Law360, New York (October 31, 2014, 10:40 AM EDT) -- A review of recent Financial Industry Regulatory Authority disciplinary decisions and Letters of Acceptance, Waiver and Consent (AWCs) reveals that FINRA has filed enforcement actions based on interpretations cited in regulatory notices[1] as if the interpretations were rules.[2] FINRA's practice of rule-making by interpretation is troubling in that by enforcing the guidance outlined in a notice rather than that of "the rule," the regulator essentially bypasses the U.S. Securities and Exchange Commission's rule-making process.[3] In fact, SEC Rule 19b-4 specifically states that a policy, practice or interpretation of the self-regulatory organization shall be deemed to be a proposed rule change unless it is reasonably and fairly implied by an existing rule of the self-regulatory organization....
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