The legal fight between Alpine Securities Corp. and the Financial Industry Regulatory Authority Inc. took one step sidewise this week when Finra moved to uphold and finalize its expulsion of the firm, pending a review, from the securities industry, just as Alpine’s dispute of Finra’s authority to do so continues in federal court.
In 2022, Finra sanctioned Alpine Securities, which has been open for business since 1984, for violating industry rules, and issued a cease-and-desist order against the firm. After Finra expelled the firm, Alpine Securities appealed the decision inside Finra while also suing the firm in federal court.
Tuesday’s decision by Finra’s National Adjudicatory Council, or NAC, affirms the regulator’s original decision to ban the firm. But, it also stays the decision, pending a review by the Securities and Exchange Commission, which oversees Finra.
The NAC on Tuesday cited Alpine Securities “egregious misconduct” in transacting business with client for its decision to expel the firm, according to the order. The firm violated industry rules when it “implemented an unreasonable and unfairly discriminatory $5,000 monthly account fee,” and also “engaged in unauthorized transactions,” according to the NAC order.
Alpine also “improperly used and converted customer assets” and also “unfairly priced hundreds of securities transactions acting as principal,” according to the NAC order.
Maranda Fritz, counsel for Alpine Securities, said on Thursday the NAC decision was favorable to the broker-dealer as it now sits before the SEC.
“We’ve fought hard to eliminate unlawful practices at Finra,” Fritz said. “We’re not surprised by the decision, because the NAC is an in-house, Finra tribunal. But this is part of the structure that we’re arguing in federal court is not constitutional. We’ve achieved some positive results in DC on that issue.”
“But the NAC decision is also disappointing because it’s a skewed version of evidence in the case,” she said. “No customer harm was intended or caused.”
A Finra spokesperson declined to comment.
As the Alpine Securities matter plays out either in front of the SEC or in federal court, Finra is now a regulator in Washington in an era when the administration of President Trump favors curbing the power of such organizations, according to industry executives and attorneys.
The US Court of Appeals for the District of Columbia in the fall issued the first successful blow to Finra’s enforcement power in Alpine Securities Corp.’s lawsuit against it.
According to Bloomberg News, a panel sided with Alpine Securities 2–1 on November 22, finding that FINRA’s expedited proceeding against the broker-dealer would allow “Finra to expel Alpine with no opportunity for SEC review,” which likely violates the private nondelegation doctrine.
“If any firm is looking to challenge an agency’s authority, it’s clearly an issue that’s ripe for federal court review at the moment,” said Louis Tambaro, an industry attorney. “We’re in the middle of reviewing regulations under the new administration, which is obsessed with deregulation.”
“If I were on the side of Alpine Securities, I’d put all my eggs in the federal court,” he added.
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