Oct 24, 2023

Recent Federal Court of Appeals’ Ruling Calls Into Question the Authority of FINRA Hearing Officers

Securities Attorneys (Exchange Act) By Michael Starmer
Dark desk with judges gavel. Two people reaching over the desk to exchange Federal Court of Appeals Ruling

The U.S. Court of Appeals for the District of Columbia Circuit issued an order on July 5, 2023 in Alpine Securities Corp. v. FINRA that calls into doubt the authority of the Financial Industry Regulatory Authority (FINRA) to conduct enforcement actions. That order granted a motion by the appellant, Alpine Securities Corporation (Alpine), to stay FINRA’s enforcement proceedings against it during the pendency of Alpine’s appeal.

The Court of Appeals granted the stay pending the appeal, in part, because Alpine’s appeal raises “a serious argument that FINRA impermissibly exercises significant executive power.” In the appeal, Alpine has argued that, under the U.S. Constitution, only the President can exercise “executive Power.” FINRA’s hearing officers, according to Alpine, exercise this executive power, which should be reserved for the President and his direct subordinates.

FINRA, while being a Self-Regulatory Organization (SRO), is a private corporation. Its primary role is to regulate securities brokers and ensure compliance with the Securities and Exchange Act. In granting the July 5th Order, the Court of Appeals referenced the Lucia v. SEC decision, 138 S. Ct. 2044 (2018). In Lucia, the Supreme Court ruled that Administrative Law Judges (ALJs) within the SEC exercised “significant authority” and therefore had to be appointed according to the Appointments Clause. Given the similarities between FINRA’s hearing officers and the SEC’s ALJs, so Alpine’s argument goes, those hearing officers are impermissibly exercising executive power that is reserved to the President under the Constitution.

The ultimate outcome of this appeal could have significant implications for the securities industry and the roles of entities that operate between private and governmental functions.

Bevilacqua PLLC is here to help you understand the potential ramifications of the Alpine appeal and to navigate FINRA’s rules, regulations, and enforcement actions. Should you need assistance in any of those regards, please contact Michael (Charlie) Starmer at