Alpine v. FINRA: Important Legal Update from Katten Muchin Rosenman – JDSupra
On November 22, the US Court of Appeals for the District of Columbia Circuit made a decision that impacts Alpine Securities Corporation and the Financial Industry Regulatory Authority (FINRA). The court granted Alpine a preliminary injunction, which means that FINRA cannot expel Alpine without the Securities and Exchange Commission’s (SEC) review. This ruling is based on the private nondelegation doctrine, which requires that a private entity delegated to perform a regulatory role must be supervised by a government actor.
Back in 2022, FINRA sanctioned Alpine Securities Corporation for violating its rules and issued a cease-and-desist order. Following this, Alpine took the matter to federal court, questioning FINRA’s constitutionality.
While the lawsuit was ongoing, FINRA determined that Alpine had violated the cease-and-desist order and started a process to expel Alpine from its membership. Alpine then asked the district court for a preliminary injunction against the expedited proceeding. They argued that FINRA’s actions were unconstitutional under the private nondelegation doctrine or the Appointments Clause. The district court initially rejected Alpine’s request.
However, the Court of Appeals intervened and decided that Alpine should not be expelled from FINRA without the SEC’s review. The court recognized that Alpine would suffer irreparable harm if immediately expelled before the SEC had a chance to review FINRA’s decision. The appellate court acknowledged Alpine’s successful challenge to FINRA’s authority and ruled in favor of Alpine receiving SEC review before any expulsion.
Although the Court of Appeals did not settle the overall constitutional challenges in this case, it did grant Alpine a limited preliminary injunction to prevent immediate expulsion. The ultimate resolution of Alpine’s constitutional arguments will have to wait for further proceedings. This decision emphasizes the importance of government oversight in regulatory matters within the securities industry.
