In a judgment released earlier this
month, the United States Court of Appeals for the
Second Circuit found that the Financial Industry Regulatory
Authority, which regulates securities firms doing
business in the U.S., lacks the authority to bring court actions to
collect disciplinary fines. The case, Fiero v. FINRA,
involved FINRA's pursuit of unpaid fines subsequent to
disciplinary action against the plaintiffs.
Specifically, the Court of Appeals found that while Section 15A(b) of the
Securities Exchange Act of
1934 (the Exchange Act) provides self-regulatory
organizations with the authority to discipline members by various
means, including suspension, fine and censure, the legislation
provides no express statutory authority for such organizations to
bring judicial actions to actually collect fines. The Court found
the statutory omission to be significant and intentional, and
compared the provision to section 21(d) of the
Exchange Act, which provides the SEC with express authority to seek
judicial enforcement of penalties. In addressing the apparent
enforcement gap created by FINRA's ability to levy but not
pursue fines, the Court noted that FINRA can already enforce fines
by the "draconian sanction" of revocation of a firm's
A 1990 rule change purporting to authorize FINRA's
collection of fines, meanwhile, was found to have been
mischaracterized as a "house-keeping" rule when, in fact,
it was a substantive change requiring publication of a notice and
comment period. As such, the purported rule change "was never
properly promulgated and cannot authorize FINRA to judicially
enforce the collection of its disciplinary fines."
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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