Alpine Securities Corp. v. Financial Industry Regulatory Authority

Alpine Securities Corp. is a brokerage firm based in Salt Lake City, Utah, that specializes in trading low-priced, “microcap” stocks. The company also provides clearing services for other broker-dealers, which means it helps other firms settle trades and manage paperwork. Alpine is owned by SCA Clearing, a holding company that was involved in the events leading up to this case.

In 2022, the Financial Industry Regulatory Authority, or FINRA, accused Alpine Securities of breaking a lot of rules. FINRA is the main group that makes sure broker-dealers follow the law and treat customers fairly. According to FINRA, Alpine charged customers really high and unfair fees, made unauthorized trades, and took customer money and stocks for its own benefit without permission. The allegations were serious: FINRA said Alpine took more than $54.5 million from customers by charging them these fees and by moving their assets into its own accounts. Some customers had their stocks treated as “worthless” or “abandoned” just because they were worth $1,500 or less, and Alpine took those stocks for itself, which is not allowed.

FINRA held a big hearing where they listened to 19 witnesses and looked at hundreds of pieces of evidence. At the end, the Hearing Panel found Alpine guilty of most of the charges and decided to kick Alpine out of FINRA. They also ordered Alpine to pay more than $2.3 million in restitution to customers and to stop breaking the rules forever. The restitution was for things like the $5,000 monthly account fee, an “illiquidity and volatility” fee, and a market making fee, all of which were considered unfair and illegal. The Hearing Panel also said Alpine had to put the restitution money into an escrow account within ten days.

Alpine didn’t agree with the decision and appealed it. But while the appeal was happening, FINRA said Alpine had broken a “cease-and-desist” order, which is a legal order to stop doing something. Because of that, FINRA started a fast-track process to kick Alpine out of FINRA right away, before the Securities and Exchange Commission (SEC), which is the government agency that oversees FINRA, could review the case.

Alpine sued FINRA in federal court, arguing that FINRA’s rules and the way it punishes firms are unconstitutional. Alpine said FINRA is a private group that is acting like a government agency, but its hearing officers aren’t appointed by the government, which is a problem under something called the Appointments Clause. Alpine also said FINRA was given too much power by Congress without enough government oversight, which is called the “private nondelegation doctrine”.

The case went up to the U.S. Court of Appeals for the D.C. Circuit. The court mostly agreed with Alpine, but only for one point: they said that FINRA couldn’t kick Alpine out of the securities industry until the SEC had a chance to review the decision. The court said it would be unfair and maybe unconstitutional for FINRA to ban a firm from the whole industry without the government checking its work first. But the court also said Alpine could still go through FINRA’s hearing process—it just couldn’t be kicked out until the SEC looked at the case.

The court didn’t agree with Alpine’s argument about the Appointments Clause, saying Alpine didn’t prove it would be hurt just by having to go through FINRA’s hearings. The court also said FINRA could keep doing most of its job, just not the part where it kicks firms out before the SEC reviews the decision.

Later, the Supreme Court decided not to get involved, so FINRA can keep disciplining firms, but it can’t kick them out until the SEC reviews the case. This is a big deal because it means private groups like FINRA can’t just end a company’s business without government oversight. It also means broker-dealers have a little more protection if they think FINRA is being unfair.

In summary, this case shows how important it is for the government to have a say in how private groups regulate industries. It also shows that even though FINRA has a lot of power, it can’t just do whatever it wants. It has to follow the rules and give companies a fair chance to appeal before the government. For Alpine, this meant it couldn’t be kicked out of the industry right away, but it still had to face the consequences if it really did break the rules.

Timeline:

2013–2019 (Investigation and Complaint): FINRA begins investigating Alpine Securities Corp. after customers complain about the firm’s new, much higher fees and other practices. In August 2019, FINRA formally charges Alpine by complaint.

2022: FINRA’s disciplinary panel finds Alpine guilty of multiple rule violations, including charging excessive and unfair fees ( a $5,000 monthly account fee, up from a $100 annual fee), misappropriating customer property, and making unauthorized transactions. The panel issues a cease-and-desist order, orders restitution to customers, and expels Alpine from FINRA membership.

2022–2023 (Internal Appeal): Alpine appeals the expulsion within FINRA’s internal process, which automatically stays (pauses) the expulsion but not the cease-and-desist order.

February 2023: Alpine files a lawsuit in federal court challenging FINRA’s constitutionality, arguing that FINRA’s authority violates the private nondelegation doctrine and the Appointments Clause.

April 2023: FINRA schedules an expedited proceeding to expel Alpine from membership, prompting Alpine to seek a preliminary injunction in federal court to stop the process.

May 26, 2023: The case is transferred to the U.S. District Court for the District of Columbia. Oral arguments are heard the night before the expedited enforcement action is set to begin.

2023: The district court denies Alpine’s request for a preliminary injunction.

November 22, 2024: The U.S. Court of Appeals for the D.C. Circuit issues a decision. The court partially reverses the district court, ruling that FINRA cannot expel Alpine before the Securities and Exchange Commission (SEC) reviews the decision. However, the court allows FINRA’s expedited proceeding to continue as long as expulsion does not take effect before the SEC review.

March 14, 2025: The U.S. Supreme Court denies Alpine’s emergency application for a stay, allowing FINRA’s expedited enforcement proceedings to continue, but expulsion is still barred until SEC review.

March 2025: FINRA’s National Adjudicatory Council affirms the original decision to expel Alpine but stays the expulsion pending SEC review.

Citations

(No date) USCOURTS. Available at: https://media.cadc.uscourts.gov/opinions/docs/2024/11/23-5129-2086156.pdf (Accessed: 06 June 2025).

Hlr (2024) Alpine Securities Corp. v. Financial Industry Regulatory Authority, Harvard Law Review. Available at: https://harvardlawreview.org/print/vol-137/alpine-securities-corp-v-financial-industry-regulatory-authority/ (Accessed: 07 June 2025).

DC Circuit Review: Reviewed - The D.C. Circuit clips one of FINRA’s wings (2024) Yale Journal on Regulation. Available at: https://www.yalejreg.com/nc/dc-circuit-review-reviewed-the-d-c-circuit-clips-one-of-finras-wings/ (Accessed: 07 June 2025).