Case Explained: 26a0174p.06

Court: United States Court of Appeals for the Sixth Circuit Filed: 2026-06-16 The Sixth Circuit denied Eric Smith’s petition for review of a Securities and Exchange Commission (SEC) order upholding sanctions imposed by the Financial Industry Regulatory Authority (FINRA). The court held that FINRA possessed statutory jurisdiction over Smith under 15 U.S.C. § 78o–3(b)(7) because, as the chairman, CEO, and majority owner of a company that wholly owned a FINRA member firm, Smith qualified as a “person associated with a member” under 15 U.S.C. § 78c(a)(21), regardless of his refusal to register directly with FINRA. Regarding Smith’s constitutional arguments challenging the proceeding under Article III and the Seventh Amendment, the court affirmed that these claims were barred by the statutory exhaustion requirement in 15 U.S.C. § 78y(c)(1). The court ruled that Smith failed to raise these issues before the SEC and provided no “reasonable ground” for this failure. Specifically, the court rejected Smith’s arguments that the SEC lacked competence to adjudicate the claims, that the Supreme Court’s decision in *SEC v. Jarkesy* constituted an intervening change of law excusing forfeiture (finding *Jarkesy* merely applied existing precedent), and that raising the issue would have been futile (concluding the SEC had the power to vacate sanctions and refer the matter to federal court). The practical consequence is that the SEC’s order affirming FINRA’s sanctions remains in effect. Smith must pay $130,000 in restitution and is barred from associating with any FINRA member. While the opinion included extensive dicta suggesting Smith likely would have been entitled to a jury trial in federal court under *Jarkesy* had he exhausted his claims, the court did not reach the merits of that constitutional question due to the procedural bar. Do It For The Case Law is a news reporting service. Nothing in this episode constitutes legal advice.