Supreme Court FINRA Ruling Allows Case Against Alpine Securities

On March 14th, 2025, the Supreme Court denied Alpine Securities’ request to halt Financial Industry Regulatory Authority (FINRA) expulsion proceedings against it. The Supreme Court’s denial of Alpine’s appeal suggests the judiciary recognizes FINRA’s enforcement authority as a self-regulatory entity and holds implications for the structure of non-governmental securities organizations.

FINRA is a private, self-regulating organization that develops and implements enforcement rules for broker-dealer firms. FINRA is overseen by the U.S. Securities and Exchange Commission (SEC) to enforce compliance with its own guidelines and federal securities laws. FINRA reported approximately 3,298 member firms as part of its 2023 statistics report and expelled 5 firms, according to the same. The scope of FINRA’s power is debated in the recent U.S. Court of Appeals for the District of Columbia and the Supreme Court rulings related to Alpine.

In March 2022, the FINRA Department of Enforcement filed a complaint against one of its members, Utah-based securities brokerage dealer, Alpine Securities, seeking to expel the member firm after they claimed Alpine Securities “converted and misused customer funds and securities, engaged in unauthorized trading, charged and paid customers unfair prices in securities transactions, charged customers unreasonable and discriminatory fees, and made an unauthorized capital withdrawal.”  Alpine attempted to appeal FINRA’s order, which FINRA automatically denied.

The FINRA Enforcement Department conducted expedited proceedings to expel Alpine. Sanctions imposed in this manner are immediately effective under FINRA Rules 9360 and 9559, which means that there is no opportunity for the SEC to review the decision until after the expulsion has already taken effect.

Consequently, Alpine turned to the U.S. Court of Appeals for the District of Columbia Circuit, requesting to halt the proceedings. Alpine challenged FINRA’s constitutionality in pursuing expulsion through an expedited proceeding, stating that expedited proceedings violate the private non-delegation doctrine meant to protect firms from FINRA unilaterally acting without prior SEC review. As it stands, the SEC delegates a significant amount of regulatory authority and enforcement action to FINRA since nearly all firms trading securities are required to join FINRA.

In a November 2022 decision, the U.S. Court of Appeals for the District of Columbia Circuit granted Alpine a preliminary injunction halting the expulsion until the SEC could review the decision, but declined to halt the proceedings altogether. The Court of Appeals determined that there was no irreparable harm to Alpine posed by the process itself, provided that expulsion did not occur without SEC review.

The proceedings continued. In February 2025, Alpine petitioned the U.S. Supreme Court to stay FINRA’s enforcement proceedings. The Chief Justice denied the request on March 14, 2025.

Implications of the Supreme Court’s Denial on Financial Firms Regulated by FINRA

In allowing the Alpine expulsion to first be reviewed by the SEC and stating FINRA cannot act unilaterally in expulsion, the U.S. Court of Appeals for the District of Columbia Circuit curbed FINRA’s procedural authority and reinforced SEC oversight over the private organization. The Court of Appeals’ ruling also reduces the likelihood of future expedited expulsions without SEC review.

It is often the case that securities firms will be members of multiple self-regulatory organizations (SROs) meaning that they must comply with the rules and regulation of each separately. Additionally, SROs can sometimes have conflicting rules and regulations, making it difficult for member firms to comply. An expulsion from FINRA would negatively impact a financial firm’s standing in other SROs. For example, Section 2 of the Application for Membership of NYSE explains that: “NYSE may deny (or may condition) trading privileges or may bar a natural person from becoming associated (or may condition an association) with a Member for the same reasons that the Securities and Exchange Commission may deny or revoke a broker-dealer registration under the Act. The Act provides for Statutory Disqualification if a person has: been expelled, barred or suspended from membership in or being associated with a member of a self-regulatory organization.” FINRA is the only self-regulatory registered securities association. Companies are not allowed to engage in trading securities if they are not part of a registered securities organization. Being expelled from FINRA would eliminate a firm from the securities industry and create significant operating challenges for expelled members.

The U.S. Court of Appeals for the District of Columbia Circuit’s ruling shows that FINRA must rely on the SEC to act prior to continuing with expulsion proceedings. However, the Supreme Court’s decision allowing FINRA to continue its proceedings upholds FINRA’s regulatory authority as it pertains to firm membership.

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