John Marshall Global Markets Law Journal


This Article compares the U.S. Supreme Court’s holding in Free Enterprise Fund v. PCAOB to the factors used in Lebron v. National Railroad Passenger Corp. when determining whether a corporation is part of the government (and consequently subject to government control and the President’s removal powers). In Free Enterprise, the U.S. Supreme Court considered factors to determine whether or not an agency is a self-regulatory organization (an independent third party agency that is not subject to government control). Under the Free Enterprise test, the Court held that PCAOB was not an SRO (unlike the Financial Industry Regulatory Authority, Inc.) because PCAOB is “part of the government.” Applying the Free Enterprise analysis and the Lebron test to FINRA, FINRA is considered to be an SRO and will remain safely nested like the tiniest matryoshka doll, away from direct governmental oversight. This Article discusses in-depth the Free Enterprise analysis, the Lebron test, and how FINRA does not pass the scrutiny of either test to be considered “part of the government.” Therefore, FINRA will remain unchecked by the government, leaving FINRA free from scrutiny and without an obligation to be accountable to the public.