., 431 F3d 803; FTC v Bunte Brothers, Inc., 312 US 349; Merchants Ladies Garment Assn., Inc. v Coat House of Wm. M. Schwartz, Inc., 152 Misc 130; Varley v Tarrytown Assoc., Inc., 477 F2d 208; American Men's Boys' Clothing Mfrs.' Assn., Inc. v Proser, 190 App Div 164; Sloan v New York Stock Exch., Inc., 489 F2d 1.) Terri L. Reicher, Associate General Counsel, Financial Industry Regulatory Authority, Inc., Washington, D.C. and New York City, for respondent. I.
The Fieros contend that even if FINRA has the power to impose fines, it does not have power to collect them through litigation. The Fieros rely on Merchants' Ladies Garment Ass'n, Inc. v. Coat House of William M. Schwartz, Inc., 273 N.Y.S. 317 (N.Y. Mun. Ct. 1934), where the state trial court held: The right or power of a private corporation to impose a fine is one thing, and the right to sue thereon or to employ judicial process for its collection is quite another.
The NASD's attempt to collect its fines is not wholly novel, as New York state courts have long recognized the right of a private membership organization to impose fines on its members, when authorized to do so by statute, charter or by-laws (see, Sigma Phi Soc. (Inc.) (Alpha of New York) v. Rensselaer Fraternity Managers Ass'n, Inc., 114 A.D.2d 711 [3rd Dept. 1985], association was authorized by Not-For-Profit Corp. Law § 507(a) to "impose reasonable fines or other penalties upon its members for violations of its rules and regulations"; Merchants' Ladies Garment Asso. v. Coat House of William M. Schwartz, 152 Misc. 130 , association may impose fines "when expressly authorized by statute, by the charter or by the by-laws"; see also Colodney v. New York Coffee and Sugar Exchange, 4 A.D.2d 137 [1st Dept. 1957], aff'd, 4 N.Y.2d 698, dismissing members' action seeking rescission of fines levied against them by self-regulatory organization). Of course, the NASD is not "just a private club," but a self-regulatory organization, federally-mandated under the 1975 amendments to the Exchange Act to discipline its members and enforce the federal securities laws as well as its own SEC-approved rules (see Austin Mun. Sec., Inc. v. NASD, 757 F.2d 676, 690 [5th Cir. 1985], "[T]he procedural safeguards imposed by the Maloney Act and the SEC and NASD rules on the NASD disciplinary process are sufficient to check abuses").
"Fines can be imposed only when expressly authorized by statute, by the charter or by the by-laws." ( Merchants Ladies Garment Assn. v. Coat House of William M. Schwartz, 152 Misc. 130; see, also, Colodney v. New York Coffee Sugar Exch., 4 A.D.2d 137, affd. 4 N.Y.2d 698.) Section 507 Not-For-Profit Corp. of the Not-for-Profit Corporation Law on September 1, 1970 also provides for penalties.
I do not reach the same conclusion concerning the late charge of $2. In the first instance, a corporation cannot impose an assessment or fine for a violation of its by-laws ( Monroe Dairy Assn. v. Webb, 40 App. Div. 49; Merchants Ladies Garment Assn. v. Schwartz, 152 Misc. 130), unless it is expressly authorized by statute ( Johnstown Cemetery Assn. v. Parker, 45 App. Div. 55). A co-operative corporation may by direct statutory sanction fix a liability for a violation of a by-law (Cooperative Corporations Law, § 14, subd. [i]). But such a by-law must be reasonable ( Monroe Dairy Assn. v. Webb, supra; Thompson v. Wyandanch Club, 70 Misc. 299, supra).