Scottsdale Capital Advisors Corporation, a Securities and Exchange Commission registered broker-dealer, and certain of its senior officers, sought an injunction in a federal court in Maryland against the Financial Industry Regulatory Authority from proceeding against them in a disciplinary action in FINRA’s administrative forum alleging their violations of the Securities Act of 1933. The Act was the first US federal securities law and generally addresses the issuance of securities, including imposing registration and disclosure requirements. Plaintiffs contend that FINRA has no authority to prosecute claims under the Securities Act because its disciplinary authority is limited to matters that might constitute violations of the Exchange Act of 1934, a provision of US law that established the SEC, authorizes national securities associations such as FINRA, and generally governs the secondary trading of securities, financial markets and their participants, including broker-dealers. FINRA commenced a disciplinary action against plaintiffs in May 2015, charging violations of a provision of the Securities Act that generally prohibits the public distribution of an unregistered security without an exemption. The firm was also charged with not maintaining a supervisory system reasonably designed to detect the alleged violations. As a result of their alleged wrongful conduct, plaintiffs were charged with violating a FINRA rule that requires a member to observe “high standards of commercial honor and just and equitable principles of trade." (Click here to access FINRA Rule 2010.) Plaintiffs argued that the federal court should grant their requested injunction without them first proceeding with the FINRA disciplinary action and permitted appeals through a FINRA administrative process, the SEC and then potentially a federal court. This is because, said the plaintiffs, their challenge is a jurisdictional challenge and “not the type of claim Congress directed only to the administrative system.”