Legal Challenge to FINRA's Constitutionality Dismissed by D.C. Court

Posted on November 3rd, 2023 at 1:15 PM
Legal Challenge to FINRA's Constitutionality Dismissed by D.C. Court

From the desk of Jim Eccleston at Eccleston Law 

An advisor who faced FINRA disciplinary action attempted to stop the proceedings in a D.C. federal court.

FINRA initially alleged that Eugene Kim, while associated with National Securities Corporation (NSC) between December 2017 and June 2019, had engaged in unethical conduct, acted in bad faith, and misused customer funds. Kim challenged FINRA's enforcement action in court by filing a demand for a jury trial in a D.C. federal court, focusing on the organization's constitutionality. He argued that while FINRA claims to be a private corporation with no constitutional responsibilities, it operates as a Congressionally-authorized entity with the statutory authority to enforce federal securities laws against a large number of individuals.

Kim referenced the Alpine Securities v. FINRA case, where a three-judge panel in the D.C. Appeals Circuit temporarily halted FINRA's industry ban on Alpine Securities. Still, the D.C. Circuit Court rejected this argument, stating that the Alpine order does not require courts to enjoin all challenged FINRA enforcement actions.

Ben Edwards, a professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, and a keen observer of legal challenges against FINRA, anticipates a growing number of cases where representatives seek to challenge FINRA's disciplinary actions by questioning the organization's legitimacy.

Edwards believes this argument will persist until the Supreme Court addresses it. Edwards told WealthManagement.com in an interview that despite FINRA's temporary success, the organization still faces a "reconstituted post-Trump era Supreme Court," which he sees as broadly unfriendly to administrative regulation.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

Return to Archive

TESTIMONIALS

Previous
Next

That is just fantastic! Thank you very much!

Julie N.

LATEST NEWS AND ARTICLES

October 21, 2025
Judge Denies Merrill Lynch's TRO in Advisor Transition

A federal judge has rejected Merrill Lynch’s request for a temporary restraining order (TRO) against a group of former financial advisors who left the firm to launch their own independent practice, OpenArc Corporate Advisory, under Dynasty Financial Partners’ platform with custody at Charles Schwab.

October 20, 2025
FINRA Accuses Former MML Broker of Cheating on SIE Exam

Regulators have accused a former MML Investors Services-affiliated broker of cheating on the Securities Industry Essentials (SIE) exam, according to a recent Financial Industry Regulatory Authority (FINRA) enforcement complaint.

October 17, 2025
FINRA Fines Oak Hills Securities for Private Placement Misconduct

The Financial Industry Regulatory Authority (FINRA) has censured and fined Oak Hills Securities Inc., an Oklahoma City brokerage, for multiple rule violations over five years.