Steven I. WEISSMAN, as Custodian under the Florida Uniform Transfers to Minors Act, as Trustee and individually, Plaintiff-Appellee, v. NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., a Delaware not-for-profit corporation, NASDAQ Stock Market, Inc., a Delaware corporation organized for profit, Defendants-Appellants, 468 F.3d 1306

BARKETT, Circuit Judge: The National Association of Securities Dealers, Inc. (“NASD”) and its subsidiary, the NASDAQ Stock Market, Inc. (“NASDAQ”), seek reversal of the district court’s denial of their motion to dismiss Steven Weissman’s complaint, as well as the district court’s order permitting Weissman to engage in pre-trial discovery. NASD and NASDAQ (“Appellants”) claim absolutely immunity from Weissman’s suit. They argue that Weissman complains of conduct undertaken pursuant to their quasi-governmental role as market regulators under the Securities Exchange Act (SEA), 15 U.S.C. § 78a et seq.

The district court rejected this defense, explaining that while Appellants do enjoy absolute immunity for statutorily-mandated regulatory or disciplinary functions, they are not entitled to such immunity in this case because Weiss-man’s complaint relates to private commercial conduct not mandated by the Act. BACKGROUND Between December 2000 and June 2002, Weissman purchased 82,800 shares of WorldCom, Inc. (“WorldCom”) stock on behalf of his minor children.

In the wake of WorldCom’s collapse, and after losing almost the entire investment, Weissman filed a diversity suit in federal district court against the NASD and NASDAQ. Weissman’s complaint was initially dismissed for failure to allege diversity of citizenship, but he redrafted it to correct that defect.

In his second complaint, Weissman disavowed any reliance on Appellants’ regulatory activity as the basis for his suit, emphasizing that “this action is based solely on the for-profit commercial business activity of the Defendants[,... ] includfing] Defendants’ approximately $100 million dollar marketing and advertising campaign during the years 2000, 2001 and 2002 to promote and sell ... shares of WorldCom.” The complaint set forth the following allegations: First, Weissman alleged that NASDAQ violated Fla. Stat. § 517.301(l)(

b) by promoting WorldCom through its marketing and advertising without disclosing that their revenues were directly enhanced by increased trading in WorldCom stock. With regard to this count, Weissman’s complaint specifically charged that: During 2000 and 2001, NASDAQ expended $74 million dollars on marketing and advertising. In 2002, NASDAQ expended an additional $27 million dollars on marketing and advertising. The marketing and advertising campaign featured NASDAQ-listed companies, including WorldCom.

NASDAQ published numerous print and television advertisements in Florida endorsing WorldCom as a great company and a good investment .... Though not purporting to offer World-Com stock for sale, NASDAQ undertook said advertising and promotion for a consideration received or to be received directly or indirectly from WorldCom, market markers and/or stock dealers without disclosing the receipt, whether past or prospective, of such consideration ....

The purpose of NASDAQ’s advertising campaign to build the “NASDAQ Brand” is to generate revenue through maintaining its listings, obtaining new listings and to jointly market shares with the listed companies .... NASDAQ sought to engender [the] trust and confidence of the investing public, including Plaintiff, that when they invest in a NASDAQ-listed stock, ... [they are] assur[ed] of the quality of their investment. The failure of NASDAQ to disclose that it was compensated by WorldCom, market makers and/or stock dealers, directly or indireetly[,] for the advertisements and promotions violated Florida Statute

Section 517.301(l)(b). NASDAQ’s advertisements and endorsements of WorldCom carried extraordinary weight and power with Plaintiff Second, Weissman alleged that NASDAQ offered WorldCom shares for sale without registering as a broker, in violation of Fla. Stat. § 517.12.

With regard to this count, Weissman’s complaint reiterated that “Plaintiff relied upon the endorsements and recommendation of WorldCom shares by NASDAQ in purchasing same” and that “NASDAQ directly benefited and profited [from] Plaintiffs purchases of WorldCom shares because, inter alia, its income is increased by increased trading volume on the NASDAQ stock market.” Third, Weissman alleged that Appellants committed common-law fraud and/or negligent misrepresentation in their attempts to induce investors to purchase shares of WorldCom.

With regard to these counts, Weissman’s complaint specifically charged, again, that: During 2000 and 2001, NASDAQ and NASD, jointly and in concert with each other, expended $74 million dollars on marketing and advertising. In 2002, NASDAQ expended an additional $27 million dollars on marketing and advertising. The purpose of this marketing and advertising campaign was to induce investors, including Plaintiff, to purchase shares of stock traded on the NASDAQ stock market, including WorldCom, in order to benefit the NASD and NASDAQ ... by: (

i) generating increased trading volume and the attendant revenue; (ii) generating and retaining listing income from NASDAQ-listed companies, including WorldCom; and, (iii)increasing the value of NASDAQ’s stock. As part of [its] advertising and marketing campaign ... NASDAQ published numerous print and television advertisements in Florida which knowingly, with intent to deceive, endorsed WorldCom and conveyed the false representation and impression that World-Com was a great company with accounting in accordance with [Generally Accepted Accounting Principles] GAAP ....

NASDAQ also provided publicity to WorldCom on its web-site and assisted in the dissemination of World-Corn’s fraudulent financial statements.

The aforesaid advertising and marketing campaign conducted during the year prior to Plaintiffs purchases of WorldCom shares included, but was not limited to ... a two full page spread advertisement in the Wall Street Journal discussing [NASDAQ’s] belief in the need for NASDAQ-listed companies to provide accurate financial reporting in accordance with [GAAP], “supported by a Knowledgeable Audit Committee.” On one page is a picture of the NASDAQ ticker with the slogan “The Responsibilities We All Share.” On the opposite page under the headline “Keeping Our Markets True — It Is All About Character” is a list of the chief executives of the “good” NASDAQ listed companies under the subheading “Our Beliefs Stand in Good Company.” Listed thereunder as an endorser of these NASDAQ goals is “Bernard J.

Ebbers, President and Chief Executive Officer[,] WorldCom, Inc.” ... In addition ..., during the months prior to his purchases of WorldCom shares, Plaintiff saw, heard and relied upon other public media advertisements/communications by the Defendants conveying the same false representations and impression to the effect that WorldCom was a great company with accounting in accordance with GAAP; a good investment; and, that it met the listing requirements of the NASDAQ stock market ....

NASDAQ and NASD’s advertising and marketing campaign was designed and intended by Defendants to induce investors, including Plaintiff, to purchase shares of WorldCom and, as part of that campaign, Defendants knowingly and intentionally made false laudatory representations regarding WorldCom while concealing their direct profit motive and interest in generating purchases of WorldCom shares.

The intention of NASDAQ and NASD in making these false representations and concealing their direct profit motive and interest in selling the stock of that company, was to convince and induce investors, including Plaintiff, to purchase shares of World-Com.

Elsewhere in his complaint, and in support of his claim that NASDAQ was touting WorldCom stock, Weissman pointed to NASDAQ’s April 2001 registration statement filed with the Securities and Exchange Commission (SEC), which stated that “NASDAQ’s branding strategy is designed to convey to the public that the world’s most innovative, successful growth companies are listed on NASDAQ.” Appellants moved to dismiss the complaint, claiming absolute immunity.

In the alternative, they argued that Weissman lacked a federal private right of action, failed to exhaust his administrative remedies, and failed to state a cause of action under Florida law. The district court held that both the absence of a federal private right of action, as well as any failure to exhaust SEC remedies, were immaterial because all of Weissman’s claims were based solely on state law.

It further held that, because Appellants’ enjoyment of absolute immunity for quasi-governmental activity does not insulate them from suit for activity related to private business, their alleged advertisement and promotion of WorldCom was outside the scope of such immunity. Appellants timely appealed. Weissman moved to dismiss the appeal for lack of jurisdiction. We granted that motion in part, dismissing Appellants’ claims that Weissman failed to adequately plead his state law claims and did not exhaust his administrative remedies.

We permitted the appeal to proceed as to Appellants’ absolute immunity defense, as well as their claim that Weissman lacked a federal private right of action. STANDARD OF REVIEW We review de novo the district court’s denial of a motion to dismiss on the basis of immunity. See Maggio v. Sipple, 211 F.3d 1346, 1350 (11th Cir.2000) (applying de novo standard of review to denial of qualified immunity). We review the complaint, and all inferences to be drawn therefrom, in the light most favorable to the plaintiff, accepting all well-pleaded factual allegations as true. Id.

DISCUSSION Appellants are self-regulatory organizations (“SROs”) within the meaning of the Securities Exchange Act, 15 U.S.C. § 78c(a)(26), which vests them with a duty to promulgate and enforce rules concerning the conduct of their members. See 15 U.S.C. §§ 78s(

g) and 78f(b); see also Silver v. New York Stock Exch, 373 U.S. 341, 352, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963) (explaining the “federally mandated duty of self-policing by [securities] exchanges”). Our sister circuits have accorded SROs absolute immunity from civil damages for conduct undertaken as part of their statutorily delegated adjudicatory, regulatory, and prosecutorial authority. See Barbara v. New York Stock Exch., 99 F.3d 49, 59 (2d Cir.1996); Austin Mun. Sec., Inc. v. Nat’l Ass’n of Sec. Dealers, Inc., 757 F.2d 676, 692 (5th Cir.1985); Sparta Surgical Corp. v. Nat’l Ass’n of Sec.

Dealers, Inc., 159 F.3d 1209, 1215 (9th Cir.1998); Zand-ford v. Nat’l Ass’n of Sec. Dealers, Inc., 80 F.3d 559 (D.C.Cir.1996). Such grants of immunity accommodate SROs’ unique position in the regulatory scheme: SROs perform a variety of functions that would otherwise be performed by a governmental agency, but they lack the sovereign immunity which governmental agencies enjoy. See Barbara, 99 F.3d at 59; Austin, 757 F.2d at 692. “To be sure, self-regulatory organizations do not enjoy complete immunity from suits.” Sparta, 159 F.3d at 1213.

Only when an SRO is “acting under the aegis of the Exchange Act’s delegated authority” does it enjoy that privilege. Id. Absolute immunity is not appropriate unless the relevant conduct constitutes a delegated quasi-governmental prosecutorial, regulatory, or disciplinary function. See D’Alessio v.

New York Stock Exch., Inc., 258 F.3d 93, 105 (2d Cir.2001) (“a[n] SRO, such as the [New York Stock Exchange], may be entitled to immunity from suit for conduct falling within the scope of the SRO’s regulatory and general oversight functions”) (emphasis added); see also Austin, 757 F.2d at 692 (“NASD is entitled to absolute immunity for its role in disciplining its members and associates.”); Barbara, 99 F.3d at 59 (absolute immunity granted in suit arising from disciplinary action against employee of exchange member); Sparta, 159 F.3d at 1213 (holding that decision to suspend trading was “a regulatory function cloaked in immunity”).

Except with regard to those portions of Weissman’s complaint involving NASDAQ’s “dissemination of WorldCom’s fraudulent financial statements,” Appellants fail to carry their burden of demonstrating entitlement to absolute immunity from Weissman’s suit.

Although “dissemination” of company financial statements warrants absolute immunity because, at the very least, it is undertaken pursuant to NASDAQ’s regulatory authority “to remove impediments and perfect” the free market, 15 U.S.C. § 78o-3(b)(6), the rest of Weissman’s complaint expressly and exclusively relates to Appellants’ for-profit commercial activity, without any reliance on their quasi-governmental enforcement or regulatory functions.

The complaint mainly concerns Appellants’ advertising activities, which, according to Weissman, fraudulently touted WorldCom’s stock in order to profit from resulting increases in trading volume. This conduct does not fall “under the aegis” of Appellants’ delegated disciplinary or regulatory authority and therefore is not shielded by absolute immunity. Sparta, 159 F.3d at 1213. To advertise its own sense of responsibility and its honesty and character, NASDAQ compared itself to WorldCom, asserting that its “Beliefs Stand In Good Company.” This is not a regulatory action.

More generally, the whole point of the advertisements was to entice investors to buy stock on NASDAQ’s exchange — ■ such as NASDAQ’s exchange-traded fund, QQQ, which included WorldCom. This, too, is a non-regulatory action. Indeed, none of NASDAQ’s advertisements relate to its statutorily delegated responsibility to “prevent fraudulent and manipulative ... practices,” “promote just and equitable principles of trade,” “remove impediments to and perfect” the free market, or “protect investors and the public interest.” 15 U.S.C. § 78o-(3)(b)(6).

The advertisements were in no sense mandated by, or coterminous with, any regulatory activity contemplated by the Exchange Act. This conduct was private business activity; and “[w]hen conducting private business, [SROs] remain subject to liability.” Sparta, 159 F.3d at 1213. Weissman does not contest either NASDAQ’s decision to list or de-list WorldCom, nor any prosecutorial actions that NASDAQ took or failed to take against that corporation.

Although a company’s appearance on the NASDAQ exchange is surely a prerequisite to being touted as a sound NASDAQ investment, these occurrences are materially distinct for the purposes of immunity analysis, as only one of them falls under the mandate of the Exchange Act. In listing and de-listing companies like WorldCom, NASDAQ clearly does “stand in the shoes of the SEC.” But NASDAQ represents no one but itself when it entices investors to trade on its exchange and, specifically, when it suggests that particular companies are sound investments.

As a private corporation, NASDAQ places advertisements that are patently intended to increase trading volume and, as a result, company profits. Even if NASDAQ’s status as a money-making entity does not foreclose absolute immunity for any number of its activities, its television and newspaper advertisements cannot be said to directly further its regulatory interest under the Securities Exchange Act. These advertisements were in the service of NASDAQ’s own business, not the government’s, and such distinctly non-governmental conduct is unprotected by absolute immunity.

In his partial concurrence, Judge Tjoflat concludes that today’s decision creates an untenable precedent, a slope made slippery by the fact that “everything [NASDAQ] does arguably contributes to its coffers.” This fear is unwarranted. On the contrary, our holding, in and of itself, marks a clear and sturdy line. In granting immunity for certain contested NASDAQ activities while withholding it from others, we have acknowledged the existence of NASDAQ’s absolute immunity while more precisely defining its contours.

Far from simply asking whether NASDAQ was enriched by the activities described in Weissman’s complaint, our immunity analysis has also and especially asked whether those for-profit activities were quasi-governmental in nature — whether, in other words, they were regulatory, adjudicatory, or prosecutorial actions taken pursuant to the Securities and Exchange Act.

Because NASDAQ satisfies this test when it provides to the public the financial statements of companies listed on its exchange, but does not satisfy this test when it engages in advertising activity unsuited to a government actor like the Securities and Exchange Commission, the district court’s denial of absolute immunity to Defendants is AFFIRMED IN PART and REVERSED IN PART. . Weissman’s motion to dismiss this appeal for lack of jurisdiction was granted in part by prior order dated October 13, 2004.

Specifically, this Court dismissed the appeal to the extent it sought review of the district court's determination that Weissman adequately pled his state law claims and exhausted his administrative remedies. We denied Weissman's motion as to Appellants' immunity claims, over which we have jurisdiction. We noted that our jurisdiction extends to the district court's discovery order; if Appellants' immunity claim is meritorious, they will necessarily be insulated from pre-trial discovery. .

Appellants' arguments focus on the allegations in Weissman's first complaint, which is obviously not the one relevant to this appeal. While we may take notice of Weissman's prior pleading to the extent it bears on this appeal, see Paul v. Dade County, 419 F.2d 10, 12 (5th Cir.1969), it is the allegations in the operative complaint that must support Appellants’ claim of absolute immunity if that claim is to prevail. .

The complaint frequently refers to NASDAQ as the “The For Profit.” For the sake of clarity and consistency, when citing the complaint, this opinion will in each instance render "The For Profit” as NASDAQ. . Weissman has also moved for attorneys' fees and double costs, arguing that this appeal is frivolous within the meaning of Federal Rule of Appellate Procedure 38. "Rule 38 sanctions have been imposed against appellants who raise ‘clearly frivolous claims' in the face of established law and clear facts." Farese v. Scherer, 342 F.3d 1223, 1232 (11th Cir.2003) (citing Misabec Mercantile, Inc. De Panama v.

Donaldson, Lufkin & Jenrette ACLI Futures, Inc., 853 F.2d 834, 841 (11th Cir.1988)). Because Appellants raise colorable arguments as to why the district court's immunity determination should be reversed, we deny Weissman's Rule 38 motion. . See Butz v. Economou, 438 U.S. 478, 506, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978) (burden placed on party claiming immunity from suit). . Appellants also argue that the district court erred in concluding that the absence of a federal private right of action proved immaterial because Weissman’s cause of action was grounded in state law.

Specifically, Appellants argue that this cannot terminate the inquiry, as state-law claims that relate to SRO activities are nonetheless subject to the immunity bar. We agree. However, as discussed above, the conduct Weissman alleges does not "relate to SRO activities." Thus, the district court did not err on this point.