This isn't a rule anymore. Not sure when it was changed exactly but corners are definitely allowed to stop fights now. This is in the Unified Rules now:
27. Interference from a mixed martial artist’s corner or seconds: Interference is defined as any action or activity aimed at disrupting the fight or causing an unfair advantage to be given to one combatant. Corners are not allowed to distract the referee or influence the actions of the referee in any fashion.
REMOVED AS A FOUL- Throwing in the towel during competition
A fighter's corner, at the Commission's discretion, should have the option to retire his fighter in the quickest and most efficient manner possible, during competition. A corner person having worked alongside a fighter may recognize and accept what their fighter's capabilities are from past experience. It makes sense from a safety perspective to allow a corner to retire the fighter. If there is consideration that debris in the form of a towel entering the ring or cage may contribute to a disruption or confusion in the contest, then colored towels or special towels might be a consideration to be used