Court Dismisses Alpine’s Constitutional Challenge to FINRA Authority

A federal judge in Washington, D.C., sided with FINRA on seven of eight counts, holding the self-regulator is a private entity operating under sufficient SEC oversight.

A federal judge has dismissed a years-long constitutional challenge to the Financial Industry Regulatory Authority brought by broker-dealer Alpine Securities Corp. and affiliated firm Scottsdale Capital Advisors, delivering a broad win for the self-regulator and preserving its enforcement structure largely intact.

U.S. District Judge Beryl A. Howell of the U.S. District Court for the District of Columbia on Thursday ruled in FINRA’s favor on seven of eight counts asserted by Alpine and Scottsdale, and concluded that her court lacked jurisdiction to rule on the eighth. Howell granted FINRA’s motion to dismiss and dismissed Alpine’s complaint in its entirety.

The ruling resolves the district court portion of a lawsuit Alpine filed in October 2022 challenging the constitutionality of FINRA’s existence and its authority to bar member firms from the securities industry. As previously reported by AltsWire, the case is one of several pending constitutional challenges to FINRA’s enforcement powers in federal courts.

Howell rejected Alpine’s appointments-clause argument, which asserted that FINRA is a government agency whose officers must be appointed by the president with Senate confirmation. She held that FINRA is a private entity. She also dismissed Alpine’s argument that Congress and the U.S. Securities and Exchange Commission unconstitutionally delegated governmental authority to FINRA, noting that FINRA “is subordinate to the SEC” at every turn and that many of its actions have no legal effect without SEC approval.

Howell additionally rejected Alpine’s argument that FINRA’s dual role as the entity both bringing and adjudicating disciplinary proceedings makes it a state actor that violated Alpine’s Fifth Amendment due process rights. She also dismissed claims based on the First and Seventh Amendments.

Background

FINRA’s disciplinary action against Alpine dates to 2019, when the regulator filed a complaint alleging the Salt Lake City-based broker-dealer charged unreasonable and discriminatory fees, made unauthorized securities transactions, and misused and converted customer assets. A FINRA hearing panel found in March 2022 that Alpine converted and misused customer funds, engaged in unauthorized trading, charged customers unfair prices, and made an unauthorized capital withdrawal. FINRA imposed a permanent bar, ordered the firm to pay more than $2.3 million in restitution, and issued a cease-and-desist order.

FINRA’s National Adjudicatory Council later affirmed the hearing panel’s findings in part and expelled Alpine from membership.

In April 2023, while Alpine’s appeal to FINRA’s National Adjudicatory Council was pending, FINRA initiated an expedited enforcement proceeding to expel the firm after determining it had violated the cease-and-desist order more than 35,000 times by charging more than $4 million in unreasonable fees and commissions.

The case then moved to the U.S. Court of Appeals for the D.C. Circuit, which held in November 2024 that FINRA could not expel Alpine through an expedited proceeding without prior SEC review of that decision. In response, FINRA amended its rules to require SEC review before an expedited expulsion takes effect. In June 2025, the Supreme Court denied Alpine’s petition for certiorari, leaving the D.C. Circuit’s narrower ruling in place and returning the constitutional questions to the district court for resolution.

What Comes Next

As of Friday, Alpine’s counsel, David Thompson of Washington, D.C.-based Cooper & Kirk, had not filed a notice of appeal.

FINRA said in a statement it was pleased with the ruling and considered it well-supported and correct.

Securities industry attorneys who reviewed the ruling but were not involved in the case said it was consistent with how federal courts have approached prior constitutional challenges to FINRA. The outcome, they noted, leaves the self-regulator’s enforcement framework intact while not foreclosing the possibility that future challenges on narrower grounds could gain traction.

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