SEC’s private enforcer prosecutes investment veteran in sham court

Frank Black embodies the quintessential American success story. From humble beginnings in a poor family, he rose to establish a thriving investment firm that created not only jobs but also economic prosperity.

Today, at 82, Frank remains as enthusiastic about his work as he was a half-century ago. Unfortunately, he’s caught in a rigged, in-house prosecution orchestrated by a private corporation wielding enough government power to destroy his company, livelihood, and rights.

Frank grew up in Rock Hill, SC. Financial struggles marked his early years; his dad died when he was just 12, leaving his mother to raise Frank and his six siblings. It was the 1950s, and money was scarce, but love, happiness, and integrity were abundant. Ideals of truth, justice, and the American way were paramount.

“I grew up with Hopalong Cassidy, Roy Rogers, and Gene Autry, when the good guys wore white hats and the bad ones wore black hats,” he recalls. “I know darn well what I wear. I wear a white hat.”

Frank graduated from high school in 1959 with no concept of college or the stock market.

“And of course we didn’t have a bank account or any money,” he says. “But I was halfway smart, lucky, and I loved to learn.”

The turning point came when he joined the U.S. Navy. A Thanksgiving invitation from a shipmate from Michigan led him to move there after his naval service. He got a job at an Oldsmobile factory to pay for college, where a visiting Merrill Lynch broker ignited his passion for finance.

Frank hired on at Merrill Lynch in 1971 and later worked for other national firms. In 1997, he founded Southeast Investments (SEI), a securities broker-dealer in Charlotte, NC.

Despite stringent regulatory oversight by the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA), Frank’s business flourished. He attributes this success to his hands-on approach to compliance.

“I saw every client who walked in the door. I saw every fax that came in. I personally opened the mail,” he explains.

Frank was equally persnickety about adhering to FINRA’s “branch office” inspection rules. He personally inspected the workplaces of all SEI employees and contractors, including those working remotely in other states.

“Yes, I drove. I hate planes, and I grew up in a family without a car. So, I love driving,” he says. “Whether it’s Michigan or New York, the drive has never been a problem for me.”

The road trips were a problem for FINRA, however. In 2012, the agency charged Frank and SEI with fraud, alleging insufficient receipts as proof of his travel and inspections.

Instead of a courthouse, FINRA hauled him to an in-house tribunal before its own employees who—predictably—rubber-stamped the charges, fined Frank and his firm $243,000, and slapped Frank with a lifetime industry ban—a corporate death penalty.

Frank never had a fair chance to defend himself.

“It’s not a courtroom. It’s a judge and two panelists who are agency employees and who automatically find you guilty,” he says.

The appeal was another sham process conducted by another set of FINRA employees, and then Frank’s last chance for justice would be appealing to the SEC itself.

The fines FINRA collects also remain in house to fund its operating budget, rather than being turned over to the U.S. Treasury, as with SEC fines.

“FINRA collects enormous fines and keeps it all to pay the people who levy the fines. Anybody who would call that fair doesn’t understand plain English,” exclaims Frank. “They’re intent on putting small broker dealers out of business and ruining lives. There is no excuse for FINRA to be able to do this to people.”

FINRA’s actions are indeed inexcusable and unconstitutional. Though FINRA enforces government regulations, it is a private, nonprofit corporation, lacking the authority required by the Constitution for entities that issue and enforce rules that have the force and effect of federal law.

Represented by Pacific Legal Foundation free of charge, Frank is now fighting back in federal court—a genuine court of law.

“Allowing quasi-government agencies to play judge and jury in pretend courts denies accused citizens the right to proceedings in an actual court in front of an impartial judge and jury. That’s not justice,” says PLF attorney Adi Dynar. “Left unchecked, unaccountable private organizations will do whatever they want to whomever they want with no consequences to themselves and no recourse for the prosecuted.”

It’s not just FINRA and the SEC. Many other agencies conduct in-house tribunals that violate due process and the rule of law. Frank and SEI are among a growing list of courageous citizens joining PLF’s fight to strip cases like theirs from rigged agency tribunals and return them to real, constitutional courts where due process will be respected.

Frank already scored a legal victory when the SEC—after sitting on his appeal for almost five years—overturned FINRA’s lifetime ban but affirmed the ruinous fine that FINRA gets to pocket and sent the case back for reconsideration. Though he’s once again at the starting point, Frank refuses to give up or give in.

“It is just not in my DNA. A lawyer once told me, ‘Frank, sometimes when the doggone steamroller is coming at you, it’s better to just lay down and let it run over you,’” he says. “I’m not going to let the steamroller run over me. Winning means I get back to the business that I love, and it says to FINRA, ‘No, you can’t treat people this way.’”