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  • 9800. TEMPORARY AND PERMANENT CEASE AND DESIST ORDERS

    Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
    Amended by SR-FINRA-2009-035 eff. July 14, 2009.
    Amended by SR-FINRA-2009-034 eff. June 23, 2009.
    Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
    Amended by SR-NASD-2007-033 eff. June 23, 2007.
    Amended by SR-NASD-2005-061 eff. May 11, 2005.
    Amended by SR-NASD-2003-110 eff. June 28, 2004.
    Adopted by SR-NASD-98-80 eff. June 23, 2003.

    Selected Notices: 03-35, 04-36, 08-57.

    • 9810. Initiation of Proceeding

      (a) Department of Enforcement
      With the prior written authorization of FINRA's Chief Executive Officer or such other senior officers as the Chief Executive Officer may designate, the Department of Enforcement may initiate: (1) a temporary cease and desist proceeding with respect to alleged violations of Section 10(b) of the Exchange Act and SEA Rule 10b-5 thereunder; SEA Rules 15g-1 through 15g-9; FINRA Rule 2010 (if the alleged violation is unauthorized trading, or misuse or conversion of customer assets, or based on violations of Section 17(a) of the Securities Act); FINRA Rule 2020; or FINRA Rule 4330 (if the alleged violation is misuse or conversion of customer assets) ("TCDO Proceeding") or (2) a permanent cease and desist proceeding with respect to alleged violations of Supplementary Material .03 to Rule 5210 (PCDO Proceeding"). The Department of Enforcement shall initiate the proceeding by serving a notice on a member or associated person (hereinafter "Respondent") (or upon counsel representing the Respondent, or other person authorized to represent others under Rule 9141, when counsel or other person authorized to represent others under Rule 9141 agrees to accept service for the Respondent) and filing a copy thereof with the Office of Hearing Officers. The Department of Enforcement shall serve the notice by personal service, overnight commercial courier, facsimile, or email. If service is made by facsimile or email, the Department of Enforcement shall send an additional copy of the notice by personal service or overnight commercial courier. Service is complete upon sending the notice by facsimile or email, sending the notice by overnight courier or delivering it in person, except that, where duplicate service is required, service is complete when the duplicate service is complete. The notice shall be effective when service is complete.
      (b) Contents of Notice
      The notice shall set forth the rule or statutory provision that the Respondent is alleged to have violated and that the Department of Enforcement is seeking to have the Respondent ordered to cease violating. The notice also shall state whether the Department of Enforcement is requesting the Respondent to be required to take action, refrain from taking action or both. The notice shall be accompanied by:
      (1) a declaration of facts, signed by a person with knowledge of the facts contained therein, that specifies the acts or omissions that constitute the alleged violation;
      (2) a memorandum of points and authorities setting forth the legal theories upon which the Department of Enforcement relies; and
      (3) a proposed order that contains the required elements of an order (except the date and hour of the order's issuance), which are set forth in Rule 9840(c), with respect to temporary cease and desist orders, and 9840(d), with respect to permanent cease and desist orders.
      (c) Authority to Approve Settlements
      If the Parties agree to the terms of the proposed temporary or permanent cease and desist order, the Hearing Officer shall have the authority to approve and issue the order.
      (d) Filing of Underlying Complaint for Temporary Cease and Desist Orders
      If the Department of Enforcement has not issued a complaint under Rule 9211 against the Respondent relating to the subject matter of the TCDO Proceeding and alleging violations of the rule or statutory provision specified in the notice described in paragraph (b), the Department of Enforcement shall serve and file such a complaint with the notice initiating the TCDO Proceeding. Service of the complaint can be made in accordance with the service provisions in paragraph (a).
      Amended by SR-FINRA-2018-027 eff. Aug. 3, 2018.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2015-019 eff. Nov. 2, 2015.
      Amended by SR-FINRA-2014-016 eff. May 1, 2014.
      Amended by SR-FINRA-2010-047 eff. Oct. 15, 2010.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-057 eff. Dec. 15, 2008.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Amended by SR-NASD-2007-033 eff. June 23, 2007.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 15-35, 17-22.

    • 9820. Appointment of Hearing Officer and Hearing Panel

      (a) As soon as practicable after the Department of Enforcement files a copy of the notice initiating a TCDO Proceeding or a PCDO Proceeding with the Office of Hearing Officers, the Chief Hearing Officer shall assign a Hearing Officer to preside over the proceeding. The Chief Hearing Officer shall appoint two Panelists to serve on a Hearing Panel with the Hearing Officer. Each Panelist shall be associated with a member of FINRA or retired therefrom. The Chief Hearing Officer shall select as a Panelist a person who:
      (1) previously served on a District Committee;
      (2) currently serves or previously served on a Regional Committee;
      (3) previously served on the National Adjudicatory Council;
      (4) previously served on a disciplinary subcommittee of the National Adjudicatory Council or the National Business Conduct Committee, including a Subcommittee, an Extended Proceeding Committee, or their predecessor subcommittees;
      (5) previously served as a Director or a Governor, but does not currently serve in any of these positions; or
      (6) currently serves or previously served on a committee appointed or approved by the FINRA Board, but does not serve currently on the National Adjudicatory Council or as a Director or a Governor.
      (b) If at any time a Hearing Officer or Hearing Panelist determines that he or she has a conflict of interest or bias or circumstances otherwise exist where his or her fairness might reasonably be questioned, or if a Party files a motion to disqualify a Hearing Officer or Hearing Panelist, the recusal and disqualification proceeding shall be conducted in accordance with Rules 9233 and 9234, except that:
      (1) a motion seeking disqualification of a Hearing Officer or Hearing Panelist must be filed no later than 5 days after the later of the events described in paragraph (b) of Rules 9233 and 9234; and
      (2) the Chief Hearing Officer shall appoint a replacement Panelist using the criteria set forth in paragraph (a) of this Rule.
      Amended by SR-FINRA-2018-027 eff. Aug. 3, 2018.
      Amended by SR-FINRA-2018-021 eff. May 18, 2018.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2015-019 eff. Nov. 2, 2015.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 15-35, 17-22.

    • 9830. Hearing

      (a) When Held
      The hearing shall be held not later than 15 days after service of the notice and filing initiating the proceeding, unless otherwise extended by the Chief Hearing Officer or Deputy Chief Hearing Officer for good cause shown. If a Hearing Officer or Hearing Panelist is recused or disqualified, the hearing shall be held not later than five days after a replacement Hearing Officer or Hearing Panelist is appointed.
      (b) Service of Notice of Hearing
      The Office of Hearing Officers shall serve a notice of date, time, and place of the hearing on the Department of Enforcement and the Respondent (or upon counsel representing the Respondent, or other person authorized to represent others under Rule 9141, when counsel or other person authorized to represent others under Rule 9141 agrees to accept service for the Respondent) not later than seven days before the hearing, unless otherwise ordered by the Hearing Officer. Service shall be made by personal service, overnight commercial courier, facsimile, or email. If service is made by facsimile or email, the Office of Hearing Officers shall send an additional copy of the notice by personal service or overnight commercial courier. Service is complete upon sending the notice by facsimile or email, sending the notice by overnight courier or delivering it in person, except that, where duplicate service is required, service is complete when the duplicate service is complete. The notice shall be effective when service is complete.
      (c) Authority of Hearing Officer
      The Hearing Officer shall have authority to do all things necessary and appropriate to discharge his or her duties as set forth under Rule 9235.
      (d) Witnesses
      A person who is subject to the jurisdiction of FINRA shall testify under oath or affirmation. The oath or affirmation shall be administered by a court reporter or a notary public.
      (e) Additional Information
      Prior to the hearing, the Hearing Officer may order a Party to furnish to all other Parties and the Hearing Panel such information as deemed appropriate, including any or all of the pre-hearing submissions described in Rule 9242(a). The documentary evidence submitted by the Parties pursuant to this paragraph shall not become part of the record, unless the Hearing Officer or Hearing Panel orders some or all of such evidence included pursuant to Rule 9830(g). At any time during the Hearing Panel's consideration, the Hearing Panel may direct a Party to submit additional information. Any additional information submitted shall be provided to all Parties at least one day before the Hearing Panel renders its decision.
      (f) Transcript
      The hearing shall be recorded by a court reporter and a written transcript thereof shall be prepared. A transcript of the hearing shall be available to the Parties for purchase from the court reporter at prescribed rates. A witness may purchase a copy of the transcript of his or her own testimony from the court reporter at prescribed rates. Proposed corrections to the transcript may be submitted by affidavit to the Hearing Panel within a reasonable time determined by the Hearing Panel. Upon notice to all the Parties to the proceeding, the Hearing Panel may order corrections to the transcript as requested or sua sponte.
      (g) Record and Evidence Not Admitted
      The record shall consist of the notice initiating the proceeding, the declaration, and the proposed order described in Rule 9810(b); the transcript of the hearing; all evidence considered by the Hearing Panel; and any other document or item accepted into the record by the Hearing Officer or the Hearing Panel. The Office of Hearing Officers shall be the custodian of the record. Proffered evidence that is not accepted into the record by the Hearing Panel shall be retained by the custodian of the record until the date when FINRA's decision becomes final or, if applicable, upon the conclusion of any review by the SEC or the federal courts.
      (h) Failure to Appear at Hearing
      If a Respondent fails to appear at a hearing for which it has notice, the allegations in the notice and accompanying declaration may be deemed admitted, and the Hearing Panel may issue a temporary cease and desist order in a TCDO Proceeding or a permanent cease and desist order in a PCDO Proceeding without further proceedings. If the Department of Enforcement fails to appear at a hearing for which it has notice, the Hearing Panel may order that the proceeding be dismissed.
      Amended by SR-FINRA-2018-027 eff. Aug. 3, 2018.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2015-019 eff. Nov. 2, 2015.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 15-35, 17-22.

    • 9840. Issuance of Order by Hearing Panel

      (a) Basis for Issuance of a Temporary Cease and Desist Order in a TCDO Proceeding
      The Hearing Panel shall issue a written decision stating whether a temporary cease and desist order shall be imposed. The Hearing Panel shall issue the decision not later than ten days after receipt of the hearing transcript, unless otherwise extended by the Chief Hearing Officer or Deputy Chief Hearing Officer for good cause shown. A temporary cease and desist order shall be imposed if the Hearing Panel finds:
      (1) that the Department of Enforcement has made a showing of a likelihood of success on the merits; and
      (2) that the alleged violative conduct or continuation thereof is likely to result in significant dissipation or conversion of assets or other significant harm to investors prior to the completion of the underlying disciplinary proceeding under the Rule 9200 and 9300 Series.
      (b) Basis for Issuance of a Permanent Cease and Desist Order in a PCDO Proceeding
      The Hearing Panel shall issue a written decision stating whether a permanent cease and desist order shall be imposed. The Hearing Panel shall issue the decision not later than ten days after receipt of the hearing transcript, unless otherwise extended by the Chief Hearing Officer or Deputy Chief Hearing Officer for good cause shown. A permanent cease and desist order shall be imposed if the Hearing Panel finds:
      (1) by a preponderance of the evidence that the alleged violation specified in the notice has occurred; and
      (2) that the violative conduct or continuation thereof is likely to result in significant market disruption or other significant harm to investors.
      (c) Content, Scope, and Form of Temporary Cease and Desist Order
      A temporary cease and desist order shall:
      (1) be limited to ordering a Respondent (and any successor of a Respondent, where the Respondent is a member firm) to cease and desist from violating a specific rule or statutory provision, and, where applicable, to ordering a Respondent (and any successor of a Respondent, where the Respondent is a member firm) to cease and desist from dissipating or converting assets or causing other harm to investors;
      (2) set forth the alleged violation and the significant dissipation or conversion of assets or other significant harm to investors that is likely to result without the issuance of an order;
      (3) describe in reasonable detail the act or acts the Respondent (and any successor of a Respondent, where the Respondent is a member firm) shall take, refrain from taking, or both; and
      (4) include the date and hour of its issuance.
      (d) Content, Scope, and Form of Permanent Cease and Desist Order
      A permanent cease and desist order shall:
      (1) be limited to: (A) ordering a Respondent to cease and desist from violating Rule 5210.03, and/or (B) ordering a Respondent to cease and desist from providing market access to a client of Respondent that is causing violations of Rule 5210.03;
      (2) set forth the violation and the significant market disruption or other significant harm to investors that is likely to result without the issuance of an order;
      (3) describe in reasonable detail the act or acts the Respondent is to take or refrain from taking and to suspend the Respondent unless and until such action is taken or refrained from; and
      (4) include the date and hour of its issuance.
      (e) Duration of Order
      (1) A temporary cease and desist order shall remain effective and enforceable until the issuance of a decision under Rule 9268 or Rule 9269, or until a settlement offer is accepted pursuant to Rule 9270.
      (2) A permanent cease and desist order shall remain effective and enforceable unless modified, set aside, limited, or suspended pursuant to Rule 9850.
      (f) Service and Dissemination Requirements
      The Office of Hearing Officers shall serve the Hearing Panel's decision and any temporary or permanent cease and desist order on the Department of Enforcement and the Respondent (or upon counsel representing the Respondent or person, or other person authorized to represent others under Rule 9141, when counsel or other person authorized to represent others under Rule 9141 agrees to accept service for the Respondent) by personal service, overnight commercial courier, facsimile, or email. If service is made by facsimile or email, the Office of Hearing Officers shall send an additional copy of the Hearing Panel's decision and any temporary or permanent cease and desist order by personal service or overnight commercial courier. Service is complete upon sending the notice by facsimile or email, sending the notice by overnight courier, or delivering it in person, except that, where duplicate service is required, service is complete when the duplicate service is complete. The temporary or permanent cease and desist order shall be effective when service is complete. The Office of Hearing Officers shall provide a copy of a temporary or permanent cease and desist order to each FINRA member with which a Respondent is associated.
      (g) Delivery Requirement
      Where a Respondent is a member firm, Respondent shall deliver a copy of a temporary or permanent cease and desist order, within one business day of receiving it, to its associated persons.
      Amended by SR-FINRA-2018-027 eff. Aug. 3, 2018.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2015-019 eff. Nov. 2, 2015.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 15-35, 17-22.

    • 9850. Review by Hearing Panel

      At any time after the Office of Hearing Officers serves the Respondent (or counsel representing the Respondent, or other person authorized to represent others under Rule 9141, when counsel or other person authorized to represent others under Rule 9141 agrees to accept service for the Respondent) with a temporary or permanent cease and desist order, a Party may apply to the Hearing Panel to have the order modified, set aside, limited, or suspended. The application shall set forth with specificity the facts that support the request. With respect to a temporary cease and desist order, the Hearing Panel that presided over the TCDO Proceeding shall retain jurisdiction to modify, set aside, limit, or suspend the temporary cease and desist order, unless at the time the application is filed a Hearing Panel has already been appointed in the underlying disciplinary proceeding commenced under FINRA Rule 9211 in which case the Hearing Panel appointed in the disciplinary proceeding has jurisdiction. The Hearing Panel shall respond to the request in writing within ten days after receipt of the request, unless otherwise extended by the Chief Hearing Officer or Deputy Chief Hearing Officer for good cause shown. The Hearing Panel's response shall be served on the Respondent (or upon counsel representing the Respondent, or other person authorized to represent others under Rule 9141, when counsel or other person authorized to represent others under Rule 9141 agrees to accept service for the Respondent) via personal service, overnight commercial courier, facsimile, or email. If service is made by facsimile or email, the Office of Hearing Officers shall send an additional copy of the temporary or permanent cease and desist order by personal service or overnight commercial courier. The filing of an application under this Rule shall not stay the effectiveness of a temporary or permanent cease and desist order.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2015-019 eff. Nov. 2, 2015.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 15-35, 17-22.

    • 9860. Violation of Cease and Desist Orders

      A Respondent who violates a temporary or permanent cease and desist order imposed under this Rule Series may have its association or membership suspended or canceled or be subject to any fitting sanction under Rule 9556. FINRA's Chief Executive Officer or such other senior officer as the Chief Executive Officer may designate must authorize the initiation of any such proceeding in writing.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2015-019 eff. Nov. 2, 2015.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Amended by SR-NASD-2007-033 eff. June 23, 2007.
      Amended by SR-NASD-2005-061 eff. May 11, 2005.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 15-35, 17-22.

    • 9870. Application to SEC for Review

      Temporary and permanent cease and desist orders issued pursuant to this Rule Series constitute final and immediately effective disciplinary sanctions imposed by FINRA. The right to have any action under this Rule Series reviewed by the SEC is governed by Section 19 of the Exchange Act. The filing of an application for review shall not stay the effectiveness of a temporary or permanent cease and desist order, unless the SEC otherwise orders.
      Amended by SR-FINRA-2016-043 eff. Dec. 15, 2016.
      Amended by SR-FINRA-2009-035 eff. July 14, 2009.
      Amended by SR-FINRA-2009-034 eff. June 23, 2009.
      Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
      Adopted by SR-NASD-98-80 eff. June 23, 2003.

      Selected Notices: 03-35, 08-57, 17-22.