naked short selling<\/a> and other violations of federal fraud statutes. It was in 1998 that NASD Regulation Inc. filed a complaint accusing Fiero and co-conspirators of engaging in the illegal short-selling of securities to purposely push down the price 10 NASDAQ securities. The financial scam eventually led to the collapse of both Hanover Sterling, which served as the securities’ underwriter and Adler, Coleman Clearing Corp. A NASD hearing panel found that Fiero committed extortion and violated short selling rules. The $1 million fine and expulsion were imposed in 2001. <\/p>\nFiero Brothers and its owner refused to pay. FINRA took them to court to obtain payment. The SRO first brought its case to New York state court, where the state’s highest court eventually threw out a ruling in FINRA’s favor. Fiero then brought the case to federal court. There, he sought a declaratory judgment that FINRA did not have the power to pursue the fine in court. FINRA then counter-sued. <\/p>\n
Now, however, the three-judge panel is saying that FINRA’s housekeeping rule from 1990, which gave it the right to go to court to go after monetary sanctions and the country’s foundational securities laws, does not give the SRO the right to collect disciplinary fines through the court system. The federal appeals court’s ruling overturns a lower court’s decision. <\/p>\n
Some are saying that the court’s ruling reduces FINRA’s power and vindicates complaints that have been made accusing the SRO of going beyond its statutory power and abusing the process of rule making. Even ex-FINRA enforcement head Susan Merrill believes that the ruling casts a shadow on FINRA’s housekeeping rules. The court said the 1990 rule needs to be more formally examined because rather than just being a matter of housekeeping, it impacts the rights of members that have been suspended or barred. <\/p>\n
Banned brokers are not allowed to reenter the industry unless the pay all fines. As a result, obtaining fines is not usually a problem for FINRA. Now, however, seeing as FINRA doesn’t have the right to enforce payment in court, an action that it has taken over the last two decades, it will be interesting to see how other barred brokers may choose to respond to fine demands.<\/p>\n
Meantime, FINRA has said that this latest ruing will not limit its ability to enforce securities laws and FINRA rules, protect investors, or discipline financial firms. <\/p>\n
Court: FINRA cannot use lawsuits to collect fines, Reuters, October 5, 2011
\nCourt Says Regulator Exceeded Its Power, New York Times, October 6, 2011
\nNASD Regulation Bars John Fiero, Expels Fiero Brothers, Inc., and Imposes $1 Million Fine For Illegal Short Sales, Market Manipulation and Extortion, NASD\/FINRA, January 8, 2011
\n
\nMore Blog Posts:<\/strong>
\nFive Broker-Dealers Fined by FINRA Over Allegedly Misrepresenting Commissions as Fees to Clients<\/a>, Stockbroker Fraud Blog, September 16, 2011
\nTexas Securities Fraud: FINRA Fines Bluechip Securities for Ex-Employee’s Alleged Churning of Public Customer Account<\/a>s, Stockbroker Fraud Blog, August 28, 2011
\nWedbush Ordered By FINRA Panel To Pay $3.5M to Trader Over Withheld Compensation, Institutional Investor Securities Blog, July 16, 2011 Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The United States Court of Appeals for the Second Circuit says that the Financial Industry Regulatory Authority does not have the authority to take its members to court in order to enforce disciplinary actions. The ruling comes after a years-long legal battle involving penny stock brokerage firm Fiero Brothers and owner John J. Fiero. Fiero […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3739],"tags":[],"class_list":["post-958","post","type-post","status-publish","format-standard","hentry","category-finra"],"yoast_head":"\n
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