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  • Recently Approved Rule Changes Pending Determination of Effective Date

    • 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.