Supreme Court Won’t Hear FINRA Immunity Case

January 18, 2012

The U.S. Supreme Court declined to hear an appeal of a ruling that the Financial Industry Regulatory Authority (FINRA) had immunity from a private lawsuit over the 2007 deal that created the Wall Street regulator.

The justices on Tuesday let stand a ruling by a U.S. appeals court in New York that dismissed a class-action lawsuit by a small California brokerage firm, Standard Investment Chartered, claiming brokers-dealers had been misled about the merger between the National Association of Securities Dealers and NYSE Regulation.

A federal judge and then the appeals court ruled NASD was entitled to absolute immunity from a private damages lawsuit in connection with the discharge of its regulatory responsibilities.

FINRA, a self-regulatory organization, enforces securities laws among brokers and generally enjoys legal immunity for activities related to government-delegated regulatory authority. It urged the Supreme Court to reject the appeal.

Brokers have complained they were misled and shortchanged by the $35,000 payout that NASD made to brokers as a benefit for approving the merger.

The Supreme Court denied the appeal without any comment. Justice Sonia Sotomayor took no part in considering the case, apparently because she had been involved with it previously as a judge on the appeals court in New York.

(Reporting By James Vicini; editing by John Wallace)

Topics Agencies Legislation

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