On July 10, the U.S. District Court for the Eastern District of Pennsylvania received a
complaint from a plaintiff suing FINRA for allegedly putting forth disciplinary hearings that took place “in an improper forum, before an arbitrator whose selection was made in blatant violation and disregard of [the individual’s] Seventh Amendment right to a trial before a jury in an Article III court.” The individual countersued after receiving a 2023
FINRA complaint for allegedly violating FINRA Rules 2010, 2111, and 4511, where FINRA initiated in-house proceedings. The plaintiff averred these allegations were assertions of common law fraud and should have been brought before an Article III court. The 2023 FINRA complaint alleged the plaintiff failed to file certain required documents, failed to ensure clients received benefits, and exercised improper discretion.
In its complaint, plaintiff noted the recent U.S. Supreme Court decision, SEC v. Jarkesy, that the SEC may no longer pursue legal claims through in-house enforcement proceedings (covered by InfoBytes here). The complaint further noted that to receive Seventh Amendment protection pursuant to the Jarkesy holding, a two-part test from Granfinanciera v. Nordberg case must be applied. According to the plaintiff, this case met both the first and second parts of the Granfinanciera test, arguing that the plaintiff should receive the Seventh Amendment right to a jury trial, and as a second cause of action also request a permanent injunction.
