December 1st, 2023
securities
FINRA GAINS SUPPORT AGAINST CLAIM IT IS UNCONSTITUTIONAL

The North American Securities Administrators Association (“NASAA”) and the Public Investors Advocate Bar Association (“PIABA”) have announced their support for FINRA as it challenges Alpine Securities Corporation’s (“Alpine”) arguments that it is unconstitutional. NASAA, the membership organization for state regulators, filed an amicus brief with the District of Columbia Court of Appeals citing its support for the organization. NASAA counsel Zachary Knepper wrote, “FINRA provides essential services that state and federal regulators, thousands of firms, hundreds of thousands of registered persons, and millions of American investors rely upon.” The amicus brief noted FINRA sets and enforces standards for approximately 3,400 brokerage firms and 624,000 registered representatives, in addition to maintaining critical databases and performing market surveillance. NASAA argued FINRA plays a critical regulatory role that cannot be overlooked.

Counsel for PIABA also submitted an amicus brief on behalf of FINRA to directly challenge the assertions the regulatory organization is unconstitutional. In its brief, PIABA argued, “Congress’s delegation of such powers to FINRA does not violate the Constitution’s nondelegation doctrine because FINRA’s authority is subordinate to the SEC, which exercises extensive authority and surveillance over all aspects of FINRA’s relevant operations and activities.” PIABA’s submission to the Court went on to call Alpine’s attempts to have FINRA declared unconstitutional as an attempt to avoid accepting responsibility for its conduct wherein it harmed investors.

All these organizations cautioned the Court regarding the impacts of declaring FINRA unconstitutional. PIABA noted if FINRA were to be declared unconstitutional it would “create market chaos and eviscerate meaningful protections for the investing public.”  NASAA advised if the Court were to find in favor of Alpine and “find that FINRA’s rule writing and enforcement mechanisms were unconstitutional, the Court would disrupt the essential functioning of securities regulation and the Nation’s securities markets, harming the economy.”

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