By Alisa Radut, Fall 2017 IAC Student Intern
FINRA’s National Adjudicatory Council (NAC) decision represents FINRA’s final action, unless FINRA’s Board of Governors decides to review the NAC’s appellate decision.
A firm or individual can then appeal FINRA’s final decision to the SEC. Because the SEC lacks the resources to police the entire industry, it relies on industry members like FINRA to promote compliance with the securities laws and regulations, and pursue enforcement procedures when necessary.
When a member appeals FINRA’s final decision to the SEC, the SEC reviews the case de novo, meaning it does not give deference to the previous decision but rather reviews it “from the new.” The SEC’s order may then be appealed to the federal court. The court’s review of SEC decisions is generally limited, overturning an SEC disciplinary order only upon finding that it is not based in law or that it is without justification in fact. The Court will follow any finding of fact by the SEC when supported by substantial evidence. Furthermore, the court will overturn an SEC order issuing a sanction only if it finds an abuse of discretion. Because the standard of substantial evidence is to support that of a reasonable factfinder, the Court will rarely overturn an SEC decision.
And that concludes this five-part series on how FINRA regulates parts of its own organization, and the departments that are involved in the process.