Alpine Urges Supreme Court To Hear Case Against FINRA
Alpine Securities is asking the U.S. Supreme Court to consider taking its years-long case against the Financial Industry Regulatory Authority, potentially setting up a showdown that could cripple the brokerage regulator—and other self-regulatory organizations like it.
In a filing seeking the Supreme Court to hear the case, Alpine’s attorneys argue that the decision in Washington D.C.’s Court of Appeals (which offered the Utah-based firm a partial victory in its lawsuit) should have gone further.
Alpine’s attorneys asked the Court to consider whether a “here-and-now injury” by “an illegitimate proceeding” could mean an “irreparable injury” when considering a preliminary injunction as well as “whether FINRA’s structure and asserted power to enforce the federal laws, including its exercise of unfettered prosecutorial discretion, violates the Constitution’s structural provisions.”
A FINRA spokesperson said the organization would “oppose Alpine’s meritless request for the Supreme Court to overturn the D.C. Circuit Court’s decision, which rejected Alpine’s attempt to halt FINRA’s expedited disciplinary proceeding against it.”
Typically, parties like Alpine appeal to the Supreme Court to convince the justices for a final decision on their cases. However, the number of cases the Court takes up is vastly outnumbered by those seeking a hearing. According to Pew research, the Supreme Court only hears about 80 cases a year out of 7,000 to 8,000 petitions.
The Court normally considers a case on legally significant issues or if there have been divergent opinions in different circuits around the country, according to Ben Edwards, a professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, who questioned whether the Court would ultimately decide to hear Alpine’s case.
“My sense is that it may be a bit premature for the Court to take this up at this point, but I can understand why Alpine is going to take its shot to try to get it to the Supreme Court right away,” he said.
FINRA first charged Alpine with misconduct in 2019, and in March 2022, a FINRA hearing panel expelled the firm from the industry, ordering it to pay $2.3 million in restitution. FINRA later moved to expedite the expulsion, arguing Alpine continued to defy a cease-and-desist order.
Alpine has responded with a lawsuit challenging FINRA’s entire legal foundation. Alpine accused the organization’s hearing officers and arbitration panels of being essentially judges and trials overseeing U.S. securities laws. Alpine claims this enforcement arm is not accountable to the government and is unconstitutional (Alpine’s allegations mirror other suits brewing in several federal court districts).
Last year, a three-judge panel in the D.C. Court of Appeals partially affirmed Alpine’s argument, ruling FINRA must let the SEC review its decisions to expel registrants before FINRA is allowed to do so, saying Alpine would face “irreparable harm” if expelled without SEC review.
The court didn’t rule on the merits of Alpine’s claims and allowed FINRA’s enforcement proceedings against the firm to continue, leading Judge Justin Walker to dissent in part. He argued that the court should dismiss FINRA’s proceedings against Alpine altogether, arguing that FINRA’s design means that it “unilaterally” has enforcement powers in an arrangement that “violates the Constitution.”
Alpine’s request for a hearing at the nation’s highest court argued that circuits nationwide had issued diverging opinions about the questions at play in its case. Alpine also argued that its case presents a unique opportunity to consider FINRA’s constitutionality in that the b/d chose to challenge the organization’s legitimacy altogether.
According to Alpine, the circumstances have “created the ideal vehicle for review of FINRA’s enforcement authority,” which is “unlikely to present often.”
“With Courts and jurists already divided on both questions presented, further percolation would be of little benefit to this Court,” Alpine’s filing read.
Edwards speculated that the Supreme Court may not agree to review the Alpine case, instead waiting to see if other circuits finalize dissenting views in similar cases. However, if judges declare FINRA unconstitutional, he thought the Court may move quicker, as FINRA’s dissolution would cause “significant market disruption.”
“The Supreme Court would want to head that off, or at least look at it before allowing it to happen,” Edwards said.
With the Alpine request filed, other parties, including FINRA, will have the opportunity to weigh in. While the case touches on issues of interest to several justices (particularly Associate Justice Brett Kavanaugh), Edwards questioned the timing.
“I sort of expect these issues are eventually going to reach the Supreme Court,” he said. “I just don’t know if it’s now.”
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