Last week the full D.C. Circuit Court declined a request by the Financial Regulatory Authority (FINRA) to rehear arguments as to whether FINRA should be enjoined on an emergency basis from expelling a broker-dealer from the industry. Alpine Securities Corporation had argued that FINRA’s hearing officers impermissibly wield “executive power,” which lies exclusively with the President of the United States and those acting under the President’s supervision. The D.C. Circuit’s decision to not rehear arguments on the emergency injunction does not necessarily mean that it has ruled conclusively on the underlying issue, but it is consistent with the D.C. Court’s initial assessment that Alpine’s argument is “likely” to prevail on the merits. Of particular interest is the D.C. Circuit’s July 2023 discussion of FINRA as a “state actor,” especially because such a finding would implicate significant constitutional protections not viewed as available ordinarily in FINRA enforcement matters. The Alpine case – and those that will follow – are likely already affecting FINRA’s practices and strategy in current matters and, similarly, must be considered by brokerage firms and advisers undergoing scrutiny by FINRA.

We expect to have additional analysis to share soon in anticipation of a decision on the merits. For now, we recommend a review of the July 2023 Circuit Court Order.


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