FINRA Slams Broker's Bid To Block Virtual Hearing

By Emilie Ruscoe
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Law360 (November 18, 2020, 8:59 PM EST) -- The Financial Industry Regulatory Authority on Tuesday cast as misguided a broker-dealer's attempt to put on hold a disciplinary hearing process it faces and had earlier called "unfair."

In a Nov. 17 brief, FINRA told U.S. District Judge David Barlow that plaintiff Alpine Securities Corp.'s motion for a preliminary injunction of a FINRA hearing should be denied, noting that first and foremost, injunctions aren't appropriate when the matter in question doesn't pose "imminent and certain harm."

Alpine filed suit against FINRA in Utah federal court on Nov. 10, alleging that it has "the right" to in-person hearings in a disciplinary proceeding FINRA instituted against Alpine in August 2019.

According to Alpine, the hearings kicked off in February 2020. At the time, Alpine claimed, FINRA's Department of Enforcement was able to present six witnesses and Alpine only got to present one witness before the hearings had to be brought to an abrupt halt. FINRA and Alpine allegedly agreed in March to resume the hearings in person in late April, "but the COVID-19 pandemic rendered that impossible," Alpine said.

Alpine said it was assured the hearings would resume in person, and a hearing date was scheduled for Nov. 30. But on Nov. 2, FINRA's chief hearing officer determined that the hearing would have to take place virtually, citing the "Zoom amendment" to FINRA's rules adopted at the end of August and effective Oct. 1.

"That order was a completely generic directive, devoid of any acknowledgement of the extensive discussions that have occurred on the issue with the Hearing Officer; the nature of the particular proceeding and reasons that a virtual proceeding is not workable or appropriate; the fact that DOE has already enjoyed the opportunity to present virtually its entire case in chief in person; or the severity of the penalty and the fundamental rights implicated by FINRA's effort to obtain expulsion of Alpine," Alpine said, characterizing the Zoom order as a violation of Alpine's rights. Alpine filed its request for a preliminary injunction the same day it filed the suit.

On Tuesday, FINRA pointed out in its opposition brief that the Nov. 30 hearing date was no longer happening and the parties to the hearing had been ordered to submit briefs on whether the hearing officer should reconsider moving the hearings to Zoom.

According to that revised hearing schedule, FINRA noted, "the date on which the disciplinary proceeding will resume will not even be selected until after January 5, 2021."

"For that reason alone Alpine's [preliminary injunction] Motion fails," FINRA added.

But there is "an even more fundamental flaw" in Alpine's request, FINRA said, which is that the Utah district court doesn't even have subject matter jurisdiction over the issue.

"The balance of equities and public interest both favor denial of Alpine's Motion and resolution of this dispute by the hearing panel consistent with the terms of the Postponement Order," FINRA said.

Representatives for the parties did not immediately respond to requests for comment.

FINRA is represented by Clint R. Hansen and Kevin N. Anderson of Fabian Vancott and Gregory A. Davis of Squire Patton Boggs LLP.

Alpine is represented by Brent R. Baker, Aaron D. Lebenta and Jonathan D. Bletzacker of Parsons Behle & Latimer, and Maranda E. Fritz of Maranda E. Fritz PC.

The case is Alpine Securities Corporation v. Financial Industry Regulatory Authority, case number 2:20-cv-00794, in the US District Court for the District of Utah.

--Additional reporting by Dean Seal. Editing by Emily Kokoll.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Alpine Securities Corporation v. Financial Industry Regulatory Authority


Case Number

2:20-cv-00794

Court

Utah

Nature of Suit

Securities/Commodities

Judge

David Barlow

Date Filed

November 10, 2020

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