Federal Appeals Court Rules against FINRA on Fine Collection

Multiple outlets are reporting that a Manhattan federal appeals court has ruled that FINRA is not able to pursue fines by taking their members or former members to court.

The case at the root of this ruling began more than a decade ago. The New York Times noted  that “The surprise decision [on appeal]… came after a 14-year fight waged by Fiero Brothers, a tiny penny-stock brokerage firm, and its owner, John J. Fiero.”

Fiero and the firm were permanently barred from FINRA in 2000 and further fined $1 million. Fiero and his firm refused to pay the fine and court proceedings began.

Courts initially ruled in FINRA’s favor, but this recent appeals court ruling supersedes the lower court rulings. One of the 3 judges for the appeal, Ralph Winters said, “The principal issue is whether the Financial Industry Regulatory Authority Inc. has the authority to bring court actions to collect disciplinary fines, We hold that it does not…”

FINRA’s attorneys say they will review the ruling and decide how to proceed. They may be able to appeal the reversal to the Supreme Court.

While FINRA contends that the ruling will not have an impact on their ability to enforce their rules, many outside observers see this as a serious threat to FINRA’s regulatory power. A securities law professor, John C. Coffee Jr., went so far as to tell the New York Times that, “The decision neuters Finra.”

The White Law Group will closely monitor how this ruling may affect other FINRA rules and regulations. If you have questions about FINRA or FINRA arbitration and would like to speak to a securities attorney, please call our Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.