The Supreme Court let the Financial Industry Regulatory Authority proceed with disciplinary proceedings against the embattled brokerage Alpine, which stands accused of stealing from customers in a case testing Wall Street’s longstanding reliance on self-regulatory organizations.
The justices on Monday turned away an appeal from Alpine Securities, which argued that a lower court hadn’t gone far enough when it blocked FINRA from expelling Alpine until the Securities and Exchange Commission had time to weigh in on the case. Alpine said the federal appeals court should have stopped the proceedings altogether while the legal fight goes forward.
The rebuff is a win for FINRA on one aspect in a broader fight that threatens to undercut the authority of self-regulatory organizations. Alpine is pressing multiple arguments that FINRA’s powers and structure are unconstitutional.
The rejection follows Chief Justice John Roberts’s decision in March not to immediately halt the FINRA proceedings against Alpine while the Supreme Court weighed how to handle the case.
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In partially siding with Alpine, the U.S. Court of Appeals for the D.C. Circuit said the Constitution probably prohibits FINRA from unilaterally expelling a brokerage. The decision, which invoked the so-called private non-delegation doctrine, called into question FINRA’s ability to oust members through expedited proceedings that bypass the SEC.
At the Supreme Court, Alpine said that conclusion should have prompted the D.C. Circuit to suspend FINRA’s disciplinary action. Alpine said being forced to defend itself against FINRA charges — even if the decision is ultimately overturned — constitutes a “here-and-now injury” that Supreme Court precedent requires judges to prevent.
FINRA, backed by the Trump administration, urged the Supreme Court not to intervene. FINRA said it is “commonplace for parties to endure a proceeding even when it might be overturned on appeal.”
FINRA accuses Alpine of stealing more than $54 million from its clients through excessive fees and the unauthorized conversion of customer securities and then violating a cease-and-desist order more than 35,000 times. Alpine denies the allegations.
U.S. financial markets are overseen by a number of self-regulatory organizations, including stock exchanges and clearinghouses.
