On December 11, 2024, Nasdaq filed a proposed rule change with the Securities and Exchange Commission. The filing asked that Nasdaq Regulation assume primary litigation responsibility for certain contested disciplinary proceedings.
The Commission published the proposal and later approved it without receiving public comments. This change alters the allocation of enforcement tasks and prepares readers for key takeaways leading to A retenir :
A retenir :
- Increased internal handling of contested disciplinary proceedings by Nasdaq Regulation
- Reduced dependency on external SRO litigation resources across Nasdaq markets
- Alignment of complaint service authority with Nasdaq Regulation practices
- Potential efficiency gains in Nasdaq Market Surveillance and enforcement
Operational reallocation of Nasdaq Regulation litigation authority
Following those core takeaways, Nasdaq proposed to internalize litigation for Nasdaq-led investigations and enforcement actions. According to the SEC, the filing occurred on December 11, 2024, and the proposal sought to expand existing authority. The proposal builds on reallocations approved in 2019 and 2020 and extends initial authority to handle contested matters in the first instance.
Action
Scope
Date
Operational reallocation to Nasdaq Regulation
Options market and certain equity matters
April 2019
Authority to litigate subset of contested matters
Nasdaq-led investigations when FINRA constrained
March 2020
Filing to assume broader litigation responsibility
All Nasdaq-led contested disciplinary proceedings in first instance
December 11, 2024
Commission approval of proposed rule change
Expanded Nasdaq Regulation litigation authority
February 10, 2025
Operational change highlights:
- Streamlined case handoff within Nasdaq enforcement teams
- Faster engagement with hearing officers and members
- Reduced duplication when investigations originate on Nasdaq venues
- Retention of FINRA Office of Hearing Officers for hearings
History of reallocations and precedent
This subsection links the recent filing to earlier Commission approvals from 2019 and 2020. Those prior reallocations moved investigative responsibilities for the options market and certain equity matters to Nasdaq Regulation. According to Nasdaq filings, the earlier steps created a pathway for further internalization of enforcement functions.
« I watched our compliance team adapt when Nasdaq took on more investigative tasks. The change improved clarity on evidence handling. »
Alex N.
Effects on day-to-day litigation workflow
Understanding the operational shift highlights concrete effects for exchange members and compliance teams. The change allows Nasdaq Enforcement to draft complaints and memoranda directly under amended rules. According to FINRA, FINRA will continue to perform certain functions under regulatory services agreements.
Technical implementation elements:
- Amendment of Rules 9131(a) and 9810(b)(2) to permit Nasdaq service
- Continued use of FINRA Office of Hearing Officers for hearing administration
- Option to refer cases to FINRA when Nasdaq resources constrained
- Preservation of procedural protections for respondents
Procedural safeguards and hearing administration under Nasdaq Enforcement
As the operational remit expands, procedural protections remain central to fairness and due process. According to the SEC, the Commission found that the proposed amendments preserve fair procedures and hearing administration. This section examines how hearings continue to be administered and how service authority changes affect litigants.
Rule
Prior Service Authority
Amended Service Authority
Rule 9131(a)
FINRA Department of Enforcement only
FINRA Department of Enforcement and Nasdaq Regulation
Rule 9810(b)(2)
FINRA Department of Enforcement only
FINRA Department of Enforcement and Nasdaq Regulation
Hearing administration
FINRA Office of Hearing Officers
FINRA Office of Hearing Officers (unchanged)
Referral option
Not applicable
Nasdaq may refer to FINRA when warranted
How member protections are preserved
This subsection situates member protections within the amended framework and links them to hearing administration. Nasdaq has stated that procedural rules governing disciplinary matters will not change. Members retain the same evidentiary rights and appeal pathways under the Code of Procedure.
« I received clear guidance when served with a complaint, and the hearing timeline was respected. Our counsel appreciated familiar procedures. »
Maria N.
Administration logistics and oversight
Linking administrative practice to enforcement outcomes clarifies operational responsibilities and oversight roles. The Exchange will continue to rely on FINRA’s Office of Hearing Officers to manage proceedings and calendars. According to Nasdaq, internalizing litigation can accelerate case handling while preserving neutral adjudication.
- Use of FINRA hearing officers for neutrality and consistency
- Nasdaq drafting of complaints for Nasdaq-led investigations
- Capacity-based referral to FINRA when necessary
- Document custody and evidence handoff protocols
Market integrity tools, surveillance, and compliance integration
Building on administrative clarity, Nasdaq can leverage surveillance tools to strengthen enforcement and market integrity. The Exchange intends to use platforms such as Nasdaq SMARTS and the Nasdaq Risk Platform to detect and escalate potential misconduct. According to Nasdaq, tighter integration between surveillance and litigation teams can yield timelier interventions.
Tool
Primary Function
Role in Enforcement
Nasdaq SMARTS
Market surveillance and pattern detection
Signals potential misconduct for investigation
Nasdaq MarketWatch
Market data dissemination and monitoring
Context for anomalous trading activity
Nasdaq Risk Platform
Risk analytics and member risk scoring
Prioritization of supervisory resources
Nasdaq Listing Center
Listing rules and issuer compliance tools
Source of listing-related inquiries and reviews
Surveillance to enforcement workflow
This section links detection with prosecution and explains pragmatic workflows from surveillance alerts to action. Surveillance systems generate leads which compliance teams review and escalate to enforcement. The integrated approach aims to reduce time from detection to disciplinary filing and action.
« Our desk received an alert from SMARTS and the matter was escalated within hours. The coordinated response improved market confidence. »
Jordan N.
Implications for traders, issuers, and compliance officers
Connecting surveillance, enforcement, and listing oversight changes how market participants manage compliance obligations. Nasdaq Trader users and listed issuers will face clearer pathways for inquiries, and compliance teams must coordinate with enforcement counsel. This alignment positions Nasdaq to act swiftly while preserving procedural safeguards for respondents.
- Enhanced coordination between Nasdaq Market Surveillance and enforcement teams
- Clearer service procedures via amended Code of Procedure rules
- Faster escalation of critical market integrity concerns
- Ongoing role for FINRA under regulatory services agreements
« The policy change made compliance workflows more predictable for our firm, and we adjusted monitoring thresholds accordingly. The outcome felt practical. »
Pat N.
Source : Securities and Exchange Commission, « Order Approving SR-NASDAQ-2024-083 », Federal Register, February 10, 2025 ; The Nasdaq Stock Market LLC, « SR-NASDAQ-2024-083 », Nasdaq Listing Center, December 11, 2024.
