The U.S. Supreme Court has turned away a challenge by Alpine Securities Corp. aimed at blocking expulsion proceedings against the firm, according to Advisor Hub.
The high court declined to hear Alpine’s appeal of a lower court’s ruling that allowed the Financial Industry Regulatory Authority to move forward with its enforcement action against the company. The justices did not issue a comment on their decision.
FINRA decided to expel Alpine Securities in 2022, alleging the firm converted and misused customer funds and securities, engaged in unauthorized trading, charged customers unfair prices in securities transactions and unreasonable fees, and made an unauthorized capital withdrawal. Alpine, a broker-dealer based in Utah, was also ordered to pay $2.3 million in restitution.
The U.S. Court of Appeals for the District of Columbia Circuit then upheld a preliminary injunction that allowed Alpine Securities to continue to operate while appealing FINRA’s decision to bar the firm from the financial industry. The court said FINRA cannot expel member firms in expedited proceedings without obtaining review by the Securities and Exchange Commission.
In its Supreme Court appeal, Alpine said it faced irreparable harm from having to defend itself in FINRA’s enforcement proceeding, which it called unconstitutional. Alpine challenged the constitutionality of FINRA by claiming its disciplinary hearing officers were not properly appointed by the executive branch.
As the case went to the Supreme Court, the government contended that Alpine had not met the threshold for granting a stay of FINRA’s enforcement action, and that both the government and the public would be harmed if the high court stopped the proceedings.
“There is a strong congressional and public interest in ensuring that securities markets remain trustworthy and sound, including by ensuring that those markets remain free of those who repeatedly violate not just the federal securities laws, but also longstanding industry rules that protect customers and investors,” the response read.
In March, Chief Justice John Roberts denied Alpine’s request to halt FINRA’s enforcement proceedings during the ongoing appeal. This decision permitted FINRA to continue its disciplinary actions against Alpine while the broader constitutional issues remained under judicial consideration.
Alpine has contended 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.”
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