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FINRA expels Utah broker, orders $2.3 million restitution

The Financial Industry Regulatory Authority expelled Salt Lake City-based broker/dealer Alpine Securities, which has a long history of regulatory issues from the industry, and charged the firm with over $2.3 million for clients claiming misappropriation of funds. Ordered to pay more. , conducted unauthorized trade and charged unreasonable and unreasonable fees from customers.

After 19 days hearing FINRA Extended Hearing Panel also released b/d a cease-and-desist order, prohibiting it from “converting or misusing client funds or securities”.

FINRA first made charges against Alpine in August 2019, accusing the firm of misappropriating clients’ funds amid growing financial difficulties. Several years ago, Alpine was one of the largest clearing firms in the country, according to the regulator, but argued that increased clearing-related expenses, as well as compliance and legal costs, resulted in a reduction in its profits during 2018.

In response, Alpine argued that it told customers it would no longer hold retail accounts and would impose new fees, including a $5,000 monthly account fee, on customers who did not close their accounts. According to FINRA, their investigation into the matter started after some customers complained about this monthly fee.

Alpine Securities argued that the changes were necessary because more regulatory scrutiny on microcap securities had forced their hand and required higher fees, but FINRA argued that the allegations were “excessive and discriminatory.”

According to the panel’s findings, Alpine gave customers little notice before levying additional charges, and due to the firm’s back-office system, staff difficulties and a poor telephone system, customers were unable to reach Alpine to question the changes. Difficulty ensued.

As of press time, Alpine Securities did not return a request for comment.

In addition to finding exorbitant fees, FINRA argued that Alpine misappropriated client funds by forfeiting some of them to cover the cost of the new fees, with the panel finding that no clients could forfeit securities or cash for the cost of the monthly fee. not authorized to use. Angel.

In addition, the hearing panel found that some clients paid some or all of the $5,000 fee because they were forced to do so in order to take over their other holdings, but none of the clients paid the unreasonable fee to cover the fee. Not authorized to remove funds and securities,” the FINRA statement read. “In most instances, clients were not even aware of the $5,000 monthly account fee the firm was taking to cover its cash and securities.”

After FINRA first filed a complaint against Alpine in 2019, the broker/dealer requested a disciplinary hearing which was held in February. 18, 2020, where he called several witnesses with plans to reconvene in April. But the spread of COVID-19 in the United States the following month put an end to those plans.

FINRA intends to continue the process through a Zoom hearing, but Alpine and owner John Hari filed suit against the verdict., claiming that the setup has violated the due process rights of the firm. aim A Utah federal judge was not persuadedDismissing the case and claiming that the Court lacks jurisdiction to deliver the decision.

This isn’t the first time Alpine Securities, Hurry, and Scottsdale Capital Advisors, another brokerage firm managed by Hurry, have run-in to regulators. In December 2020, the Second Circuit Court of Appeals in New York ruled against Alpine in an attempt to reverse a $12 million civil fine from the SEC imposed after the company allegedly failed to report suspicious transactions, according to Reuters, Alpine petitioned the Supreme Court to take their appeal, but the Court refused to listen and upheld the decision of the Second Circuit.

But Hurry had some success in his struggle with the regulators. In 2017, FINRA fined Scottsdale Capital Advisors $1.5 million for an unregistered sale of microcap securities, as well as the regulator’s early restraint from the industry. but hasten to appeal the decision, and SEC finally reverses FINRA sanctions and his ban in September 2021. The SEC argued that FINRA had “applied incorrect legal standards, failed to adequately explain the basis for its findings, and confused the applicable regulations,” according to for decision analysis by the law firm Shearman & Sterling.

If the decision of the hearing panel in the expulsion of Alpine Securities is not appealed, according to FINRA’s statement on the decision, the order will become final within 45 days.

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