Are you providing a response to another of FINRA’s Rule 8210 requests in what appears to be an endless FINRA Enforcement investigation? Are you literally in your fifth year of the investigation? Have you considered whether the sheer length of the investigation has caused such hardship on you or your business that the investigation itself has become inherently unfair? If you have, you are not alone. Both the SEC and FINRA have held that certain FINRA disciplinary actions are so aged that they are inherently unfair to the subjects and have dismissed those cases. Are you a candidate for such a ruling? Read on.
The Securities Exchange Act of 1934 requires that FINRA, as a self-regulatory organization (“SRO”) “provide a fair procedure for the disciplining of members and persons associated with members[.]” For many years, until the SEC’s issuance of its opinion in Jeffrey Ainley Hayden in 2000, the concept of fairness in this context focused on whether an SRO such as FINRA had followed its internal procedures and whether those procedures were fair. However, in Hayden, the SEC for the first time dismissed an SRO disciplinary action on fairness grounds based on the age of the case.
In Hayden the SEC outlined four periods for review to determine whether an NYSE proceeding was fair. Those periods are the time between:
1. The first alleged occurrence of misconduct and the date that the NYSE filed the complaint;
2. The last alleged occurrence of misconduct and the date that the NYSE filed the complaint;
3. The date that the NYSE received notice of the alleged misconduct and the date that the NYSE filed the complaint, and;
4. The date that the NYSE commenced its investigation and the date that the NYSE filed the complaint.
Based on an analysis of those four periods, the Commission in Hayden dismissed an action brought by NYSE against a member because “the delay in the underlying proceedings was inherently unfair,” even though it did not find “as a factual matter” that “Hayden’s ability to mount an adequate defense was impaired by the Exchange’s delay.” Beyond setting out the categories and corresponding time periods, Hayden did little to lay out the framework for future consideration of fairness based on a case’s age.
If you would like to read the entire article, including legal citations, please request a copy at info@carletonlaw.net.
_____________________________________________
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information is for general informational purposes only. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader should act or refrain from acting on the basis of information contained herein without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this article does not create an attorney-client relationship between the reader or user and the article author or law firm.