSE’s conduct in seeking Turk’s testimony and disciplining him could be treated as governmental action due to alleged coordination with the SEC and criminal authorities, triggering Fifth Amendment constraints.
3. Whether the NYSE adequately considered Turk’s status as a criminal-investigation target and the fairness of imposing a permanent bar based solely on refusal to testify in the parallel-proceedings context.

## Decision

- The SEC did not affirm or set aside the NYSE sanctions on the existing record.
- The SEC remanded the matter to the NYSE for further consideration consistent with the Commission’s opinion.
- The SEC directed the NYSE to develop the record and reconsider its action in light of (i) the extent of NYSE communications/coordination with governmental authorities and (ii) the fairness implications of compelling testimony from a criminal-investigation target.
- The SEC left open whether the censure and permanent bar should be reaffirmed, modified, or rescinded after further proceedings.

## Legal Principles

- Self-regulatory organizations generally may require members and associated persons to provide information and testimony to support their regulatory functions, and may discipline noncompliance under applicable rules.
- Because SROs are ordinarily not state actors, a member’s invocation of the Fifth Amendment typically does not, by itself, bar SRO discipline for refusal to cooperate.
- Extensive SRO coordination with prosecutors or the SEC may create state-action concerns if the SRO’s investigative or disciplinary steps are effectively directed by, or intertwined with, governmental investigations.
- When parallel criminal exposure exists, an SRO’s enforcement decision and sanctions must be evaluated with attention to the surrounding circumstances, including the individual’s criminal-investigation status and the completeness of the record supporting discipline.
- The SEC may remand an SRO disciplinary matter where factual gaps prevent reliable resolution of state-action and fairness questions material to whether the discipline is consistent with the Exchange Act.

## Conclusion

The SEC remanded the NYSE’s censure and permanent bar imposed for Turk’s refusal to testify, concluding that the record required further development and reconsideration regarding alleged government coordination and the fairness of disciplining a criminal-investigation target for invoking the privilege against self-incrimination.


In re Application of Turk for Review of Disciplinary Action Taken by N.Y. Stock Exch., Inc., Exchange Act Release No. 55942 (June 22, 2007)