Court Limits FINRA’s Power to Expel Brokerages

“Expulsion would likely put Alpine out of business, and would do so before the SEC performs a full review of Finra’s decision,” wrote Millett, a Barack Obama appointee.

Maranda Fritz, a lawyer for Alpine, said after the ruling that Finra “exercises enormous power over participants in the securities industry while insisting that it need not abide by the Constitution.”

Finra said in a statement that it was reviewing the decision.

Wall Street Watches

The lawsuit has attracted the attention of Wall Street, which is overseen by a number of self-regulatory organizations, or SROs, including stock exchanges and clearinghouses.

Those SROs have warned of significant disruptions to the markets if Alpine wins the case.

Other groups, including one represented by former Attorney General William Barr, are supporting Alpine’s stance that citizens aren’t guaranteed their constitutional rights under the current structure.

U.S. Circuit Judge Justin Walker, a Donald Trump appointee, dissented in part to the opinion, saying Finra should be stopped altogether from wielding enforcement authority.

“The problems with Finra’s enforcement proceedings run even deeper,” since it “wields significant executive authority when it investigates, prosecutes, and initially adjudicates allegations against a company required by law to put itself at Finra’s mercy,” he wrote.

Chief Circuit Judge Sri Srinivasan, also an Obama appointee, was on the panel as well.

The case is Alpine Securities Corp. v. Financial Industry Regulatory Authority, 23-5129, U.S. Court of Appeals for District of Columbia Circuit.

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