24-3907
6th Cir.
Mar 27, 2026
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Background

  • Smith founded CSSC, controlled its FINRA-registered broker-dealer subsidiary CSSC-BD, and managed debt offerings and investor solicitations. 1
  • FINRA charged Smith with securities-law and rule violations after a routine examination and complaints uncovered misleading offering materials and investor sales. 2
  • FINRA found Smith liable, ordered $130,000 restitution, and barred him from associating with any FINRA member; the SEC affirmed. 3
  • Smith petitioned for review, arguing FINRA lacked jurisdiction over him and that SEC proceedings violated Article III and the Seventh Amendment. 4
  • Smith did not contest the SEC’s factual findings or the underlying violations, only FINRA jurisdiction and constitutional objections. 5
  • The court reviewed legal issues de novo and factual findings for substantial evidence. 6

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Did FINRA have jurisdiction over Smith? 7 Smith was never a FINRA member, so FINRA could not discipline him. Smith controlled a FINRA member through CSSC-BD, making him an associated person. Yes; Smith was associated with a FINRA member and subject to discipline. 8
Could Smith raise his Seventh Amendment claim despite not presenting it to the SEC? 9 Jarkesy, futility, and SEC incompetence excused exhaustion. Smith had to exhaust before the SEC and had no reasonable ground for failing to do so. No; the claim was unexhausted and statutorily barred. 10
Would Smith likely have had a meritorious jury-trial claim under Jarkesy? 11 SEC/FINRA imposed legal fraud sanctions requiring a jury trial in Article III court. The securities self-regulatory system and public-rights tradition allowed administrative adjudication. The court said Smith had a strong merits argument, but did not reach it. 12

Key Cases Cited

  • Mohlman v. FINRA, 977 F.3d 556 (6th Cir. 2020) (describes FINRA as a private Delaware member organization 13)
  • Fiero v. FINRA, 660 F.3d 569 (2d Cir. 2011) (FINRA can impose sanctions but cannot enforce them in federal court 14)
  • SEC v. Mohn, 465 F.3d 647 (6th Cir. 2006) (SEC may enforce FINRA discipline in federal court 15)
  • Jones Bros., Inc. v. Sec'y of Labor, 68 F.4th 289 (6th Cir. 2023) (defines substantial evidence review 16)
  • Louisville Gas & Elec. Co. v. FERC, 988 F.3d 841 (6th Cir. 2021) (legal questions are reviewed de novo 17)
  • Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (U.S. 1940) (private entity may act as an SEC adjunct 18)
  • Oklahoma v. United States, 163 F.4th 294 (6th Cir. 2025) (private enforcement can cut against the usual regulatory grain 19)
  • Axon Enterprises, Inc. v. FTC, 143 S. Ct. 890 (U.S. 2023) (addressed pre-enforcement district-court challenges to agency structure 20)
  • Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (U.S. 2010) (addressed pre-enforcement structural constitutional challenges 21)
  • Calcutt v. FDIC, 37 F.4th 293 (6th Cir. 2022) (distinguished because no statutory exhaustion requirement applied there 22)
  • Carr v. Saul, 141 S. Ct. 1352 (U.S. 2021) (recognizes futility as a potential exhaustion excuse 23)
  • Jarkesy v. SEC, 603 U.S. 109 (U.S. 2024) (securities-fraud penalties can trigger Article III and Seventh Amendment rights 24)
  • Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (U.S. 2002) (distinguishes legal from equitable restitution 25)
  • Tull v. United States, 481 U.S. 412 (U.S. 1987) (sets the Seventh Amendment historical-and-remedy framework 26)
  • Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (U.S. 1989) (common-law fraud actions are private rights for jury-trial purposes 27)
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