The Financial Industry Regulatory Authority’s National Adjudicatory Council announced that it has affirmed in part and modified in part a Hearing Panel decision against broker-dealer Alpine Securities Corporation, expelling the company and ordering it to pay more than $800,000 in restitution.
The findings were part of a FINRA disciplinary proceeding that originally stemmed from a 2018 FINRA examination of Alpine’s securities certificate review process. During the review, FINRA discovered that Alpine intended to charge customers a $5,000 monthly account fee. In 2019, FINRA filed a disciplinary complaint, and in March 2022, the Hearing Panel found that Alpine charged unreasonable and unfairly discriminatory fees, made unauthorized securities transactions, misused and converted customer assets and priced securities trades unfairly. Alpine appealed the decision.
The Hearing Panel had originally stated that, from about October 2018 to July 2019, Alpine intentionally converted customer funds and securities, without authorization, to pay exorbitant fees imposed by the firm, including the $5,000 monthly account fee. The Hearing Panel also asserted that Alpine treated customer securities as abandoned and seized them by moving them to firm accounts. These actions also constituted a misuse of customer assets. The Hearing Panel also stated that Alpine charged an unreasonable illiquidity and volatility fee, along with a $1,500 fee to withdraw securities certificates from the depository trust company, or DTC.
Alpine responded that its fees were not unreasonable or indiscriminately imposed but rather reflected the costs that the company bore to clear microcap securities for its customers. Further, Alpine said the fees were disclosed in advance. The firm also stated that if it took any customer assets to satisfy fees due, those actions were consistent with customer agreements. In regard to abandoned securities, Alpine claimed it took the proper steps to notify customers that it intended to transfer such securities. Notably, and as previously reported by AltsWire, Alpine also argued that the process by which FINRA disciplined the firm was unconstitutional and that “FINRA is part of the ‘Government itself’ for constitutional purposes.”
After an independent review of the record, FINRA affirmed in part and modified in part the Hearing Panel’s findings.
FINRA affirmed the Hearing Panel’s finding that the $5,000 monthly account fee that Alpine charged customers was unreasonable and unfairly discriminatory, in violation of various FINRA rules. FINRA also stated that the fee was not related to any service that Alpine provided to its customers and was not reasonably related to any actual costs that Alpine incurred to supply a service to its customers. FINRA also agreed with the Hearing Panel that Alpine made unauthorized transfers of securities and misused and converted customer assets when it improperly used customer assets to pay for the $5,000 monthly fee.
FINRA also found that Alpine’s “worthless” securities transactions were unauthorized and resulted in the misuse and conversion of customer securities. It also determined that Alpine’s treatment of accounts as abandoned was unauthorized and led to the improper use and conversion of customer assets.
The regulatory body, however, did not agree with the Hearing Panel’s findings that the illiquidity and volatility fee and the $1,500 fee to withdraw securities certificates from DTC were unreasonable. It also dismissed the unfair pricing claims relating to the “worthless” securities transactions, finding them duplicative of other violations.
It also stated that Alpine’s constitutional claims were vague and lacked merit.
FINRA determined to impose a unitary sanction of expulsion from FINRA membership for Alpine’s “grave misconduct” and FINRA’s belief that the firm represented an “ongoing threat to the investing public.” FINRA reasoned that Alpine intentionally engaged in a prolonged pattern of serious misconduct that the securities industry recognizes as among the worst.
The Hearing Panel had originally ordered Alpine to pay restitution totaling more than $2.3 million. FINRA modified the amount to $802,678.77.
While FINRA’s National Adjudicatory Council has upheld most of the findings against Alpine, including its expulsion from the industry, the legal battle appears to be far from over.
Alpine Securities Corporation is actively engaged in federal litigation challenging FINRA following its expulsion. Alpine contends that FINRA’s enforcement mechanisms violate constitutional principles, specifically citing the private nondelegation doctrine and the Appointments Clause.
In November 2024, the U.S. Court of Appeals for the District of Columbia Circuit issued a preliminary injunction preventing FINRA from expelling Alpine without prior review by the U.S. Securities and Exchange Commission. The court expressed concerns that FINRA’s expedited expulsion process, lacking immediate governmental oversight, could infringe upon the private nondelegation doctrine.
Subsequently, in March 2025, Chief Justice John Roberts of the U.S. Supreme Court denied Alpine’s request to halt FINRA’s enforcement proceedings during the ongoing appeal. This decision permits FINRA to continue its disciplinary actions against Alpine while the broader constitutional issues remain under judicial consideration.
Alpine’s legal challenges are part of a broader discourse on the constitutionality of self-regulatory organizations like FINRA. These cases question whether such entities, which exercise significant regulatory authority, operate within the bounds set by the U.S. Constitution.
As of March 2025, Alpine’s appeals are ongoing, with potential implications for the regulatory framework governing the securities industry. The outcomes of these cases could redefine the balance between self-regulation and governmental oversight in financial markets.
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