BackText onlyPrint

You need the Flash plugin.

Download Macromedia Flash Player



  • Recently Approved Rule Changes Pending Determination of Effective Date

    • SR-FINRA-2018-023

      • 6730. Transaction Reporting

        (a) When and How Transactions are Reported
        Each member that is a Party to a Transaction in a TRACE-Eligible Security must report the transaction. A member must report a transaction in a TRACE-Eligible Security as soon as practicable, but no later than within 15 minutes of the Time of Execution, except as otherwise specifically provided below. Transactions not reported within the specified timeframe will be designated as "late." A member must transmit the report to TRACE during TRACE System Hours.
        (1) Reporting Requirements
        Except as otherwise specifically provided in paragraph (a)(2) through paragraph (a)(4), transactions in TRACE-Eligible Securities must be reported as provided in this paragraph (a)(1).
        (A) Transactions Executed At or After 12:00:00 A.M. Through 7:59:59 A.M. Eastern Time
        Transactions executed on a business day at or after 12:00:00 a.m. Eastern Time through 7:59:59 a.m. Eastern Time must be reported the same day no later than 15 minutes after the TRACE system opens.
        (B) Transactions Executed During TRACE System Hours
        Transactions executed on a business day at or after 8:00:00 a.m. Eastern Time through 6:29:59 p.m. Eastern Time (standard TRACE System Hours) must be reported within 15 minutes of the Time of Execution, except as provided in paragraph (a)(1)(C) below.
        (C) Transactions Executed Less Than 15 Minutes Before TRACE System Closes
        Transactions executed on a business day less than 15 minutes before 6:30:00 p.m. Eastern Time must be reported no later than 15 minutes after the TRACE system opens the next business day (T + 1), and if reported on T + 1, designated "as/of" and include the date of execution.
        (D) Transactions Executed After TRACE System Hours or on Non-Business Days
        Transactions executed on a business day at or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time or on a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time) must be reported the next business day (T + 1), no later than 15 minutes after the TRACE system opens, designated "as/of" and include the date of execution.
        (2) Reporting Requirements — List or Fixed Offering Price Transactions and Takedown Transactions
        (A) A List or Fixed Offering Price Transaction or a Takedown Transaction that is executed on a business day at or after 12:00:00 a.m. Eastern Time through 11:59:59 p.m. Eastern Time must be reported no later than the next business day (T + 1) during TRACE System Hours and if reported on T + 1, designated "as/of" and include the date of execution.
        (B) List or Fixed Offering Price Transactions or Takedown Transactions executed on a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time) must be reported the next business day (T + 1) at any time during TRACE System Hours, designated "as/of" and include the date of execution.
        (3) Reporting Requirements — Securitized Products Transactions
        Transactions in Securitized Products must be reported as provided in this paragraph (a)(3).
        (A) Collateralized Debt Obligations and Commercial Mortgage-Backed Securities
        Except as provided in paragraphs (a)(3)(B), (a)(3)(C), (a)(3)(D), (a)(3)(E), (a)(3)(F) and (a)(3)(G), transactions in collateralized debt obligations (“CDOs”) and commercial mortgage-backed securities (“CMBSs”) executed on:
        (i) a business day at or after 12:00:00 a.m. Eastern Time through 5:00:00 p.m. Eastern Time must be reported the same day during TRACE System Hours;
        (ii) a business day after 5:00:00 p.m. Eastern Time but before the TRACE system closes must be reported no later than the next business day (T + 1) during TRACE System Hours, and, if reported on T + 1, designated "as/of" and include the date of execution; or
        (iii) a business day at or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time, or a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time) must be reported the next business day (T + 1) during TRACE System Hours, designated "as/of" and include the date of execution.
        (B) Asset-Backed Securities
        Except for transactions in Asset-Backed Securities that meet the definition of List or Fixed Offering Price Transaction or a Takedown Transaction, which shall be reported as provided in paragraph (a)(2), transactions in Securitized Products that are Asset-Backed Securities shall be reported as provided in paragraph (a)(1)(A) through paragraph (a)(1)(D).
        (C) Collateralized Mortgage Obligation Transactions Before Issuance
        Transactions in Securitized Products that are Collateralized Mortgage Obligations ("CMOs") that are executed before the issuance of the security must be reported no later than the first settlement date of the security.
        If the transaction is reported other than on the date of execution, the transaction report must be designated "as/of" and include the date of execution.
        (D) Agency Pass-Through Mortgage-Backed Securities Traded To Be Announced For Good Delivery
        Transactions in Securitized Products that are Agency Pass-Through Mortgage-Backed Securities traded TBA for good delivery ("GD") ("MBS TBA transactions GD") must be reported as provided in paragraph (a)(1)(A) through paragraph (a)(1)(D).
        (E) Agency Pass-Through Mortgage-Backed Securities Traded To Be Announced Not For Good Delivery
        Transactions in Securitized Products that are Agency Pass-Through Mortgage-Backed Securities traded TBA not for good delivery ("NGD") ("MBS TBA transactions NGD") must be reported as provided in this paragraph (a)(3)(E).
        (i) Transactions executed on a business day at or after 12:00:00 a.m. Eastern Time through 7:59:59 a.m. Eastern Time must be reported the same day no later than 60 minutes after the TRACE system opens.
        (ii) Transactions executed on a business day at or after 8:00:00 a.m. Eastern Time through 6:29:59 p.m. Eastern Time (standard TRACE System Hours) must be reported within 60 minutes of the Time of Execution, except as provided in paragraph (a)(3)(E)(iii) below.
        (iii) Transactions executed on a business day less than 60 minutes before 6:30:00 p.m. Eastern Time must be reported no later than 60 minutes after the TRACE system opens the next business day (T + 1), and if reported on T + 1, designated "as/of" and include the date of execution.
        (iv) Transactions executed on a business day at or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time or on a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time) must be reported the next business day (T + 1), no later than 60 minutes after the TRACE system opens, designated "as/of" and include the date of execution.
        (F) Agency Pass-Through Mortgage-Backed Securities Traded in Specified Pool Transactions
        Agency Pass-Through Mortgage-Backed Securities traded in Specified Pool Transactions ("MBS Specified Pool transactions") must be reported as provided in paragraph (a)(3)(E)(i) through paragraph(a)(3)(E)(iv).
        (G) SBA-Backed ABS
        SBA-Backed ABS traded TBA or in Specified Pool Transactions must be reported as provided in paragraph (a)(3)(E)(i) through paragraph (a)(3)(E)(iv).
        (H) Collateralized Mortgage Obligation Transactions On or After Issuance
        Transactions in CMOs executed at or after issuance must be reported as provided in this paragraph (a)(3)(H).
        (i) Transactions executed on a business day at or after 12:00:00 a.m. Eastern Time through 7:59:59 a.m. Eastern Time must be reported the same day no later than 60 minutes after the TRACE system opens.
        (ii) Transactions executed on a business day at or after 8:00:00 a.m. Eastern Time through 6:29:59 p.m. Eastern Time (standard TRACE System Hours) must be reported within 60 minutes of the Time of Execution, except as provided in paragraph (a)(3)(H)(iii) below.
        (iii) Transactions executed on a business day less than 60 minutes before 6:30:00 p.m. Eastern Time must be reported no later than 60 minutes after the TRACE system opens the next business day (T + 1), and if reported on T + 1, designated "as/of" and include the date of execution.
        (iv) Transactions executed on a business day at or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time or on a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time) must be reported the next business day (T + 1), no later than 60 minutes after the TRACE system opens, designated "as/of" and include the date of execution.
        (4) Reporting Requirements — U.S. Treasury Securities
        Transactions in U.S. Treasury Securities must be reported as provided in this paragraph (a)(4).
        (A) General Reporting Requirements
        Transactions in U.S. Treasury Securities executed on:
        (i) a business day at or after 12:00:00 a.m. Eastern Time through 5:00:00 p.m. Eastern Time must be reported the same day during TRACE System Hours;
        (ii) a business day after 5:00:00 p.m. Eastern Time but before the TRACE system closes must be reported no later than the next business day (T + 1) during TRACE System Hours, and, if reported on T + 1, designated "as/of" and include the date of execution; or
        (iii) a business day at or after 6:30:00 p.m. Eastern Time through 11:59:59 p.m. Eastern Time, or a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time) must be reported the next business day (T + 1) during TRACE System Hours, designated "as/of" and include the date of execution.
        (5) Members have an ongoing obligation to report transaction information promptly, accurately, and completely. The member may employ an agent for the purpose of submitting transaction information. However, the primary responsibility for the timely, accurate, and complete reporting of transaction information remains the non-delegable duty of the member obligated to report the transaction.
        (6) A member may be required to report as soon as practicable to the Market Regulation Department on a paper form, the transaction information required under Rule 6730 if electronic submission into TRACE is not possible. Transactions that can be reported into TRACE, including transactions executed on a Saturday, a Sunday, a federal or religious holiday or other day on which the TRACE system is not open at any time during that day (determined using Eastern Time), and transactions that can be submitted on the trade date or a subsequent date on an "as/of" basis shall not be reported on a paper form.
        (7) If a member that is a Party to a Transaction makes a good faith determination that a transaction involves a TRACE-Eligible Security, the member must report the transaction as provided in this Rule, and if the TRACE-Eligible Security is not entered in the TRACE system, the member must promptly notify and provide FINRA Operations the information required under Rule 6760(b) prior to reporting the transaction.
        (b) Which Party Reports Transaction
        Trade data input obligations are as follows:
        (1) In transactions between two members, both members shall submit a trade report to TRACE;
        (2) In transactions involving a member and a non-member, including a customer, the member shall submit a trade report to TRACE.
        (c) Transaction Information To Be Reported
        Each TRACE trade report shall contain the following information:
        (1) CUSIP number or if a CUSIP number is not available at the Time of Execution, a similar numeric identifier (e.g., a mortgage pool number) or a FINRA symbol;
        (2) The size (volume) of the transaction as required by paragraph (d)(2) below;
        (3) Price of the transaction (or the elements necessary to calculate price, which are contract amount and accrued interest) or, for When-Issued Transactions in U.S. Treasury Securities executed before the Auction for the security, the yield as required by paragraph (d)(1) of this Rule;
        (4) A symbol indicating whether the transaction is a buy or a sell;
        (5) Date of Trade Execution ("as/of" trades only);
        (6) Contra-party's identifier (MPID, customer, or a non-member affiliate, as applicable);
        (7) Capacity — Principal or Agent (with riskless principal reported as principal);
        (8) Time of Execution;
        (9) Reporting side executing broker as "give-up" (if any);
        (10) Contra side Introducing Broker in case of "give-up" trade;
        (11) The commission (total dollar amount), if applicable;
        (12) Date of settlement;
        (13) If the member is reporting a transaction that occurred on an ATS pursuant to Rule 6732, the ATS's separate MPID obtained in compliance with Rule 6720(c); and
        (14) Such trade modifiers as required by either the TRACE rules or the TRACE users guide.
        (d) Procedures for Reporting Price, Capacity, Volume
        (1) Price
        (A) Except as noted in subparagraph (B), for principal transactions, report the price, which must include the mark-up or mark-down. (However, if a price field is not available, report the contract amount and, if applicable, the accrued interest.) For agency transactions, report the price, which must exclude the commission. (However, if a price field is not available, report the contract amount and, if applicable, the accrued interest.) Report the total dollar amount of the commission if one is assessed on the transaction. Notwithstanding the foregoing, a member is not required to include a commission, mark-up or mark-down where one is not assessed on a trade-by-trade basis at the time of the transaction or where the amount is not known at the time the trade report is due. A member must use the "No Remuneration" indicator described in paragraph (d)(4)(F) where a trade report does not reflect either a commission, mark-up or mark-down, except for an inter-dealer transaction, a "List or Fixed Offering Price Transaction," as defined in Rule 6710(q), or a "Takedown Transaction," as defined in Rule 6710(r).
        (B) For When-Issued Transactions in U.S. Treasury Securities executed before the Auction for the security and conducted on a principal basis, report the yield, which must include the mark-up or mark-down, of the security in lieu of price. For When-Issued Transactions in U.S. Treasury Securities executed before the Auction for the security and conducted on an agency basis, report the yield, which must exclude the commission, of the security in lieu of price. Report the total dollar amount of the commission.
        (2) Size (Volume)
        (A) General
        For a transaction in a TRACE-Eligible Security, except a Securitized Product, report the total par value or principal value of the security traded.
        (B) Securitized Products
        (i) For a transaction in a Securitized Product traded TBA ("TBA transaction"), report the original face value of such security.
        (ii) For a transaction, other than a TBA transaction, in a Securitized Product that is subject to amortization, report the original face value of such security and, if a member uses a Factor to execute the transaction that is not the most current Factor publicly available at the Time of Execution, report the Factor used, except as provided in subparagraph (iv) below regarding certain transactions executed in an agency capacity.
        (iii) For a transaction in a Securitized Product that does not amortize, report the total par value, principal value or original face value of such security, except as provided in subparagraph (iv) below regarding certain transactions executed in an agency capacity.
        (iv) For a transaction, other than a TBA transaction, in a Securitized Product that is executed in an agency capacity and subject to a commission charge, report the original face value of such security and the Factor used to execute the transaction.
        (3) Crosses
        For in-house cross transactions, a member must report two transactions, which are the member's purchase transaction and the member's sale transaction.
        (4) Modifiers; Indicators
        Members shall append the applicable trade report modifiers or indicators as specified by FINRA to all transaction reports.
        (A) Special Price Modifier
        If a transaction is not executed at a price that reflects the current market price, select the modifier, "special price." When the reporting method chosen provides a "special price memo" field, state why the transaction was executed at other than the current market price in the "special price memo" field (e.g., when a debt security is traded conventionally and in the current market does not have a due bill and/or a warrant attached, but in the transaction to be reported is traded with a due bill and/or warrant attached, the price of the transaction is a "special price"). Do not select the modifier, "special price," where the transaction price is determined using a weighted average price.
        (B) Weighted Average Price Modifier
        If the price of the transaction is determined using a weighted average price method, select the modifier, ".w."
        (C) List or Fixed Offering Price Transaction or Takedown Transaction Indicator
        If reporting a primary market transaction that is a List or Fixed Offering Price Transaction or a Takedown Transaction, select the appropriate indicator.
        (D) Securitized Product Indicators

                  Select the indicator:
        (i) ".O," if the transaction is a Specified Pool Transaction;
        (ii) ".N," if the transaction is a Stipulation Transaction;
        (iii) ".D," if the transaction is a Dollar Roll; or
        (iv) ".L," if the transaction is a Dollar Roll and a Stipulation Transaction.
        (E) Non-member Affiliate—Principal Transaction Indicator

                  If reporting a transaction with a "non-member affiliate," as defined in Rule 6710, in which both the member and non-member affiliate act in a principal capacity, and that occurs within the same day, at the same price and in the same security as a transaction by the member with another contra-party, select the non-member affiliate—principal transaction indicator. If a member does not reasonably expect to engage in a subsequent same day, same price transaction in the same security with another contra-party, the member is not required to append the principal transaction indicator or subsequently correct a prior trade report with its non-member affiliate solely for the purpose of appending the non-member affiliate—principal transaction indicator. If, however, a member appends the non-member affiliate—principal transaction indicator to a trade report reflecting a transaction with a non-member affiliate and, ultimately, does not engage in a same day, same price transaction in the same security with another contra-party, the member must correct the prior trade report to exclude the non-member affiliate—principal transaction indicator.
        (F) No Remuneration Indicator
        Where a trade report does not reflect either a commission, mark-up or mark-down, select the "No Remuneration" indicator, subject to the exceptions provided in paragraph (d)(1) above.
        (G) U.S. Treasury Security Indicators and Modifiers
        (i) If reporting a When-Issued Transaction, select the appropriate indicator.
        (ii) Select the modifier:
        a. ".B," if the transaction is part of a series of transactions where at least one of the transactions involves a futures contract;
        b. ".S," if the transaction is part of a series of transactions and may not be priced based on the current market.
        (e) Reporting Requirements for Certain Transactions and Transfers of Securities
        The following shall not be reported:
        (1) Transfers of TRACE-Eligible Securities for the sole purpose of creating or redeeming an instrument that evidences ownership of or otherwise tracks the underlying securities transferred (e.g., an exchange-traded fund).
        (2) Transactions in TRACE-Eligible Securities that are listed on a national securities exchange, when such transactions are executed on and reported to the exchange and the transaction information is disseminated publicly.
        (3) Transactions where the buyer and the seller have agreed to trade at a price substantially unrelated to the current market for the TRACE-Eligible Security (e.g., to allow the seller to make a gift).
        (4) Provided that a data sharing agreement between FINRA and NYSE related to transactions covered by this Rule remains in effect, transactions in TRACE-Eligible Securities that are executed on a facility of NYSE in accordance with NYSE Rules 1400, 1401 and 86 and disseminated publicly by NYSE.
        (5) Transactions resulting from the exercise or settlement of an option or a similar instrument, or the termination or settlement of a credit default swap, other type of swap, or a similar instrument.
        (6) Transfers of securities made pursuant to an asset purchase agreement (APA) that is subject to the jurisdiction and approval of a court of competent jurisdiction in insolvency matters, provided that the purchase price under the APA is not based on, and cannot be adjusted to reflect, the current market prices of the securities on or following the effective date of the APA.
        (7) Bona fide repurchase and reverse repurchase transactions involving TRACE-Eligible Securities.
        (8) Auction Transactions.
        (f) Compliance With Reporting Obligations
        A pattern or practice of late reporting without exceptional circumstances may be considered conduct inconsistent with high standards of commercial honor and just and equitable principles of trade, in violation of Rule 2010.

        • • • Supplementary Material: --------------

        .01 Scope of Factor Reporting Requirement. For transactions, other than TBA transactions, in Securitized Products executed in an agency capacity and subject to a commission charge, members must report the Factor for every such transaction, including a transaction where the Factor is 1.0.

        .02 For purposes of compliance with paragraphs (c)(6) and (d)(4)(E), a member must identify those entities that would meet the definition of "non-member affiliate" at least annually. However, where the member has undergone an organizational or operational restructuring that may impact its non-member affiliate relationships, it must promptly review and update, as necessary, its identification of non-member affiliates for purposes of this rule.

        .03 Trade Reporting Time Frame

        (a) Each member with a trade reporting obligation pursuant to paragraph (a) above for a TRACE-Eligible Security that is subject to dissemination must adopt policies and procedures reasonably designed to comply with the requirement that transactions in TRACE-Eligible Securities be reported “as soon as practicable” by implementing systems that commence the trade reporting process at the Time of Execution without delay. Where a member has such reasonably designed policies, procedures and systems in place, the member generally will not be viewed as violating the “as soon as practicable” requirement because of delays in trade reporting that are due to extrinsic factors that are not reasonably predictable and where the member does not purposely intend to delay the reporting of the trade. In no event may a member purposely withhold trade reports, e.g., by programming its systems to delay reporting until the end of the reporting time period.
        (b) FINRA recognizes that members may manually report transactions in TRACE-Eligible Securities and, as a result, the trade reporting process may not be completed as quickly as where an automated trade reporting system is used. In these cases, FINRA will take into consideration the manual nature of the member's trade reporting process in determining whether the member's policies and procedures are reasonably designed to report the trade “as soon as practicable” after execution.

        .04 Time of Execution for Transactions in U.S. Treasury Securities. When reporting transactions in U.S. Treasury Securities executed electronically, members must report the time of execution pursuant to paragraph (c)(8) to the finest increment of time captured in the member's system (e.g., millisecond, microsecond), but at a minimum, in increments of seconds.

        .05 STRIPS Program (Separate Trading of Registered Interest and Principal of Securities). Members are not required to report transactions undertaken as part of the process of separating and reconstituting securities pursuant to the STRIPS Program operated by the U.S. Department of Treasury under which eligible U.S. Treasury Securities are authorized to be separated into principal and interest components and transferred separately.

        .06 Temporary Exception for Aggregate Transaction Reporting of U.S. Treasury Securities Executed in ATS Trading Sessions

        (a) A member alternative trading system ("ATS") and members engaging in trades on such ATS are permitted to report transactions in U.S. Treasury Securities executed within discrete ATS trading sessions (sometimes referred to as "work-up sessions") in an aggregated manner. Pursuant to this temporary exception, members may submit a transaction report reflecting the aggregate amount of a U.S. Treasury Security purchased (sold) to another party during a single trading session at the average price of such transactions, with the Time of Execution communicated by the ATS to each Party to a Transaction, irrespective of the number of trades in the trading session.
        (b) A member ATS availing itself of this exception must provide individual transaction information for each trade in a U.S. Treasury Security occurring in a trading session to FINRA upon request.
        (c) This Supplementary Material .06 shall be in effect until April 12, 2019.

        .07 ATS Identification of Non-FINRA Member Counterparties for Transactions in U.S. Treasury Securities

        (a) Each “covered ATS,” as defined below, must provide to FINRA a list of all of its non-FINRA member subscribers, as that term is defined in Rule 300 of SEC Regulation ATS, and must obtain from FINRA an MPID for each such subscriber. Each covered ATS must comply with paragraph (c)(6) of this Rule by identifying each non-FINRA member subscriber in the contra-party field using the MPID assigned by FINRA for the subscriber. A covered ATS may not identify a contra-party using the “customer” or “non-member affiliate” identifiers.
        (b) For purposes of this Supplementary Material .07, a “covered ATS” is an alternative trading system (“ATS”), as that term is defined in Rule 300 of SEC Regulation ATS, that executed transactions in U.S. Treasury Securities against non-FINRA member subscribers of $10 billion or more in monthly par value, computed by aggregating buy and sell transactions, for any two months in the preceding calendar quarter.
        (c) An ATS must commence complying with the requirements of this Supplementary Material .07 within 60 calendar days of the end of the calendar quarter in which it becomes a covered ATS.
        (d) Once an ATS is deemed a covered ATS, it must continue to comply with the requirements of this Supplementary Material .07 irrespective of whether its volume of executed transactions in U.S. Treasury Securities against non-FINRA member subscribers falls below $10 billion or more in monthly par value in any two months in a calendar quarter.
        Amended by SR-FINRA-2018-023.
        Amended by SR-FINRA-2018-014 eff. July 10, 2018.
        Amended by SR-FINRA-2017-018 eff. Feb. 5, 2018.
        Amended by SR-FINRA-2017-032 eff. Oct. 20, 2017.
        Amended by SR-FINRA-2017-024 eff. July 10, 2017.
        Amended by SR-FINRA-2017-023 eff. July 10, 2017.
        Amended by SR-FINRA-2016-027 eff. July 10, 2017.
        Amended by SR-FINRA-2016-046 eff. July 10, 2017.
        Amended by SR-FINRA-2016-023 eff. March 20, 2017.
        Amended by SR-FINRA-2015-055 eff. July 18, 2016.
        Amended by SR-FINRA-2015-026 and SR-FINRA-2016-003 eff. July 18, 2016.
        Amended by SR-FINRA-2015-025 eff. Nov. 30, 2015.
        Amended by SR-FINRA-2014-050 eff. Nov. 2, 2015.
        Amended by SR-FINRA-2015-037 eff. Oct. 23, 2015.
        Amended by SR-FINRA-2013-046 eff. June 1, 2015.
        Amended by SR-FINRA-2013-038 eff. Oct. 25, 2013.
        Amended by SR-FINRA-2012-052 eff. July 22, 2013.
        Amended by SR-FINRA-2012-042 eff. July 22, 2013.
        Amended by SR-FINRA-2012-020 eff. Nov. 12, 2012.
        Amended by SR-FINRA-2012-047 eff. Oct. 12, 2012.
        Amended by SR-FINRA-2012-034 eff. Aug. 10, 2012.
        Amended by SR-FINRA-2011-053 eff. Feb. 6, 2012.
        Amended by SR-FINRA-2011-072 eff. Jan. 27, 2012.
        Amended by SR-FINRA-2011-025 eff. July 8, 2011.
        Amended by SR-FINRA-2011-012 eff. May 16, 2011.
        Amended by SR-FINRA-2009-065 eff. May 16, 2011.
        Amended by SR-FINRA-2011-002 eff. Jan. 5, 2011.
        Amended by SR-FINRA-2011-001 eff. Jan. 4, 2011.
        Amended by SR-FINRA-2009-010 eff. March 1, 2010.
        Amended by SR-FINRA-2009-002 eff. Jan 12, 2009.
        Amended by SR-FINRA-2008-060 eff. Jan. 12, 2009.
        Amended by SR-FINRA-2008-065 eff. Jan. 8, 2009.
        Amended by SR-FINRA-2008-057 eff. Dec. 15, 2008.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Amended by SR-FINRA-2007-007 eff. Dec. 13, 2007.
        Amended by SR-NASD-2006-110 eff. Jan. 9, 2007.
        Amended by SR-NASD-2004-57 Stage 2 eff. July 1, 2005.
        Amended by SR-NASD-2004-57 Stage 1 eff. Oct. 1, 2004.
        Amended by SR-NASD-2003-182 eff. June 17, 2004.
        Amended by SR-NASD-2003-78 eff. Oct. 1, 2003.
        Amended by SR-NASD-2002-46 eff. July 1, 2002.
        Amended by SR-NASD-2001-04 eff. July 1, 2002.
        Adopted by SR-NASD-99-65 eff. July 1, 2002.

        Selected Notices: 02-76, 03-36, 04-39, 04-51, 07-18, 07-61, 08-57, 09-57, 10-23, 10-55, 11-20, 11-53, 12-26, 12-48, 12-56, 13-15, 14-34, 15-14, 15-41, 15-47, 16-15, 16-38, 16-39.

    • SR-FINRA-2018-019

      • 12214. Payment of Arbitrators

        (a) Except as provided in paragraph (b) and in Rule 12800, FINRA will pay the panel an honorarium, as follows:
        (1) $300 to each arbitrator for each hearing session in which he or she participates;
        (2) an additional $125 per day to the chairperson for each hearing on the merits;
        (3) $50 to each arbitrator for travel to a hearing session that is postponed pursuant to Rule 12601;
        (4) $600 to each arbitrator if a hearing session other than a prehearing conference is postponed within 10 days before a scheduled hearing session pursuant to Rules 12601(a)(2) and (b)(2); and
        (5) $100 to each arbitrator scheduled to attend a prehearing conference that is cancelled within three business days of the prehearing conference by agreement of the parties or is requested by one or more parties within three business days of the prehearing conference and granted, pursuant to Rules 12500(d) and 12501(d).
        (b) The Director may authorize a higher or additional honorarium for the use of a foreign hearing location.
        (c) Payment for Deciding Discovery-Related Motions Without a Hearing Session
        (1) FINRA will pay each arbitrator an honorarium of $200 to decide a discovery-related motion without a hearing session. This paragraph does not apply to cases administered under Rule 12800.
        (2) For purposes of paragraph (c)(1), a discovery-related motion and any replies or other correspondence relating to the motion shall be considered to be a single motion.
        (3) The panel will allocate the cost of the honoraria under paragraph (c)(1) to the parties pursuant to Rule 12902(c).
        (d) Payment for Deciding Contested Subpoena Requests Without a Hearing Session
        (1) The honorarium for deciding one or more contested motions requesting the issuance of a subpoena without a hearing session shall be $250. The honorarium shall be paid on a per case basis to each arbitrator who decides the contested motion(s). The parties shall not be assessed more than $750 in fees under this paragraph in any arbitration proceeding. The honorarium shall not be paid for cases administered under Rule 12800.
        (2) For purposes of paragraph (d)(1), a contested motion requesting the issuance of a subpoena shall include a motion requesting the issuance of a subpoena, the draft subpoena, a written objection from the party opposing the issuance of the subpoena, and any other documents supporting a party's position.
        (3) The panel will allocate the cost of the honorarium under paragraph (d)(1) to the parties pursuant to Rule 12902(c).
        (e) Payment for Explained Decisions
        (1) The chairperson who is responsible for writing an explained decision pursuant to Rule 12904(g) will receive an additional honorarium of $400.
        (2) If the panel decides on its own to write an explained decision, then no panel member will receive the additional honorarium of $400.
        Amended by SR-FINRA-2018-019
        Amended by SR-FINRA-2018-012 eff. Feb. 21, 2018.
        Amended by SR-FINRA-2015-003 eff. July 6, 2015.
        Amended by SR-FINRA-2014-026 eff. Dec. 15, 2014.
        Amended by SR-FINRA-2008-051 eff. Apr. 13, 2009.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Paragraph (d) Adopted by SR-NASD-2006-101 eff. April 2, 2007.
        Paragraphs (a) through (c) adopted by SR-NASD-2003-158 eff. April 16, 2007.

        Selected Notice: 07-07, 08-57, 09-16, 14-49, 15-21.

      • 12500. Initial Prehearing Conference

        (a) After the panel is appointed, the Director will schedule an Initial Prehearing Conference before the panel, except as provided in paragraph (c) of this rule.
        (b) The Initial Prehearing Conference will generally be held by telephone. Unless the parties agree otherwise, the Director must notify each party of the time and place of the Initial Prehearing Conference at least 20 days before it takes place.
        (c) At the Initial Prehearing Conference, the panel will set discovery, briefing, and motions deadlines, schedule subsequent hearing sessions, and address other preliminary matters. The parties may agree to forgo the Initial Prehearing Conference only if they jointly provide the Director with the following information, in writing before the Initial Prehearing Conference is scheduled to be held:
        (1) A statement that the parties accept the panel;
        (2) Whether any other prehearing conferences will be held, and if so, for each prehearing conference, a minimum of four mutually agreeable dates and times, and whether the chairperson or the full panel will preside;
        (3) A minimum of four sets of mutually agreeable hearing dates;
        (4) A discovery schedule;
        (5) A list of all anticipated motions, with filing and response due dates; and
        (6) A determination regarding whether briefs will be submitted, and, if so, the due date for the briefs and any reply briefs.
        (d) If a cancellation request is agreed to by the parties or requested by one or more parties within three business days before a scheduled prehearing conference and granted, the party or parties shall be charged a fee of $100 per arbitrator scheduled to attend the prehearing conference. If more than one party requests the cancellation, the arbitrator(s) may allocate the $100 per-arbitrator fee between or among the requesting parties. If one party requests the cancellation, the arbitrator(s) shall allocate the fee to that party; provided, however, the arbitrator(s) may allocate all or a portion of the $100 per-arbitrator fee to the non-requesting party or parties if the arbitrator(s) determine that the non-requesting party or parties caused or contributed to the need for the cancellation. In the event that an extraordinary circumstance prevents a party or parties from making a timely cancellation request, the arbitrator(s) may use their discretion to waive the fee, provided a written explanation of such circumstance is received.
        Amended by SR-FINRA-2018-019
        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.

      • 12501. Other Prehearing Conferences

        (a) A prehearing conference may be scheduled upon the joint request of the parties or at the discretion of the Director. The Director will set the time and place of the prehearing conference and appoint a person to preside.
        (b) At a party's request, or at the discretion of the panel, the panel may schedule one or more additional prehearing conferences regarding any outstanding preliminary matters, including:
        (1) Discovery disputes;
        (2) Motions;
        (3) Witness lists and subpoenas;
        (4) Stipulations of fact;
        (5) Unresolved scheduling issues;
        (6) Contested issues on which the parties will submit briefs; and
        (7) Any other matter that will simplify or expedite the arbitration.
        (c) The panel will determine the time and place of any additional prehearing conferences. Prehearing conferences will generally be held by telephone. Unless the full panel is required under Rule 12503, prehearing conferences may be held before a single arbitrator, generally the chairperson.
        (d) If a cancellation request is agreed to by the parties or requested by one or more parties within three business days before a scheduled prehearing conference and granted, the party or parties shall be charged a fee of $100 per arbitrator scheduled to attend the prehearing conference. If more than one party requests the cancellation, the arbitrator(s) may allocate the $100 per-arbitrator fee between or among the requesting parties. If one party requests the cancellation, the arbitrator(s) shall allocate the fee to that party; provided, however, the arbitrator(s) may allocate all or a portion of the $100 per-arbitrator fee to the non-requesting party or parties if the arbitrator(s) determine that the non-requesting party or parties caused or contributed to the need for the cancellation. In the event that an extraordinary circumstance prevents a party or parties from making a timely cancellation request, the arbitrator(s) may use their discretion to waive the fee, provided a written explanation of such circumstance is received.
        Amended by SR-FINRA-2018-019
        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.

      • 13214. Payment of Arbitrators

        (a) Except as provided in paragraph (b), Rule 13800, and Rule 13806(f), FINRA will pay the panel an honorarium, as follows:
        (1) $300 to each arbitrator for each hearing session in which he or she participates;
        (2) an additional $125 per day to the chairperson for each hearing on the merits;
        (3) $50 to each arbitrator for travel to a hearing session that is postponed pursuant to Rule 13601;
        (4) $600 to each arbitrator if a hearing session other than a prehearing conference is postponed within 10 days before a scheduled hearing session pursuant to Rules 13601(a)(2) and (b)(2); and
        (5) $100 to each arbitrator scheduled to attend a prehearing conference that is cancelled within three business days of the prehearing conference by agreement of the parties or is requested by one or more parties within three business days of the prehearing conference and granted, pursuant to Rules 13500(d) and 13501(d).
        (b) The Director may authorize a higher or additional honorarium for the use of a foreign hearing location.
        (c) Payment for Deciding Discovery-Related Motions Without a Hearing Session
        (1) FINRA will pay each arbitrator an honorarium of $200 to decide a discovery-related motion without a hearing session. This paragraph does not apply to cases administered under Rule 13800 or pursuant to Rule 13806(d)(1).
        (2) For purposes of paragraph (c)(1), a discovery-related motion and any replies or other correspondence relating to the motion shall be considered to be a single motion.
        (3) The panel will allocate the cost of the honoraria under paragraph (c)(1) to the parties pursuant to Rule 13902(c).
        (d) Payment for Deciding Contested Subpoena Requests Without a Hearing Session
        (1) The honorarium for deciding one or more contested motions requesting the issuance of a subpoena without a hearing session shall be $250. The honorarium shall be paid on a per case basis to each arbitrator who decides the contested motion(s). The parties shall not be assessed more than $750 in fees under this paragraph in any arbitration proceeding. The honorarium shall not be paid for cases administered under Rule 13800 or pursuant to Rule 13806(d)(1).
        (2) For purposes of paragraph (d)(1), a contested motion requesting the issuance of a subpoena shall include a motion requesting the issuance of a subpoena, the draft subpoena, a written objection from the party opposing the issuance of the subpoena, and any other documents supporting a party's position.
        (3) The panel will allocate the cost of the honorarium under paragraph (d)(1) to the parties pursuant to Rule 13902(c).
        (e) Payment for Explained Decisions
        (1) The chairperson who is responsible for writing an explained decision pursuant to Rule 13904(g) will receive an additional honorarium of $400.
        (2) If the panel decides on its own to write an explained decision, then no panel member will receive the additional honorarium of $400.
        Amended by SR-FINRA-2018-019
        Amended by SR-FINRA-2018-012 eff. Feb. 21, 2018.
        Amended by SR-FINRA-2015-003 eff. July 6, 2015.
        Amended by SR-FINRA-2014-026 eff. Dec 15, 2014.
        Amended by SR-FINRA-2009-015 eff. Sep. 14, 2009.
        Amended by SR-FINRA-2008-051 eff. Apr. 13, 2009.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Paragraph (d) Adopted by SR-NASD-2006-101 eff. April 2, 2007.
        Paragraphs (a) through (c) adopted by SR-NASD-2003-158 eff. April 16, 2007.

        Selected Notice: 07-07, 08-57, 09-16, 09-48, 14-49, 15-21.

      • 13500. Initial Prehearing Conference

        (a) After the panel is appointed, the Director will schedule an Initial Prehearing Conference before the panel, except as provided in paragraph (c) of this rule.
        (b) The Initial Prehearing Conference will generally be held by telephone. Unless the parties agree otherwise, the Director must notify each party of the time and place of the Initial Prehearing Conference at least 20 days before it takes place.
        (c) At the Initial Prehearing Conference, the panel will set discovery, briefing, and motions deadlines, schedule subsequent hearing sessions, and address other preliminary matters. The parties may agree to forgo the Initial Prehearing Conference only if they jointly provide the Director with the following information, in writing before the Initial Prehearing Conference is scheduled to be held:
        (1) A statement that the parties accept the panel;
        (2) Whether any other prehearing conferences will be held, and if so, for each prehearing conference, a minimum of four mutually agreeable dates and times, and whether the chairperson or the full panel will preside;
        (3) A minimum of four sets of mutually agreeable hearing dates;
        (4) A discovery schedule;
        (5) A list of all anticipated motions, with filing and response due dates; and
        (6) A determination regarding whether briefs will be submitted, and, if so, the due date for the briefs and any reply briefs.
        (d) If a cancellation request is agreed to by the parties or requested by one or more parties within three business days before a scheduled prehearing conference and granted, the party or parties shall be charged a fee of $100 per arbitrator scheduled to attend the prehearing conference. If more than one party requests the cancellation, the arbitrator(s) may allocate the $100 per-arbitrator fee between or among the requesting parties. If one party requests the cancellation, the arbitrator(s) shall allocate the fee to that party; provided, however, the arbitrator(s) may allocate all or a portion of the $100 per-arbitrator fee to the non-requesting party or parties if the arbitrator(s) determine that the non-requesting party or parties caused or contributed to the need for the cancellation. In the event that an extraordinary circumstance prevents a party or parties from making a timely cancellation request, the arbitrator(s) may use their discretion to waive the fee, provided a written explanation of such circumstance is received.
        Amended by SR-FINRA-2018-019
        Amended by SR-FINRA-2016-029 eff. April 3, 2017.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Adopted by SR-NASD-2004-011 eff. April 16, 2007.

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

      • 13501. Other Prehearing Conferences

        (a) A prehearing conference may be scheduled upon the joint request of the parties or at the discretion of the Director. The Director will set the time and place of the prehearing conference and appoint a person to preside.
        (b) At a party's request, or at the discretion of the panel, the panel may schedule one or more additional prehearing conferences regarding any outstanding preliminary matters, including:
        (1) Discovery disputes;
        (2) Motions;
        (3) Witness lists and subpoenas;
        (4) Stipulations of fact;
        (5) Unresolved scheduling issues;
        (6) Contested issues on which the parties will submit briefs; and
        (7) Any other matter that will simplify or expedite the arbitration.
        (c) The panel will determine the time and place of any additional prehearing conferences. Prehearing conferences will generally be held by telephone. Unless the full panel is required under Rule 13503, prehearing conferences may be held before a single arbitrator, generally the chairperson.
        (d) If a cancellation request is agreed to by the parties or requested by one or more parties within three business days before a scheduled prehearing conference and granted, the party or parties shall be charged a fee of $100 per arbitrator scheduled to attend the prehearing conference. If more than one party requests the cancellation, the arbitrator(s) may allocate the $100 per-arbitrator fee between or among the requesting parties. If one party requests the cancellation, the arbitrator(s) shall allocate the fee to that party; provided, however, the arbitrator(s) may allocate all or a portion of the $100 per-arbitrator fee to the non-requesting party or parties if the arbitrator(s) determine that the non-requesting party or parties caused or contributed to the need for the cancellation. In the event that an extraordinary circumstance prevents a party or parties from making a timely cancellation request, the arbitrator(s) may use their discretion to waive the fee, provided a written explanation of such circumstance is received.
        Amended by SR-FINRA-2018-019
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Adopted by SR-NASD-2004-011 eff. April 16, 2007.

        Selected Notice: 07-07, 08-57.

    • SR-FINRA-2010-056

      • 1113. Restriction Pertaining to New Member Applications

        This rule was introduced with the filing of SR-FINRA-2010-056 which has been approved by the SEC. The effective date for this rule has not yet been determined.

        The Department of Member Regulation shall reject an application for membership with FINRA pursuant to NASD Rule 1013 in which either the applicant or an associated person, as defined in Article I of the FINRA By-Laws, is subject to a statutory disqualification, as defined in Article III, Section 4 of the FINRA By-Laws. Any such application as described in this Rule that is approved by virtue of Department of Member Regulation error or applicant error (including, but not limited to, an inadvertent or intentional misstatement or omission by the applicant or associated person) shall be subject to cancellation of membership in accordance with Rule 9555.
        Adopted by SR-FINRA-2010-056.

      • 9521. Purpose and Definitions

        (a) Purpose
        The Rule 9520 Series sets forth procedures for a person to become or remain associated with a member, notwithstanding the existence of a statutory disqualification as defined in Article III, Section 4 of the FINRA By-Laws and for a current member or person associated with a member to obtain relief from the eligibility or qualification requirements of the FINRA By-Laws and FINRA rules. Such actions hereinafter are referred to as "eligibility proceedings."
        (b) Definitions
        (1) The term "Application" means FINRA's Form MC-400 for individuals or Form MC-400A for members, filed with the Department of Registration and Disclosure (“RAD”).
        (2) The term "disqualified member" means a member that is or becomes subject to a disqualification or is otherwise ineligible for membership under Article III, Section 3 of the FINRA By-Laws.
        (3) The term "disqualified person" means an associated person or person seeking to become an associated person who is or becomes subject to a disqualification or is otherwise ineligible for association under Article III, Section 3 of the FINRA By-Laws.
        (4) The term "sponsoring member" means the member that is sponsoring the association or continued association of a disqualified person to be admitted, readmitted, or permitted to continue in association. A sponsoring member, however, may not sponsor the association or continued association of a disqualified person to be admitted, readmitted, or permitted to continue in association if that disqualified person is directly or indirectly the beneficial owner of more than five percent of the sponsoring member.
        Amended by SR-FINRA-2010-056.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Amended by SR-NASD-99-76 eff. Sept. 11, 2000.
        Amended by SR-NASD-97-28 eff. Aug. 7, 1997.

        Selected Notices: 00-56, 08-57.

      • 9522. Initiation of Eligibility Proceeding; Member Regulation Consideration

        (a) Initiation by FINRA
        (1) Issuance of Notice of Disqualification or Ineligibility
        If FINRA staff has reason to believe that a disqualification exists or that a member or person associated with a member otherwise fails to meet the eligibility requirements of FINRA, FINRA staff shall issue a written notice to the member. The notice shall specify the grounds for such disqualification or ineligibility. FINRA staff shall not issue such written notice to members with respect to disqualifications arising solely from findings or orders specified in Section 15(b)(4)(D), (E), or (H) of the Exchange Act or arising under Section 3(a)(39)(E) of the Exchange Act, unless the member is required to file an application pursuant to a Regulatory Notice entitled "Eligibility Proceedings: Amendments to FINRA Rule 9520 Series to Establish Procedures Applicable to Firms and Associated Persons Subject to Certain Statutory Disqualifications" (the "SD Regulatory Notice").
        (2) Notice Regarding a Member
        A notice issued to a disqualified member shall state that the disqualified member may apply for relief by filing an application or, in the case of a matter set forth in Rule 9522(e)(1), a written request for relief, within ten business days after service of the notice. If the member fails to file the application or, where appropriate, the written request for relief, within the 10-day period, the membership of the member shall be canceled, unless the Department of Member Regulation grants an extension for good cause shown.
        (3) Notice Regarding an Associated Person
        A notice issued regarding a disqualified person to a member shall state that such member may file an application on behalf of itself and such person or, in the case of a matter set forth in Rule 9522(e)(1), a written request for relief, within ten business days after service of the notice. If the member fails to file the application or, where appropriate, the written request for relief, within the 10-day period, the registration of the disqualified person shall be revoked, unless the Department of Member Regulation grants an extension for good cause shown.
        (4) Service
        A notice issued under this paragraph (a) shall be served by facsimile or pursuant to Rules 9131 and 9134.
        (b) Obligation of Member to Initiate Proceeding
        (1) A member shall file an application or, in the case of a matter set forth in Rule 9522(e)(1), a written request for relief, with RAD, if the member determines prior to receiving a notice under paragraph (a) that:
        (A) it has become a disqualified member;
        (B) a person associated with such member has become a disqualified person; or
        (C) the member wishes to sponsor the association of a person who is a disqualified person.
        (2) For any disqualifications arising solely from findings or orders specified in Section 15(b)(4)(D), (E), or (H) of the Exchange Act or arising under Section 3(a)(39)(E) of the Exchange Act, a member shall not file an application unless instructed to do so by the SD Regulatory Notice.
        (c) Withdrawal of Application
        A member may withdraw its application or written request for relief prior to a hearing by filing a written notice with RAD pursuant to Rules 9135, 9136, and 9137. A member may withdraw its application after the start of a hearing but prior to the issuance of a decision by the National Adjudicatory Council by filing a written notice with RAD and the Office of General Counsel pursuant to Rules 9135, 9136, and 9137.
        (d) Ex Parte Communications
        The prohibitions against ex parte communications set forth in Rule 9143 shall become effective under the Rule 9520 Series when FINRA staff has initiated the eligibility proceeding and FINRA staff has knowledge that a member intends to file an application or written request for relief pursuant to the Rule 9520 Series.
        (e) Member Regulation Consideration
        (1) Matters that may be Approved by the Department of Member Regulation without the Filing of an Application
        The Department of Member Regulation, as it deems consistent with the public interest and the protection of investors, is authorized to approve a written request for relief from the eligibility requirements by a disqualified member or a sponsoring member without the filing of an application by such disqualified member or sponsoring member if a disqualified member or disqualified person is subject to one or more of the following conditions but is not otherwise subject to disqualification:
        (A) a disqualified member or disqualified person is subject to a disqualification based on an injunction that was entered ten or more years prior to the proposed admission or continuance by order, judgment, or decree of any court of competent jurisdiction from acting as an investment adviser, underwriter, broker, dealer, municipal securities dealer, government securities broker, government securities dealer, transfer agent, foreign person performing a function substantially equivalent to any of the above, entity or person required to be registered under the Commodity Exchange Act, or any substantially equivalent foreign statute or regulation, or as an affiliated person or employee of any investment company, bank, insurance company, foreign entity substantially equivalent to any of the above, or entity or person required to be registered under the Commodity Exchange Act or any substantially equivalent foreign statute or regulation, or from engaging in or continuing any conduct or practice in connection with any such activity, or in connection with the purchase or sale of any security.
        (B) a sponsoring member makes a request to change the supervisor of a disqualified person; or
        (C) a disqualified member or sponsoring member is a member of both FINRA and another self-regulatory organization; and:
        (i) the other self-regulatory organization intends to file a Notice under SEA Rule 19h-1 approving the membership continuance of the disqualified member or, in the case of a sponsoring member, the proposed association or continued association of the disqualified person; and
        (ii) the Department of Member Regulation concurs with that determination.
        (2) Matters that may be Approved by the Department of Member Regulation after the Filing of an Application
        The Department of Member Regulation, as it deems consistent with the public interest and the protection of investors, is authorized to approve an application filed by a disqualified member or sponsoring member if the disqualified member or disqualified person is subject to one or more of the following conditions but is not otherwise subject to disqualification (other than a matter set forth in paragraph (e)(1)):
        (A) The disqualified person is already a participant in, a member of, or a person associated with a member of, a self-regulatory organization (other than FINRA), and the terms and conditions of the proposed admission to FINRA are the same in all material respects as those imposed or not disapproved in connection with such person's prior admission or continuance pursuant to an order of the SEC under SEA Rule 19h-1 or other substantially equivalent written communication;
        (B) The Department of Member Regulation finds, after reasonable inquiry, that except for the identity of the employer concerned, the terms and conditions of the proposed admission or continuance are the same in all material respects as those imposed or not disapproved in connection with a prior admission or continuance of the disqualified person pursuant to an order of the SEC under SEA Rule 19h-1 or other substantially equivalent written communication, and that there is no intervening conduct or other circumstance that would cause the employment to be inconsistent with the public interest or the protection of investors;
        (C) The disqualification previously was a basis for the institution of an administrative proceeding pursuant to a provision of the federal securities laws, and was considered by the SEC in determining a sanction against such disqualified person in the proceeding; and the SEC concluded in such proceeding that it would not restrict or limit the future securities activities of such disqualified person in the capacity now proposed, or, if it imposed any such restrictions or limitations for a specified time period, such time period has elapsed;
        (D) The disqualification consists of a court order or judgment of injunction or conviction, and such order or judgment:
        (i) expressly includes a provision that, on the basis of such order or judgment, the SEC will not institute a proceeding against such person pursuant to Section 15(b) or 15B of the Exchange Act or that the future securities activities of such persons in the capacity now proposed will not be restricted or limited; or
        (ii) includes such restrictions or limitations for a specified time period and such time period has elapsed;
        (E) The disqualified person's functions are purely clerical and/or ministerial in nature; or
        (F) The disqualification arises from findings or orders specified in Section 15(b)(4)(D), (E), or (H) of the Exchange Act or arises under Section 3(a)(39)(E) of the Exchange Act.
        (3) Rights of Disqualified Member, Sponsoring Member, Disqualified Person, and Department of Member Regulation
        (A) In the event the Department of Member Regulation does not approve a written request for relief from the eligibility requirements pursuant to paragraph (e)(1), the disqualified member or sponsoring member may file an application, and such member shall have the right to proceed under Rule 9523 or 9524, as applicable. The Department of Member Regulation may require a disqualified member or sponsoring member to file an application with RAD, notwithstanding the provisions of paragraph (e)(1).
        (B) In the event the Department of Member Regulation does not approve an application pursuant to paragraph (e)(2), the disqualified member or sponsoring member shall have the right to proceed under Rule 9523 or 9524, as applicable.
        Amended by SR-FINRA-2010-056.
        Amended by SR-FINRA-2008-045 eff. June 15, 2009.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Amended by SR-NASD-2004-133 eff. March 7, 2005.
        Amended by SR-NASD-2002-02 eff. January 3, 2002.
        Amended by SR-NASD-99-76 eff. Sept. 11, 2000.
        Amended by SR-NASD-98-57 eff. March 26, 1999.
        Amended by SR-NASD-97-81 eff. Jan. 16, 1998.
        Adopted by SR-NASD-97-28 eff. Aug. 7, 1997.

        Selected Notices: 99-16, 00-56, 05-12, 08-57, 09-19.

      • 9523. Acceptance of Member Regulation Recommendations and Supervisory Plans by Consent Pursuant to SEA Rule 19h-1

        (a) With respect to all disqualifications, except those arising solely from findings or orders specified in Section 15(b)(4)(D), (E) or (H) of the Exchange Act or arising under Section 3(a)(39)(E) of the Exchange Act, after an application is filed, the Department of Member Regulation may recommend the continued membership of a disqualified member or sponsoring member or the association or continuing association of a disqualified person pursuant to a supervisory plan where the disqualified member, sponsoring member, and/or disqualified person, as the case may be, consent to the recommendation and the imposition of the supervisory plan. The disqualified member, sponsoring member, and/or disqualified person, as the case may be, shall execute a letter consenting to the imposition of the supervisory plan.
        (1) If a disqualified member, sponsoring member, and/or disqualified person submitted an executed letter consenting to a supervisory plan, by the submission of such letter, the disqualified member, sponsoring member and/or disqualified person waive:
        (A) the right to a hearing before a Hearing Panel and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or otherwise challenge the validity of the supervisory plan, if the supervisory plan is accepted.
        (B) any right of the disqualified member, sponsoring member, and/or disqualified person to claim bias or prejudgment by the Department of Member Regulation, the General Counsel, the National Adjudicatory Council, or any member of the National Adjudicatory Council, in connection with such person's or body's participation in discussions regarding the terms and conditions of the Department of Member Regulation's recommendation or the supervisory plan, or other consideration of the recommendation or supervisory plan, including acceptance or rejection of such recommendation or supervisory plan; and
        (C) any right of the disqualified member, sponsoring member, and/or disqualified person to claim that a person violated the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of the recommendation or supervisory plan, or other consideration of the recommendation or supervisory plan, including acceptance or rejection of such recommendation or supervisory plan.
        (2) If a recommendation or supervisory plan is rejected, the disqualified member, sponsoring member, and/or disqualified person shall be bound by the waivers made under paragraph (a)(1) for conduct by persons or bodies occurring during the period beginning on the date the supervisory plan was submitted and ending upon the rejection of the supervisory plan and shall have the right to proceed under this rule and Rule 9524, as applicable.
        (3) If the disqualified member, sponsoring member, and/or disqualified person execute the letter consenting to the supervisory plan, it shall be submitted to the Office of General Counsel by the Department of Member Regulation with a proposed Notice under SEA Rule 19h-1, where required. The Office of General Counsel shall forward the supervisory plan and proposed Notice under SEA Rule 19h-1, if any, to the Chairman of the Statutory Disqualification Committee, acting on behalf of the National Adjudicatory Council. The Chairman of the Statutory Disqualification Committee may accept or reject the recommendation of the Department of Member Regulation and the supervisory plan or refer them to the National Adjudicatory Council for acceptance or rejection by the National Adjudicatory Council.
        (4) If the recommendation and supervisory plan is accepted by the National Adjudicatory Council or the Chairman of the Statutory Disqualification Committee, it shall be deemed final and, where required, the proposed Notice under SEA Rule 19h-1 will be filed by FINRA. If the recommendation and supervisory plan are rejected by the Chairman of the Statutory Disqualification Committee or the National Adjudicatory Council, FINRA may take any other appropriate action with respect to the disqualified member, sponsoring member, and/or disqualified person. If the recommendation and supervisory plan are rejected, the disqualified member, sponsoring member, and/or disqualified person shall not be prejudiced by the execution of the letter consenting to the supervisory plan under this paragraph (a) and the letter may not be introduced into evidence in any proceeding.
        (b) With respect to disqualifications arising solely from findings or orders specified in Section 15(b)(4)(D), (E) or (H) of the Exchange Act or arising under Section 3(a)(39)(E) of the Exchange Act, after an application is filed, in approving an application under Rule 9522(e)(2)(F), the Department of Member Regulation is authorized to accept the continued membership of a disqualified member or sponsoring member or the association or continuing association of a disqualified person pursuant to a supervisory plan where the disqualified member, sponsoring member, and/or disqualified persons, as the case may be, consent to the imposition of the supervisory plan. The disqualified member, sponsoring member, and/or disqualified person, as the case may be, shall execute a letter consenting to the imposition of the supervisory plan. The Department of Member Regulation shall prepare a proposed Notice under SEA Rule 19h-1, where required, and FINRA shall file such Notice.
        (1) If a disqualified member, sponsoring member, and/or disqualified person submitted an executed letter consenting to a supervisory plan, by the submission of such letter, the disqualified member, sponsoring member and/or disqualified person waive:
        (A) the right to a hearing before a Hearing Panel and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or otherwise challenge the validity of the supervisory plan, if the supervisory plan is accepted;
        (B) any right of the disqualified member, sponsoring member, and/or disqualified person to claim bias or prejudgment by the Department of Member Regulation or the General Counsel in connection with such person's or body's participation in discussions regarding the terms and conditions of the Department of Member Regulation's recommended supervisory plan, or other consideration of the supervisory plan, including acceptance or rejection of such recommendation or supervisory plan; and
        (C) any right of the disqualified member, sponsoring member, and/or disqualified person to claim that a person violated the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of the supervisory plan, or other consideration of the supervisory plan, including acceptance or rejection of such supervisory plan.
        (2) If the supervisory plan is rejected, the disqualified member, sponsoring member, and/or disqualified person shall be bound by the waivers made under paragraph (b)(1) for conduct by persons or bodies occurring during the period beginning on the date the supervisory plan was submitted and ending upon the rejection of the supervisory plan and shall have the right to proceed under Rule 9524.
        Amended by SR-FINRA-2010-056.
        Amended by SR-FINRA-2008-045 eff. June 15, 2009.
        Amended by SR-FINRA-2008-021 eff. Dec. 15, 2008.
        Adopted by SR-NASD-99-76 eff. Sept. 11, 2000.

        Selected Notices: 00-56, 08-57, 09-19.