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Attacks On Securities Regulators To Be Decided In 2024


Securities law in the United States is an ever-evolving entity, given its youth, and with every legal decision, securities investors and regulators are required to adapt. In 2024, several significant cases are poised to potentially affect securities regulators on an integral level, forcing major changes for the entire industry. Whether you are an investor or part of a regulatory agency, it is generally a good idea to keep abreast of these developments, and to enlist a knowledgeable attorney to help guide you through any new legal processes.

FINRA’s Structure May Be Unconstitutional

The Financial Industry Regulatory Authority (FINRA) is classified as a private corporation, formed via the merger of the National Association of Securities Dealers (NASD) and of several departments of the New York Stock Exchange (NYSE) in 2007. Its stated mission is to ‘protect investors’ by promoting oversight, and serves as an independent regulator for securities firms in the United States. However, its attempt to discipline the Utah-based broker Alpine Securities in 2022 has resulted in the broker filing a lawsuit challenging its authority.

Alpine Securities alleges that FINRA has no right to exercise oversight functions because it is not a government agency; it argues that any agency with such powers would have to be part of the Executive Branch. In reality, such a decision would materially affect any ‘self-regulating’ agency, of which many exist in varied industries like healthcare, energy, and transportation. The Washington D.C. Circuit Court of Appeals will almost certainly rule on the case in 2024, but the outcome remains to be seen.

SEC’s Authority To Police Cryptocurrency Under Fire

The Securities & Exchange Commission (SEC) is tasked with enforcing securities law in the United States. In 2023, it brought cases against Binance and Coinbase, two large cryptocurrency exchanges that cumulatively hold about 12 percent of the crypto economy worldwide, alleging numerous violations of U.S. law. The cases against these exchanges will be some of the first to test the SEC’s enforcement powers in court, and both will likely be highly technical proceedings.

In addition to navigating the cases against Binance and Coinbase, the SEC’s right to conduct in-house tribunals is being directly challenged in another lawsuit. In the suit, a hedge fund manager was banned from the securities industry after an in-house tribunal determined he had committed fraud. The 5th Circuit Court of Appeals found, however, that the SEC’s proceedings deprived the manager of his Seventh Amendment right to a jury trial. The case will likely come before the Supreme Court, potentially handicapping federal agencies from properly enforcing their mandate if the lower court’s ruling is upheld.

Contact A Seminole, FL Securities Law Attorney

The potential to radically alter how the securities industry is regulated is clear in these filings, but as of this writing, none of these cases have yet been decided. If you have questions or concerns about the potential implications, a Florida securities law attorney from the Hunt Law Group may be able to assist you in managing them. Call our office today at (727) 471-0444 to schedule a consultation.

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