After fighting an enforcement case for nearly eight years, Richard Goble, an ex-Finra board member and founder of North American Clearing Corp, is taking one last shot at his chief tormentor, the Securities and Exchange Commission.
Goble is asking the U.S. Supreme Court to rule on whether he can sue the SEC over its role in shutting down and liquidating his clearing firm in 2008.
It’s a long shot, to be sure. Goble has tried to sue everyone involved in his case -- the SEC, the SIPC and the bankruptcy trustee who liquidated his firm -- all to no avail. He has lost a series of court rulings, the latest in July from the U.S. Eleventh Circuit Court of Appeals, which found that the SEC and other entities are immune from his legal challenge.
Hence Goble’s hail-Mary pitch to the Supreme Court, which will decide early next month whether or not to take his case.
Goble, a longtime regulatory gadfly, has claimed that the SEC (with backing by Finra) shut him down over his activism in running dissident candidates for the Finra board and district committees.
A group Goble formed to advocate for small broker-dealers, the Financial Industry Association, also fought the 2007 merger of the NASD with the regulatory unit of the NYSE -- and the changes that came along with the deal that diminished the power of smaller broker-dealers to elect board members to the combined SRO (since renamed Finra).
In 2007, Goble himself was elected as a Finra governor, but resigned his seat the next year when the SEC charged him for making fictitious money-fund trades in order to free up funds from North American’s customer reserve account to finance the business.
At the time, the agency claimed North American was in “severe financial decline” from the departure of a large clearing client and big losses from penny-stock trades.
A court-appointed trustee later liquidated North American, which at one time cleared trades for about 40 small broker-dealer firms.
But it turns out that North American wasn’t in shaky financial shape at all -- at least according to a federal bankruptcy court.
The firm “was consistently profitable” in 2006 and 2007, the court found in a 2014 ruling, and in 2008 when it was shut down, North American “appeared poised for its most profitable year,” wrote judge Karen Jennemann, chief bankruptcy judge for the U.S. Bankruptcy Court in Orlando. (The ruling rejected a request from the bankruptcy trustee to claw back more than $500,000 in disputed business expenses from Goble.)
In addition, judge Jennemann said, the trustee “did not prove that NACI ever failed to accurately perform its weekly reserve computation” except for one error in May 2008 that resulted in the closure of North American.
The bankruptcy court, though, didn’t absolve Goble for his role in fiddling with the customer reserve account.
In a 2011 bench trial, a federal judge found him liable for securities fraud and aiding and abetting. The court ruled that a money-fund transaction at issue was a “sham” trade that freed up $3.4 million from the customer reserve account, and that Goble and his staff knew the trade was improper and deliberately hid it from Finra examiners who were on site at North American. Goble was permanently banned from the industry and fined $7,500.
He later beat back the fraud charge, as well as the fine and the lifetime ban, and ended up with an aiding and abetting violation.
Goble has since filed a rash of further legal appeals -- so many, in fact, that he now faces legal sanctions.
In addition to denying his request to sue the SEC, the Eleventh Circuit upheld a request by the bankruptcy trustee for sanctions against Goble. The court said "it appears from the totality of [Goble’s] various actions and appeals that he has abused the judicial system in order to prolong proceedings and frustrate their resolution."
The pending sanctions against Goble are one of the remaining items left in the clean-up of North American. The SIPC trustee filed a final report in August and expects to conclude the eight-year-old liquidation proceeding this year, after spending more than $14 million in legal fees and expenses.
Goble, 55, of Lake Mary, Fla., has spent much of his time doing his own legal work to save money, and gets by on savings. He recently set up a mortgage loan business but says it isn’t operational yet.
The loss of his clearing firm is a “constitutional tragedy,” Goble says. “If you’re in a regulated business, you have no constitutional rights to your property” if regulators decide to shut you down.
What if the Supreme Court declines to hear his case? “It’s over,” Goble says.
Finra, the SEC and the bankruptcy trustee Robert Gilbert of Carlton Fields Jorden Burt LLP in West Palm Beach, Fla., all declined to comment on Goble’s case.