The U.S. Court of Appeals for the Third Circuit affirmed a lower court's dismissal of a financial industry professional's challenge to the Financial Industry Regulatory Authority's disciplinary process, ruling that FINRA's administrative proceedings do not violate constitutional jury trial rights.
In a non-precedential opinion filed Jan. 8, the appeals court rejected D. Allen Blankenship's attempt to halt FINRA disciplinary charges against him. Blankenship had sought injunctive relief in federal district court, arguing that the Seventh Amendment to the Constitution entitled him to a jury trial in federal court rather than proceeding through FINRA's administrative system.
The case, *D. Allen Blankenship v. Financial Industry Regulatory Authority* (3d Cir. 2026), arose when Blankenship faced disciplinary charges from FINRA, the private, not-for-profit Delaware corporation that serves as the sole registered national securities association under Securities and Exchange Commission oversight. Rather than proceeding through FINRA's established disciplinary process, Blankenship filed suit in the U.S. District Court for the Eastern District of Pennsylvania seeking to block the proceedings.
Blankenship's central argument centered on his constitutional right to a jury trial. He contended that the Seventh Amendment required that claims against him be adjudicated in federal court before a jury rather than through FINRA's administrative process. This constitutional challenge reflects broader tensions in financial industry regulation between self-regulatory organization authority and individual practitioners' due process rights.
The district court, presided over by Judge John F. Murphy, rejected Blankenship's constitutional argument and dismissed his case for lack of subject matter jurisdiction. The dismissal indicated the federal court found it lacked authority to intervene in FINRA's regulatory proceedings at that stage.
On appeal, the Third Circuit panel consisting of Chief Judge Michael Chagares, Circuit Judge Cheryl Ann Krause Porter, and Circuit Judge Jane Richards Roth affirmed the district court's dismissal, though on different legal grounds than the lower court relied upon. The appeals court's opinion, written by Chief Judge Chagares, was designated as non-precedential, meaning it does not establish binding legal precedent for future cases.
FINRA operates as a self-regulatory organization with authority to discipline registered securities industry members for violations of securities laws and regulations. The organization's disciplinary process includes formal hearings before hearing panels, but these proceedings are administrative in nature rather than traditional court trials with juries.
The regulatory framework governing securities professionals has long relied on this hybrid public-private enforcement model. FINRA, while a private organization, operates under SEC oversight and derives its authority from federal securities laws. This structure allows for specialized expertise in securities regulation while maintaining federal oversight.
Blankenship's Seventh Amendment challenge touched on fundamental questions about when the constitutional right to jury trial applies in regulatory proceedings. The Seventh Amendment guarantees jury trials in federal civil cases, but courts have recognized exceptions for administrative proceedings, particularly those involving specialized regulatory matters.
The case highlights ongoing debates about the balance between efficient regulatory enforcement and individual due process rights in securities industry oversight. Financial professionals subject to FINRA discipline have historically had limited options to challenge proceedings in federal court before the administrative process concludes.
Similar constitutional challenges to securities industry self-regulation have emerged in other circuits, reflecting broader questions about the role of self-regulatory organizations in federal enforcement schemes. The Supreme Court has generally upheld the constitutionality of securities industry self-regulation, but specific procedural challenges continue to arise.
Blankenship's case was submitted to the Third Circuit under Local Appellate Rule 34.1(a), which governs cases deemed suitable for resolution without oral argument. The expedited consideration reflects the court's view that the legal issues were sufficiently clear to resolve based on written submissions alone.
The Third Circuit's affirmance means Blankenship's disciplinary proceedings will continue through FINRA's administrative process. He retains the right to challenge any final FINRA disciplinary action through the established appellate process, which includes potential SEC review and ultimately federal court review of final agency action.
The ruling reinforces FINRA's authority to conduct disciplinary proceedings against registered securities professionals without federal court intervention at the preliminary stage. This preserves the efficiency of the securities industry's self-regulatory framework while maintaining ultimate federal oversight through the established review process.
For securities industry professionals facing FINRA discipline, the decision confirms that constitutional challenges to the administrative process face significant hurdles. The established regulatory framework continues to channel most disputes through FINRA's specialized proceedings rather than federal court litigation.