FINRA Wins Key Dismissal in Dayton Federal Court Securities Broker Litigation

An analytics trend chartOn February 24, 2020, the United States District Court for the Southern District of Ohio granted the motion to dismiss filed by Jeff Cox, Steve Weigand and Melinda Burton on behalf of the Financial Industry Regulatory Authority, Inc. ("FINRA") and two senior members of its Department of Enforcement in an action by a former securities broker.  Mohlman v. FINRA, et al., Case No. 3:19-cv-154 (S.D Ohio).  Originally filed in state court in Montgomery County, Ohio, the case was removed by FINRA to federal court in Dayton.  The complaint alleged fraud and constitutional violations resulting from a final disciplinary settlement with FINRA that included a permanent bar of the broker from the securities industry.  The District Court held that the broker failed to exhaust administrative remedies through the Securities Exchange Commission as prescribed under the Securities Exchange Act of 1934 and thus lacked subject matter jurisdiction to seek damages or equitable relief in state or federal district courts.  The District Court further held that FINRA and its employees are immune from such suits for conduct falling within the scope of the delegated authority provided by the Exchange Act.  Finally, the Court held that the broker's fraud/state constitutional claim does not apply because FINRA is a private entity and Article I, Section 16 of the Ohio Constitution does not create a cause of action against private actors.

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