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Keywords

jurisdictioninjunctioncorporationdue processjudicial review
jurisdictioninjunctioncorporationdue processjudicial review

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Touche Ross & Co. v. S.E.C., 609 F.2d 570, Fed. Sec. L. Rep. P 96,854

Facts

On September 1, 1976, the SEC initiated a public administrative proceeding against Touche Ross & Co. and three of its former partners to determine if they engaged in unethical conduct during audits of two corporations. The SEC alleged that they failed to follow generally accepted accounting standards and had no reasonable basis for their opinions on the financial statements. Touche Ross sought a permanent injunction against the SEC's proceedings, claiming lack of statutory authority for Rule 2(e) and due process violations.

On September 1, 1976, the SEC initiated a public administrative proceeding against Touche Ross & Co. and three of its former partners to determine if they engaged in unethical conduct during audits of two corporations. The SEC alleged that they failed to follow generally accepted accounting standards and had no reasonable basis for their opinions on the financial statements. Touche Ross sought a permanent injunction against the SEC's proceedings, claiming lack of statutory authority for Rule 2(e) and due process violations.

Issue

Whether the SEC has the authority to conduct an administrative proceeding under Rule 2(e) and whether Touche Ross must exhaust its administrative remedies before seeking judicial review.

Whether the SEC has the authority to conduct an administrative proceeding under Rule 2(e) and whether Touche Ross must exhaust its administrative remedies before seeking judicial review.

Rule

The court applied the exhaustion doctrine, which requires litigants to pursue all administrative remedies before seeking judicial relief, emphasizing the need for agencies to develop factual findings and apply their expertise.

The court applied the exhaustion doctrine, which requires litigants to pursue all administrative remedies before seeking judicial relief, emphasizing the need for agencies to develop factual findings and apply their expertise.

Analysis

The court determined that Touche Ross must exhaust its administrative remedies before challenging the SEC's proceedings. It noted that the SEC's authority to promulgate Rule 2(e) is not plainly beyond its jurisdiction and that the rule serves to protect the integrity of the SEC's processes. The court emphasized that allowing judicial intervention before the agency has acted would undermine the administrative process.

The court determined that Touche Ross must exhaust its administrative remedies before challenging the SEC's proceedings. It noted that the SEC's authority to promulgate Rule 2(e) is not plainly beyond its jurisdiction and that the rule serves to protect the integrity of the SEC's processes. The court emphasized that allowing judicial intervention before the agency has acted would undermine the administrative process.

Conclusion

The court affirmed the district court's dismissal of Touche Ross's action, holding that the accounting firm must exhaust its administrative remedies before seeking judicial review of the SEC's proceedings.

The court affirmed the district court's dismissal of Touche Ross's action, holding that the accounting firm must exhaust its administrative remedies before seeking judicial review of the SEC's proceedings.

Who won?

Securities and Exchange Commission (SEC) prevailed because the court upheld the validity of Rule 2(e) and required Touche Ross to exhaust its administrative remedies.

Securities and Exchange Commission (SEC) prevailed because the court upheld the validity of Rule 2(e) and required Touche Ross to exhaust its administrative remedies.

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