FINRA In-House Courts Face Challenges, Jarkesy Ripple Effect (1)

When the US Supreme Court heard arguments in Securities and Exchange Commission v. Jarkesy last month, the justices’ questions suggested the court would likely declare the SEC’s in-house tribunal at least partially unconstitutional.

In the Jarkesy proceedings, the Fifth Circuit held that the SEC’s in-house adjudication of securities fraud claims violates the Seventh Amendment, creating further uncertainty for the Financial Industry Regulatory Authority. FINRA’s own in-house tribunal structure already faces a constitutional challenge in Alpine Securities Corp. v. FINRA.