A federal appeals court has ruled against the Financial Industry Regulatory Authority in its legal battle with an expelled brokerage firm, reports Advisor Hub.
Last week, the U.S. Court of Appeals for the D.C. Circuit upheld a preliminary injunction against FINRA that allows Alpine Securities Corporation to continue to operate while it appeals a 2022 FINRA decision to bar the firm from the financial industry.
The preliminary injunction was issued last month in a 2-1 decision by a three-judge panel of the D.C. court after Alpine challenged the constitutionality of FINRA by claiming its disciplinary hearing officers were not properly appointed by the executive branch.
The appellate court declined to rehear the arguments and denied FINRA’s motion to lift the injunction.
Last year a FINRA hearing panel expelled Alpine Securities for allegedly imposing unreasonable fees on its customers, and ordered the firm to pay $2.3 million in restitution.
Alpine then filed a lawsuit asking for an injunction, claiming that FINRA’s structure and operation including its Board of Governors and enforcement units were in violation of the Constitution’s separation of powers. The firm based the challenge on its claim that FINRA sought to enforce the nation’s securities laws without authorization from the executive branch. Alpine said FINRA was “unaccountable and immune at every turn.”
In the July opinion granting the injunction, Circuit Judge Justin R. Walker wrote, “There is a serious argument that FINRA hearing officers exercise significant executive power. And it is undisputed that they do not act under the President. That may be a constitutional problem.”
Following the latest ruling, a FINRA spokesperson responded with a statement that read, “While disappointed with the decision on this motion, FINRA looks forward to the D.C. Circuit’s consideration of Plaintiffs’ appeal, when FINRA and the United States Government will present their defenses to Plaintiffs’ novel and unsupported constitutional arguments.”
The attorneys at Hyman Cotter PC understand the complexities that come with being the subject of a regulatory inquiry by the SEC, FINRA, and other self-regulatory organizations, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact us at 312-291-4600 or through our online contact form for a free consultation.
