On September 4, the U.S. District Court for the Eastern District of Pennsylvania dismissed a plaintiff’s attempt to enjoin FINRA from proceeding with a disciplinary hearing against the plaintiff. The plaintiff’s disciplinary issues stemmed from a complaint filed against him in December 2023, alleging violations of FINRA rules during his employment at a financial group. As previously covered by InfoBytes, the plaintiff had asked the court for a temporary restraining order and a preliminary injunction to enjoin FINRA from proceeding with the hearing. The plaintiff argued that FINRA’s proceedings violated his Seventh Amendment right to a jury trial, referencing the U.S. Supreme Court’s decision in SEC v. Jarkesy, which held that a respondent to an enforcement action requires a jury trial for civil penalties. However, the district court held that the plaintiff’s claims must appeal to FINRA’s Office of Hearing Officers (OHO) or to an appellate court.
FINRA argued that under the standard set forth in Thunder Basin Coal Co. v. Reich, a 1994 U.S. Supreme Court decision, the court lacked subject matter jurisdiction. The court agreed, holding that: (i) denial of the district court’s jurisdiction would not foreclose meaningful judicial review; (ii) the claim is not wholly collateral to the Securities Exchange Act’s review; and (iii) the claim is within the SEC’s expertise. The plaintiff’s case will now proceed through the administrative channels like the OHO, with the potential for further appeals.
