SEC raises red flag over Finra enforcement referral rule

Citing concerns over investor protection, Securities and Exchange Commissioners, in an unusual assertion of their authority over Finra, will take up a proposal that would allow arbitrators to alert Finra to broad investor threats in the middle of disputes they are hearing. In a May 27 notice published in the Federal Register, the SEC expressed concerns that the Finra proposal could harm investors if a mid-case referral is used as grounds to request the recusal of an arbitrator or challenge an arbitration award. In the same notice, the SEC indicated that it would “institute proceedings” on the Finra proposal, or have the full five-member SEC vote on whether to adopt or reject it. Typically, SEC members delegate decisions on Finra rules to staff members. More in Investment News here.