                    NONPRECEDENTIAL DISPOSITION
                      To be cited only in accordance with
                              Fed. R. App. P. 32.1



           United States Court of Appeals
                             For the Seventh Circuit
                             Chicago, Illinois 60604

                             Submitted April 18, 2007*
                              Decided April 25, 2007

                                      Before

                    Hon. KENNETH F. RIPPLE, Circuit Judge

                    Hon. MICHAEL S. KANNE, Circuit Judge

                    Hon. DIANE S. SYKES, Circuit Judge

No. 06-3788

DAVID C. HO,                                   Petition for Review of an Order of the
    Petitioner,                                Securities and Exchange
                                               Commission.
      v.

SECURITIES AND EXCHANGE                        No. 54481
COMMISSION,
    Respondent.


                                    ORDER

       The Business Conduct Committee (“BCC”) of the Chicago Board of Options
Exchange (“CBOE”) imposed sanctions against David Ho after finding that he
violated CBOE rules by engaging in prohibited transactions while he was
suspended and by continuing to make transactions after his CBOE membership had
expired. Ho appealed to the CBOE’s Board of Directors, which upheld the BCC’s
findings and imposition of sanctions. Ho then appealed to the Securities and


      *
       After an examination of the briefs and the record, we have concluded that oral
argument is unnecessary. Thus, the appeal is submitted on the briefs and the record.
See Fed. R. App. P. 34(a)(2).
No. 06-3788                                                                   Page 2

Exchange Commission (“SEC”), which also affirmed the disciplinary action. Ho now
appeals the decision of the SEC. Ho argues that bias in the BCC’s procedures
deprived him of a fair hearing, that substantial evidence did not support some of
the facts on which the SEC based its sanctions, and that his three-year suspension
is unwarranted because it would not protect the trading public from harm. We
affirm.

       Ho was registered with the CBOE as a nominee market maker--a person
authorized to make transactions on the CBOE as a dealer-specialist--for a member
organization. In 2002 the BCC, which conducts disciplinary proceedings for
violations of CBOE rules, issued formal charges against him for rules violations
stemming from alleged harassment and intimidation of other members of his
trading crowd. In October 2003, Ho submitted an Offer of Settlement to resolve the
charges. In the Offer, Ho stipulated that he “engaged in an on-going course of
verbal and physical conduct intended to harass, threaten and intimidate” others in
his trading crowd. He also stipulated that this conduct violated CBOE rules and
that he understood that the BCC’s decision would “become part of his disciplinary
record and [might] be considered in any future [CBOE] proceeding.” And Ho
proposed a sanction of a censure, a $15,000 fine, completion of an anger-
management course, and an eight-week suspension from CBOE membership, to
begin no later than January 2004. The BCC accepted Ho’s Offer of Settlement in
October 2003 (“2003 Order”).

       Throughout his eight-week suspension, Ho engaged in hundreds of stock and
options transactions that were prohibited by the terms of the 2003 Order. He also
continued to engage in stock and options transactions after his CBOE membership
lapsed in January 2004. In July 2004, the BCC issued a Statement of Charges
against Ho for rules violations stemming from these trading activities. At a hearing
before a panel of the BCC, Ellen Miller, a CBOE Senior Investigator, presented
evidence that Ho engaged in improper trades even after the CBOE allowed Ho to
delay his suspension so that he would have time to wind down his positions. At the
hearing Ho admitted that he engaged in prohibited stock and options transactions
while under suspension. In August 2004, the BCC found that Ho violated CBOE
rules and sanctioned him with a censure, fined him $50,000 and suspended him for
three years.

      Ho appealed to the CBOE’s Board of Directors, which upheld the BCC’s
findings and sanctions. He then appealed to the SEC, see 15 U.S.C. § 78s(d)(1), (2),
which undertook an independent review of the record, concurred with the CBOE’s
findings, and affirmed the sanctions. Ho appeals this decision. See 15 U.S.C. §
78y(a)(1).
No. 06-3788                                                                    Page 3

       The scope of our review of the SEC’s findings is limited. See Otto v. SEC, 253
F.3d 960, 964 (7th Cir. 2001). We give conclusive effect to the SEC’s findings of fact
if they are supported by substantial evidence in the record. See McConville v. SEC,
465 F.3d 780, 786 (7th Cir. 2006). We review the SEC’s imposition of sanctions for
abuse of discretion. See Schellenbach v. SEC, 989 F.2d 907, 909 (7th Cir. 1993).

       Ho first argues that the disciplinary proceedings before the BCC were tainted
with bias. He claims that his right to due process was violated because Andrew
Spiwak, the CBOE’s chief enforcement officer who prosecuted him in both
disciplinary actions, attended the BCC’s preliminary discussion of whether to issue
charges against Ho. Ho asserts that the CBOE, in violation of SEC Releases and
CBOE Rules 17.2, 17.3, and 17.4, commingled its investigative and enforcement
functions in allowing Spiwak to attend. According to Ho, Spiwak believed that the
CBOE “should prosecute and severely sanction” him, and concludes that “[t]here is
no way of measuring [Spiwak’s] influence” on the BCC members present, some of
whom later served on Ho’s hearing panel. Ho urges that Spiwak’s influence unduly
biased these members against him.

       Constitutional due process standards apply only if the CBOE is a state actor,
see Otto, 253 F.3d at 965. But, Ho and the SEC ignored the issue of whether the
CBOE is a state actor in their arguments to this court; thus, to the extent that Ho’s
argument presumes CBOE’s status as a state actor, we reject it and will not
consider whether the proceedings violated a constitutional right to due process. See
Gold v. SEC, 48 F.3d 987, 991 (7th Cir. 1995).

       Ho also raises a due process argument not based on constitutional
requirements. He asserts that the BCC proceedings violated a “due-process-like”
requirement involving general principles of fairness and impartiality. However, our
review in these circumstances is narrow and we will consider errors in BCC
proceedings “only if and to the extent they infected the [SEC’s] action by leading to
error on its part.” Schellenbach, 989 F.2d at 909 (internal quotation and citation
omitted). Here, Ho does not challenge the fairness of the SEC proceedings;
therefore, we decline to revisit the BCC proceedings.

       Ho next challenges two SEC factual findings upholding CBOE findings on
which he claims his sanctions were based. First, he claims that the CBOE and
SEC’s finding that he “committed serious rule violations involving harassment and
intimidation” was not supported by substantial evidence. The CBOE and SEC
relied on Ho’s 2003 stipulation that he “engaged in an on-going course of verbal and
physical conduct intended to harass, threaten and intimidate” other CBOE
members. Ho’s argument is difficult to follow, but he seems to suggest that this
stipulation cannot be factual evidence because it is a legal conclusion.
No. 06-3788                                                                   Page 4

       Because the SEC engages in an independent review of the BCC record, we
are highly deferential of the SEC’s findings of fact and will give them conclusive
effect as long as they are supported by substantial evidence, see McConville, 465
F.3d at 786; see also 15 U.S.C. § 78y(a)(4).

       Ho cannot now contest the stipulations in his Offer of Settlement, which the
BCC accepted, because stipulations bind the parties that enter into them. River v.
Commercial Life Ins. Co., 160 F.3d 1164, 1173 (7th Cir. 1998). Ho was bound to his
stipulation, including his assertion that he “engaged in an on-going course of verbal
and physical conduct intended to harass, threaten and intimidate” other CBOE
members. Further, Ho misapprehends the CBOE and SEC’s finding, because they
merely took notice of the existence of that Order, including Ho’s stipulations, as
part of Ho’s disciplinary record and did not make a separate finding that Ho
engaged in the underlying harassing conduct. After an independent review of the
record, the SEC acted within its discretion when it considered Ho’s disciplinary
history of rules violations in upholding the three-year suspension.

       Second, Ho claims that substantial evidence does not support the CBOE and
SEC’s finding that the CBOE accommodated him when it permitted him to serve
his suspension three months after it issued its 2003 Order. The only evidence
reflecting that the CBOE accommodated Ho was Ellen Miller’s testimony, which Ho
claims consisted of unreliable hearsay (because it was based in part on Spiwak’s
statements) and thus was insufficient to support the CBOE and SEC’s finding.

       Given our deferential standard of review, we cannot say that the SEC erred
in basing its determination on the lack of evidence that Miller was biased and the
lack of “any testimony or other evidence . . . that contradicts Miller’s statement.”
Although Ho claims that Spiwak was biased against him, he does not purport to
show that Miller gave undue weight to Spiwak’s statements over the other sources
on which she relied. There was sufficient basis for the SEC to find Miller’s
testimony reliable, thus her testimony was substantial evidence that the CBOE
accommodated Ho. See Gimbel v. Commodity Futures Trading Comm’n, 872 F.2d
196, 199 (7th Cir. 1989).

      Ho next asks us to set aside his three-year suspension because the SEC did
not adequately explain how such a penalty would protect the trading public. Ho
argues that suspension from securities exchange membership is warranted only if
the suspension will protect the public, and not if the sole purpose is to punish a
broker. His suspension, he claims, is “solely punitive in nature,” and is thus
inappropriate.

      Although some courts have held that suspension from securities trading
should serve a remedial purpose to protect the public, rather than as punishment
No. 06-3788                                                                  Page 5

for the offender, see McCarthy v. SEC, 406 F.3d 179 (2d Cir. 2005), the CBOE rules
list several additional factors that the BCC takes into account before imposing
sanctions, including the offender’s recidivism and the importance of tailoring
sanctions to the misconduct at issue, see CBOE Rule 17.11. The Rules also state
that the BCC “should design sanctions to prevent and deter future misconduct by
wrongdoers.” Id.

       The SEC did not abuse its discretion in affirming the BCC’s sanctions
determination, see Schellenbach, 989 F.2d at 909, and Ho’s three-year suspension
was not unwarranted in law or unjustified in fact, see Otto, 253 F.3d at 964. The
investing public has an interest in financial markets that are free of the
unnecessary risk that may arise when regulatory requirements, including margin
requirements, are circumvented. As a market maker, Ho’s trades received
favorable margin treatment, but he misused this treatment when he traded while
suspended from the CBOE and after his CBOE membership had lapsed. The SEC
thus did not abuse its discretion when it agreed with the CBOE that sanctions were
warranted because “improperly receiving favorable market-maker margin
treatment [is] harmful to the public interest” and that “impermissible use of margin
causes systemic risk to the market and the public.” In addition, the SEC took into
account the other factors listed in the CBOE’s rules, concluding that “Ho’s
recidivism, his disregard for [the CBOE’s] disciplinary authority in violating his
suspension, and the seriousness of his violations all serve as adequate support” for
Ho’s sanctions. The SEC agreed with the CBOE that the sanctions were necessary
to “make[] clear to [Ho] and others that restrictions imposed in disciplinary
decisions are not to be ignored.” These determinations show that a three-year
suspension is not unwarranted by law or unjustified in fact. See Otto, 253 F.3d at
964. Unlike McCarthy v. SEC, 406 F.3d 179 (2d Cir. 2005), on which Ho relies, the
SEC here engaged in a thorough analysis of the factors that contributed to Ho’s
three-year suspension including protection of the public interest and general
deterrence.

      Accordingly, we affirm the decision of the SEC.
