Suing an Exchange: Weissman v. NASD

In general, courts have held that there is no private right of action for violations of a rule (or listing standard) of an exchange or other self regulatory organization.  Similarly, actions by the SROs are generally treated as quasi governmental (standing in the shoes of the SEC) and are therefore immunized from liability.  With the transformation of the NYSE and Nasdaq into for profit companies, however, the law in this area may be beginning to evolve.  

The Eleventh Circuit recently found that a cause of action could be maintained against Nasdaq for allegedly misleading advertisements.  SeeWeissman v. Nat'l Ass'n of Sec. Dealers, Inc., 468 F.3d 1306 (11th Cir. 2006).   The court found that the type of advertising at issue (based upon allegations in the complaint) was not related to Nasdaq's regulatory role and, therefore, was not protected by absolute immunity.  In his dissent, Justice Tjoflat expressed concern that the holding would leave Nasdaq vulnerable to much civil litigation.

Primary material for this case may be found on the DU Corporate Governance website.