Facing Possible Discipline, Scottsdale Capital Advisors Sues FINRA Over Enforcement Authority

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Almost one year after FINRA first filed a complaint against Scottsdale Capital Advisors alleging $1.7 million in illegal microcap stock sales and wires, Scottsdale Capital Advisors is attempting to block the regulator from continuing a disciplinary action and investigation into the purported illegal penny stock transactions by suing FINRA in federal court.

The suit contends that FINRA's Department of Enforcement does not have the jurisdictional right to police violations of the Securities Act of 1933, alleging that FINRA is only authorized to discipline member firms and brokers for violations of the Exchange Act of 1934, and requests a preliminary injunction against FINRA to stop the regulator from setting up a hearing in June.

In 2015, FINRA filed a complaint against Scottsdale Capital Advisors and brokers John J. Hurry, Timothy B. Diblasi and D. Michael Cruz for purportedly assisting a Cayman Islands broker-dealer in generating over $1.7 million in proceeds from illegal microcap stock liquidation transactions and wires that should have been (but weren't) registered with the SEC. The alleged liquidation concerned over 74 million shares of penny stocks Neuro-Hitech Inc. (HQ: Florida), Voip Pal.com (Nevada, HQ: Washington), and Orofino Gold Corp (Nevada, HQ: China).

In filing the lawsuit, Scottsdale claims that FINRA has overstepped its bounds and wrote, "FINRA's view [is] that the organization can confer upon itself jurisdiction to enforce any law it chooses...This disregard of the statutory limits on FINRA's jurisdiction renders the disciplinary proceeding ultra vires and necessitates [federal] court's intervention."

Meanwhile, a Law360 report on the Scottsdale-FINRA litigation noted that Scottsdale only challenges "FINRA's statutory authority to bring the case and not its factual findings or its interpretation of a securities law."

If you have invested with Scottsdale Capital Advisors, John Hurry, Timothy DiBlasi, D Michael Cruz, or with any firm, broker or financial adviser whose illegal transactions, sales, or liquidations of unregistered penny stocks have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.