DC Court Rejects Constitutional Challenges to FINRA by Broker-Dealer that Charged Unlawful Fees

In March 2022, a FINRA panel found that Alpine, a securities broker-dealer, “converted and misused customer funds and securities, engaged in unauthorized trading, charged and paid  customers unfair prices in securities transactions, charged customers unreasonable and
discriminatory fees, and made an unauthorized capital withdrawal.” FINRA then found that Alpine violated its cease-and-desist order 35,000 times, and commenced an enforcement proceeding to expel Alpine from FINRA.

Alpine moved for a preliminary injunction in the DC district court, making a number of statutory and constitutional challenges to FINRA’s structure and existence, including under the Appointments Clause, First Amendment, Fifth Amendment, and Seventh Amendment.

Last week, the court denied the motion, finding that FINRA is not a state actor, that its regulatory role does not violate the private non-delegation doctrine, and that requiring membership in FINRA to operate did not violate the First Amendment.

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