John, the standard answer here is that there is no rule requiring the red flag to be seen by the protestee.  The requirements of the red flag are only on the protestor.  

The protestor shall (by RRS 61.1) ...

Given these are the requirements, your OP does not provide the information required to answer your question.  

Ang

Angelo, yes I understand that, but my question is, if the boat being protested said they saw and acknowledged the hail, but the flag was not hosted at the first reasonable opportunity,, therefore breaking 61.1(a), would you still allow the protest to proceed given the protested boat acknowledge the hail?

... correction, heard the hail but flag was late. Do you declare invalid per 61.1 (a) or allow to proceed?

John, I'd like to encourage you to read the US Appeals below ... there are several questions to be answered to determine "1st reasonable opportunity".

US 124 ... and the other 3 US Appeals ... US46, US67 and US82.

Thanks Angelo, these are very helpful indeed, but don't answer my question.  Let's take a more simple and extreme case:  In the hearing, testing validity, it was found the hail was made immediately but red flag not hoisted at all.  If the boat being protested said in the hearing that he heard the hail and is prepared to continue with the hearing, knowing the flag wasn't hoisted, would you allow it to continue, or would you declare the protest invalid per 61.1(a)?  

RRS  61.1 (a) requires the protesting boat to "hail ‘Protest’ and conspicuously display a red flag at the first reasonable opportunity for each".

If the protesting boat does not display a red flag at all she has not displayed it at the first reasonable opportunity and the protest is invalid.

US Appeal US82 describes a short period during which "all crew members [are fully occupied] to keep the boat under control", that is to sail the boat in a safe and seamanlike way, as a period in which it is not reasonably possible to display the red flag.

Thanks everyone. Yes that is the way I ruled. I considered the crash tack followed by another tack, rounding the mark and hoisting spinnaker, too long before raising the red flag, particularly as they had a large crew.  I ruled the protest invalid citing RRS 61.1(a).  In all cases I try to follow the letter of the law.  But it did seem a little unfair given the protested boat acknowledged that they heard the hail of "Protest" and repeated that fact at the hearing.
I believe the reason for the flag is that it can be seen at a distance whereas a hail might not be heard.  But in this case there was no question that the hail was heard.
Of course the flag also allows other boats to know there was a protest and they may be witnesses.  So I am OK with the ruling.

For better or for worse compliance with RRS 61.1(a) depends on the protesting boat hailing and displaying the flag, NOT on the protestee hearing, knowing or understanding that they are being protested, which could be subject to endless manipulation in a hearing.