## Facts

- Steven I. Weissman purchased about 82,800 shares of WorldCom stock (December 2000–June 2002) for his minor children and lost nearly the entire investment after WorldCom collapsed.
- Weissman alleged NASD/NASDAQ (collectively, NASDAQ) spent roughly $100 million on marketing and advertising promoting NASDAQ-listed companies, including WorldCom, to increase trading volume and NASDAQ’s revenues.
- Weissman pointed to a Wall Street Journal advertisement that touted NASDAQ’s “good companies,” listing WorldCom, and promoted confidence in corporate accounting after publicized accounting scandals.
- Weissman asserted Florida statutory and common-law claims, including fraudulent/deceptive securities practices, failure to register as a broker, and fraud/negligent misrepresentation.
- The complaint expressly disclaimed any challenge to NASDAQ’s regulatory or disciplinary conduct as a self-regulatory organization (SRO) and framed the case as based only on NASDAQ’s for-profit commercial promotion.

## Issues

1. Whether an SRO is absolutely immune from private damages suits challenging allegedly misleading, for-profit advertising promoting listed securities, when the claims do not attack statutorily delegated regulatory or disciplinary functions under the Securities Exchange Act.

## Decision

- The en banc Eleventh Circuit affirmed the district court’s denial of NASDAQ’s Rule 12(b)(6) motion to dismiss.
- The court held absolute immunity protects SRO conduct only when it is regulatory or disciplinary in nature and undertaken pursuant to statutorily delegated authority.
- The court held the alleged advertising and marketing campaign, as pleaded, was commercial promotion rather than regulatory or disciplinary activity; therefore absolute immunity did not bar the suit at the pleading stage.
- The court emphasized the decision addressed only immunity on the face of the complaint and did not resolve the merits of the state-law claims or other potential defenses.

## Legal Principles

- Absolute immunity for SROs is functional: it depends on the nature of the challenged conduct, not the entity’s SRO status.
- SRO immunity extends to activities that implement statutorily delegated, quasi-governmental duties (e.g., rule enforcement, discipline, and closely related oversight functions).
- Conduct that is primarily for-profit commercial activity, including promotional advertising aimed at increasing trading volume, is not automatically immunized merely because it may be characterized as consistent with an SRO’s regulatory role.
- On a motion to dismiss, courts accept the complaint’s well-pleaded allegations and evaluate immunity based on the conduct alleged.

## Conclusion

The Eleventh Circuit allowed the investor’s suit to proceed because the complaint targeted NASDAQ’s alleged commercial promotion of WorldCom rather than SEC-delegated regulatory or disciplinary functions, placing the challenged conduct outside SRO absolute immunity at the pleading stage.


Weissman v. Nat’l Ass’n of Sec. Dealers, Inc., 500 F.3d 1293 (11th Cir. 2007) (en banc)