The Financial Industry Regulatory Authority’s adjudicatory council this week ordered Alpine Securities Corp. expelled from FINRA membership, finding the Salt Lake City firm implemented an unreasonable monthly account fee, engaged in unauthorized transactions and improperly used customer assets.
The 100-page decision, which also orders Alpine to pay over $802,000 in restitution to clients plus hearing costs, comes less than two weeks after U.S. Supreme Court Justice John Roberts denied the brokerage’s emergency request to block FINRA enforcement pending Alpine’s constitutional challenge to the self-regulatory agency’s authority.
Alpine, which specializes in clearing microcap securities traded in the over-the-counter market, plans to file an appeal with the U.S. Securities and Exchange Commission; the expulsion won’t go into effect unless upheld by the SEC, a lawyer for the firm told ThinkAdvisor on Thursday.
On Tuesday, FINRA’s National Adjudicatory Council, in ordering the expulsion and restitution, partly upheld and modified the findings and sanctions issued earlier by an agency hearing panel, which Alpine had appealed. It also established a wind-down plan pending expulsion.
Specifically, the NAC found that Alpine violated FINRA rules by implementing “an unreasonable and unfairly discriminatory $5,000 monthly account fee,” engaged in unauthorized transactions, improperly used and converted customer assets, and unfairly priced hundreds of securities transactions, resulting in the expulsion decision.
The council also found that Alpine effected an unauthorized withdrawal of the firm’s capital.
“We view this as not surprising. This is, after all, an in-house FINRA tribunal,” Alpine’s outside counsel, Maranda Fritz, told ThinkAdvisor in a phone interview.
“We appreciate the fact that they acknowledged that (FINRA) enforcement failed to prove many of their claims against Alpine. We disagree with their view of what occurred at Alpine. At no time did Alpine ever intend to or cause harm to any customer and we’ll be filing an appeal,” she said.
The decision deliberately ignores critical facts that support Alpine’s position and offers “a skewed version of the facts,” said Fritz. “It’s infuriating to me they just ignored facts and law that supported our position that there was absolutely no customer harm that would have or could have occurred.”
Fritz suggested the authority’s animus toward Alpine, which challenges its authority under the Constitution, likely increased last year after Alpine got a “good decision” from the U.S. Circuit Court of Appeals in the District of Columbia. The district court blocked FINRA from expelling Alpine without an SEC review.
While Roberts denied Alpine’s emergency request to block FINRA enforcement, the firm’s legal challenge on constitutional grounds remains active in the U.S. District Court for the District of Columbia, said Fritz, who noted the firm also has filed a petition for certiorari with the Supreme Court.
Alpine argues that FINRA is performing government functions without having to adhere to the Constitution, she said.
Separately, in 2019, the U.S. District Court for Southern New York imposed a $12 million civil penalty on Alpine in a case the SEC filed alleging Bank Secrecy Act violations.
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