Thursday, November 17, 2022
About a month ago, I covered a lawsuit challenging FINRA's constitutional status. A review of the docket since that time reveals motions for two Gibson Dunn lawyers to appear on behalf of FINRA, Amir C. Tayrani and Alex Gesch. FINRA's Answer in the matter is set to be filed on December 12th.
What conclusions can be drawn from FINRA's decision to bring the Gibson Dunn team out for the matter? At the very least, a review of Tayrani's resume shows that FINRA takes the challenge seriously. Tayrani's biography states that he has briefed 21 cases on the merits at the Supreme Court and lists some standout wins, including:
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011): Decision decertifying the largest employment-discrimination class action in history.
- Citizens United v. FEC, 558 U.S. 310 (2010): Landmark campaign-finance ruling recognizing the First Amendment right of corporations to make expenditures in support of political candidates.
Given the current composition of the Supreme Court, FINRA is likely making the right decision to invest heavily in its defense early on in this matter. When I wrote about the risk posed by these kinds of challenges in Supreme Risk, I highlighted the need for a robust response in the courts. I argued that all SROs should be monitoring any case bringing these challenges:
Awareness of existing constitutional challenges creates an opportunity to attempt to persuade courts to render favorable decisions. When SROs and federal administrative agencies recognize that a pending action may create adverse or favorable precedent, they may devote more resources to the matter. For SROs that are not parties to the action, this may mean that they should hire sophisticated outside counsel to prepare persuasive amicus briefs to inform and influence the court. For SROs that are parties to a case presenting a constitutional challenge, they may allocate additional personnel and resources to the matter to increase the likelihood of a favorable decision. Additionally, they may coordinate with other SROs with interests at stake in the matter to bring in additional support.
Given the critical role self-regulatory organizations play in our financial system, FINRA should probably alert the exchanges, and other stakeholders about the need to ensure that the courts render a fully-informed decision.
FINRA might also consider passing the hat around to other SROs as it defends this case. Gibson Dunn isn't cheap. The precedent established here or in another similar challenge will matter to those SROs.