FINRA Proposes Rule Change to Delay Immediate Sanctions Pending SEC Review
From the desk of Jim Eccleston at Eccleston Law
The Financial Industry Regulatory Authority (“FINRA”) has proposed a rule change that would allow broker-dealers and registered representatives to seek a stay of certain disciplinary sanctions before those penalties take effect. AdvisorHub reports that the Securities and Exchange Commission (“SEC”) still must approve the proposal.
Under current FINRA rules, many sanctions, including suspensions and industry bars, take immediate effect upon issuance. As reported by AdvisorHub, firms and individuals have little recourse before pursuing an appeal with the SEC. The proposed amendment would authorize FINRA staff and adjudicators to delay the effectiveness of certain sanctions, giving respondents time to request a stay from the SEC or take other appropriate action.
This shift follows increased scrutiny over the immediacy of FINRA’s disciplinary actions, particularly in light of the Alpine Securities case. In June, the U.S. Supreme Court declined to hear Alpine’s appeal after a lower court declined to halt a FINRA expulsion before SEC review. Although FINRA maintains that the Alpine litigation remains ongoing, the proposed rule acknowledges concerns raised by the case regarding the fairness of immediate sanctions without SEC oversight.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, finra, sec
