FINRA Manual: Contents
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12000. CODE OF ARBITRATION PROCEDURE FOR CUSTOMER DISPUTES
PART I INTERPRETIVE MATERIAL, DEFINITIONS, ORGANIZATION AND AUTHORITY
12104. Effect of Arbitration on FINRA Regulatory Activities; Arbitrator Referral During or at Conclusion of Case
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Unless otherwise defined in the Code, terms used in the Rules and interpretive material, if defined in the FINRA By-Laws, shall have the meaning as defined in the FINRA By-Laws.
(a) Associated Person
The term "associated person" or "associated person of a member" means a person associated with a member, as that term is defined in paragraph (r).
An award is a document stating the disposition of a case.
The term "Board" means the Board of Directors of FINRA Dispute Resolution, Inc.
The term "claim" means an allegation or request for relief.
The term "claimant" means a party that files the statement of claim that initiates an arbitration under Rule 12302.
The term "Code" means the Code of Arbitration Procedure for Customer Disputes. For disputes involving only industry parties, see the Code of Arbitration Procedure for Industry Disputes.
The term "counterclaim" means a claim asserted against a claimant by a respondent.
(h) Cross Claim
The term "cross claim" means a claim asserted by a respondent against another already-named respondent.
A customer shall not include a broker or dealer.
Except as otherwise provided, the term "day" means calendar day. If a deadline specified in the Code falls on a Saturday, Sunday or any FINRA holiday, the deadline is extended until the next business day.
The term "Director" means the Director of FINRA Dispute Resolution. Unless the Code provides that the Director may not delegate a specific function, the term includes FINRA staff to whom the Director has delegated authority.
The term "dispute" means a dispute, claim or controversy. A dispute may consist of one or more claims.
The term "hearing" means the hearing on the merits of an arbitration under Rule 12600.
(n) Hearing Session
The term "hearing session" means any meeting between the parties and arbitrator(s) of four hours or less, including a hearing or a prehearing conference.
For purposes of the Code, the term "member" means any broker or dealer admitted to membership in FINRA, whether or not the membership has been terminated or cancelled; and any broker or dealer admitted to membership in a self-regulatory organization that, with FINRA consent, has required its members to arbitrate pursuant to the Code and/or to be treated as members of FINRA for purposes of the Code, whether or not the membership has been terminated or cancelled.
(p) Non-Public Arbitrator
The term "non-public arbitrator" means a person who is otherwise qualified to serve as an arbitrator and:
(1) is, or within the past five years, was:
(A) associated with, including registered through, a broker or a dealer (including a government securities broker or dealer or a municipal securities dealer);
(B) registered under the Commodity Exchange Act;
(C) a member of a commodities exchange or a registered futures association; or
(D) associated with a person or firm registered under the Commodity Exchange Act;
(2) is retired from, or spent a substantial part of a career engaging in, any of the business activities listed in paragraph (p)(1);
(3) is an attorney, accountant, or other professional who has devoted 20 percent or more of his or her professional work, in the last two years, to clients who are engaged in any of the business activities listed in paragraph (p)(1); or
(4) is an employee of a bank or other financial institution and effects transactions in securities, including government or municipal securities, and commodities futures or options or supervises or monitors the compliance with the securities and commodities laws of employees who engage in such activities.
For purposes of this rule, the term "professional work" shall not include mediation services performed by mediators who are also arbitrators, provided that the mediator acts in the capacity of a mediator and does not represent a party in the mediation.
The term "panel" means the arbitration panel, whether it consists of one or more arbitrators.
(r) Person Associated with a Member
The term "person associated with a member" means:
(1) A natural person who is registered or has applied for registration under the Rules of FINRA; or
(2) A sole proprietor, partner, officer, director, or branch manager of a member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a member, whether or not any such person is registered or exempt from registration with FINRA under the By-Laws or the Rules of FINRA.
For purposes of the Code, a person formerly associated with a member is a person associated with a member.
A pleading is a statement describing a party's causes of action or defenses. Documents that are considered pleadings are: a statement of claim, an answer, a counterclaim, a cross claim, a third party claim, and any replies.
(t) Prehearing Conference
The term "prehearing conference" means any hearing session, including an Initial Prehearing Conference, that takes place before the hearing on the merits begins.
(u) Public Arbitrator
The term "public arbitrator" means a person who is otherwise qualified to serve as an arbitrator and:
(1) is not engaged in the conduct or activities described in paragraphs (p)(1)–(4);
(2) was not engaged in the conduct or activities described in paragraphs (p)(1)–(4) for a total of 20 years or more;
(3) is not an investment adviser, or associated with, including registered through, a mutual fund or hedge fund;
(4) is not an attorney, accountant, or other professional whose firm derived 10 percent or more of its annual revenue in the past two years from any persons or entities listed in paragraphs (p)(1)–(4);
(5) is not an attorney, accountant, or other professional whose firm derived $50,000 or more in annual revenue in the past two years from professional services rendered to any persons or entities listed in paragraph (p)(1) relating to any customer disputes concerning an investment account or transaction, including but not limited to, law firm fees, accounting firm fees, and consulting fees;
(6) is not employed by, and is not the spouse or an immediate family member of a person who is employed by, an entity that directly or indirectly controls, is controlled by, or is under common control with, any partnership, corporation, or other organization that is engaged in the securities business;
(7) is not a director or officer of, and is not the spouse or an immediate family member of a person who is a director or officer of, an entity that directly or indirectly controls, is controlled by, or is under common control with, any partnership, corporation, or other organization that is engaged in the securities business; and
(8) is not the spouse or an immediate family member of a person who is engaged in the conduct or activities described in paragraphs (p)(1)–(4). For purposes of this rule, the term immediate family member means:
(A) a person's parent, stepparent, child, or stepchild;
(B) a member of a person's household;
(C) an individual to whom a person provides financial support of more than 50 percent of his or her annual income; or
(D) a person who is claimed as a dependent for federal income tax purposes.
A person whom FINRA would not designate as a public arbitrator because of an affiliation under subparagraphs (3)–(7) shall not be designated as a public arbitrator for two calendar years after ending the affiliation.
For purposes of this rule, the term "revenue" shall not include mediation fees received by mediators who are also arbitrators, provided that the mediator acts in the capacity of a mediator and does not represent a party in the mediation.
The term "respondent" means a party against whom a statement of claim or third party claim has been filed. A claimant against whom a counterclaim has been filed is not a respondent for purposes of the Code.
(w) Statement of Claim
The term "statement of claim" means the initial or amended claim filed by the party or parties initiating the arbitration.
(x) Submission Agreement
The term "Submission Agreement" means the FINRA Submission Agreement. The FINRA Submission Agreement is a document that parties must sign at the outset of an arbitration in which they agree to submit to arbitration under the Code.
(y) Third Party Claim
The term "third party claim" means a claim asserted against a party not already named in the statement of claim or any other previous pleading.
Amended by SR-FINRA-2013-003 eff. July 1, 2013.
Amended by SR-FINRA-2009-041 eff. Jan. 18, 2010.
Amended by SR-FINRA-2008-031 eff. Feb. 9, 2009.
Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
Amended by SR-NASD-2007-021 eff. June 9, 2008.
Amended by SR-NASD-2007-038 eff. June 14, 2007.
Adopted by SR-NASD-2003-158 eff. April 16, 2007.
Selected Notices to Members: 07-07, 08-22, 08-57, 09-04, 09-74, 13-21.