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(2 versions)
Dec 15 2008 - Apr 2 2017Apr 3 2017 onwards

12801. Default Proceedings

(a) Applicability of Rule
A claimant may request default proceedings against any respondent that falls within one of the following categories and fails to file an answer within the time provided by the Code:
(1) A member whose membership has been terminated, suspended, canceled, or revoked;
(2) A member that has been expelled from the FINRA;
(3) A member that is otherwise defunct; or
(4) An associated person whose registration is terminated, revoked, or suspended.
(b) Initiating Default Proceedings
(1) To initiate default proceedings against one or more respondents that fail to file a timely answer, the claimant must serve the notification on all other parties and file a written notification with the Director. If there is more than one claimant, all claimants must agree in writing to proceed under this rule against a defaulting respondent before this rule may be used.
(2) If the Director receives written notice from the claimant and determines that the requirements for proceeding under this rule have been met, the Director will:
(A) Notify all parties that the claim against the defaulting respondent will proceed under this rule; and
(B) Appoint a single arbitrator in accordance with the Neutral List Selection System to consider the statement of claim and other documents presented by the claimant.
(c) Hearings
No hearing shall be held. The arbitrator may request additional information from the claimant before rendering an award.
(d) Amendments to Increase Relief Requested
Claimants may not amend a claim to increase the relief requested from the defaulting respondent after the Director has notified the parties that the claim will proceed under this rule.
(e) Awards
(1) The arbitrator may not issue an award based solely on the nonappearance of a party. Claimants must present a sufficient basis to support the making of an award. The arbitrator may not award damages in an amount greater than the damages requested in the statement of claim, and may not award any other relief that was not requested in the statement of claim.
(2) The default award shall have no effect on any non-defaulting party.
(f) Respondent's Answer
If a defaulting respondent files an answer after the Director has notified the parties that the claim against that respondent will proceed under this rule but before an award has been issued, the proceedings against that respondent under this rule will be terminated and the claim against that respondent will proceed under the regular provisions in the Code.
Amended by SR-FINRA-2016-029 eff. April 3, 2017.
Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
Adopted by SR-NASD-2003-158 eff. April 16, 2007.

Selected Notice: 07-07, 08-57, 17-03.

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