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  • ARTICLE V NATIONAL ADJUDICATORY COUNCIL

    • Authority

      Sec. 5.1  The National Adjudicatory Council may be authorized to act for the FINRA Board in a manner consistent with these By-Laws, the Rules of the Corporation, and the Delegation Plan with respect to an appeal or review of a disciplinary proceeding, a statutory disqualification proceeding, or a membership proceeding; a review of an offer of settlement, a letter of acceptance, waiver, and consent, and a minor rule violation plan letter; the exercise of exemptive authority; and such other proceedings or actions authorized by the Rules of the Corporation. The National Adjudicatory Council also shall consider and make recommendations to the FINRA Board on policy and rule changes relating to the business and sales practices of FINRA members and associated persons and enforcement policies, including policies with respect to fines and other sanctions. The FINRA Board may delegate such other powers and duties to the National Adjudicatory Council as the FINRA Board deems appropriate in a manner not inconsistent with the Delegation Plan.
      Amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Number of Members and Qualifications

      Sec. 5.2  (a) The National Adjudicatory Council shall consist of 15 members. The number of Non-Industry Members, including at least three Public Members, shall exceed the number of Industry Members. Industry Members shall include two Small Firm NAC Members, one Mid-Size Firm NAC Member, two Large Firm NAC Members, and two at-large Industry Members. The at-large Industry Members shall be appointed to the NAC without being designated as Small, Mid-Size, or Large Firm NAC Members.
      (b) The incumbent National Adjudicatory Council shall elect a Chair and a Vice Chair from among the members serving during the following term. The Chair and Vice Chair shall have such powers and duties as may be determined from time to time by the National Adjudicatory Council. The FINRA Board, by resolution adopted by a majority of Governors then in office, may remove the Chair or Vice Chair from such position at any time for refusal, failure, neglect, or inability to discharge his or her duties.
      Amended by SR-FINRA-2016-014 eff. Aug. 11, 2016.
      Amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-2007-023 eff. July 30, 2007.
      Amended by SR-NASD-99-36 eff. Aug. 4, 1999.
      Amended by SR-NASD-98-36 eff. July 15, 1998.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

      Selected Notice: 16-27

    • Appointments

      Sec. 5.3  The FINRA Board shall appoint a National Adjudicatory Council and all its members. The at-large Industry and Non-Industry Members of the NAC shall be appointed by the FINRA Board from candidates recommended by the Nominating Committee. The Small Firm, Mid-Size Firm and Large Firm NAC Members also shall be appointed by the FINRA Board from candidates recommended by the Nominating Committee, but in the event of a contested election, the Small Firm, Mid-Size Firm and Large Firm NAC Members shall be elected by the membership by a plurality of the votes of the members entitled to vote for such category in accordance with the provisions of these By-Laws and thereafter appointed by the FINRA Board.

      Adopted by SR-FINRA-2008-046 eff. Nov. 6, 2008.

    • Nomination Process

      Sec. 5.4  The Secretary of the Corporation shall collect from each nominee for the office of member of the National Adjudicatory Council such information as is reasonably necessary to serve as the basis for a determination of the nominee's classification as an Industry, Small Firm, Mid-Size Firm, Large Firm, Non-Industry, or Public Member, and the Secretary shall certify to the Nominating Committee each nominee's classification. After appointment to the National Adjudicatory Council, each member shall update such information at least annually and upon request of the Secretary, and shall report immediately to the Secretary any change in such classification.
      Renumbered from Sec. 5.3 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-98-36 eff. July 15, 1998.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Rejection of Nominating Committee Nominee

      Sec. 5.5  If the FINRA Board rejects the nominee of the Nominating Committee, the Nominating Committee shall repeat the nomination procedures in Sections 5.2 though 5.4. The FINRA Board may not reject Small Firm, Mid-Size Firm and Large Firm NAC Members elected in accordance with the provisions of Article VI.
      Adopted by SR-FINRA-2008-046 eff. Nov. 6, 2008.

    • Term of Office

      Sec. 5.6  (a) After a transitional period beginning in January 2017 and ending in December 2019, during which members may be appointed to terms of office necessary to achieve the requirements of Section 5.6(b) of this Article, each National Adjudicatory Council member shall hold office for a term of four years or until a successor is duly appointed and qualified, except in the event of earlier termination from office by reason of death, resignation, removal, disqualification, or other reason.
      (b) The NAC shall be divided into four classes, as equal in number as practicable, with terms of office that commence and expire on a staggered, annual basis.
      (c) No member may serve consecutive terms, except that if a member is appointed to fill a term of less than one year, such member may serve a single four year term following the expiration of such member's initial term.
      Amended by SR-FINRA-2016-014 eff. Aug. 11, 2016.
      Renumbered from Sec. 5.4 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-2001-74 eff. Oct. 17, 2001.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

      Selected Notice: 16-27

    • Resignation

      Sec. 5.7  A member of the National Adjudicatory Council may resign at any time upon written notice of resignation to the FINRA Board. Any such resignation shall take effect at the time specified therein, or if the time is not specified, upon receipt thereof, and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make such resignation effective.
      Renumbered from Sec. 5.5 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Removal

      Sec. 5.8  Any or all of the members of the National Adjudicatory Council may be removed from office at any time for refusal, failure, neglect, or inability to discharge the duties of such office by majority vote of the FINRA Board.
      Renumbered from Sec. 5.6 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Disqualification

      Sec. 5.9  Notwithstanding Section 5.6, the term of office of a National Adjudicatory Council member shall terminate immediately upon a determination by the FINRA Board, by a majority vote, that: (a) the member no longer satisfies the classification (Industry, Non-Industry, or Public member) for which the member was appointed or elected; and (b) the member's continued service as such would violate the compositional requirements of the National Adjudicatory Council set forth in Section 5.2. If the term of office of a National Adjudicatory Council member terminates under this Section, and the remaining term of office of such member at the time of termination is not more than six months, during the period of vacancy the National Adjudicatory Council shall not be deemed to be in violation of the compositional requirements of Section 5.2 by virtue of such vacancy.
      Renumbered from Sec. 5.7 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Filling of Vacancies

      Sec. 5.10  If a position on the National Adjudicatory Council becomes vacant, whether because of death, disability, disqualification, removal, or resignation, the Nominating Committee shall nominate, and the FINRA Board shall appoint a person satisfying the classification (Industry, Non-Industry, or Public) for the position as provided in Section 5.2(a) to fill such vacancy, except that if the remaining term of office for the vacant position is not more than six months, no replacement shall be required and no violation of the compositional requirements of Section 5.2 shall be deemed to have occurred. For any vacancy of a seat on the National Adjudicatory Council for which the remaining term of office is more than six months, such vacancy shall be filled in accordance with Articles V and VI of these By-Laws, and, during this process, no violation of the compositional requirements of Section 5.2 shall be deemed to have occurred.
      Renumbered from Sec. 5.8 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Quorum and Voting

      Sec. 5.11  At all meetings of the National Adjudicatory Council, a quorum for the transaction of business shall consist of a majority of the National Adjudicatory Council, including not less than 50 percent of the Non-Industry members. In the absence of a quorum, a majority of the members present may adjourn the meeting until a quorum is present.
      Renumbered from Sec. 5.9 by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Meetings

      Sec. 5.12  The members of the National Adjudicatory Council may participate in a meeting through the use of a conference telephone or similar communications equipment by means of which all persons participating in the meeting may hear one another, and such participation in a meeting shall constitute presence in person at such meeting for all purposes.
      Renumbered from Sec. 5.10 by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.

    • Review Subcommittee

      Sec. 5.13  The National Adjudicatory Council shall appoint a Review Subcommittee to determine whether disciplinary and membership proceedings decisions should be called for review by the National Adjudicatory Council under the Rules of the Corporation and to perform any other function authorized by the Rules of the Corporation. The Review Subcommittee shall be composed of no fewer than two and no more than four members of the National Adjudicatory Council. The number of Non-Industry Members shall equal or exceed the number of Industry Members. At all meetings of the Review Subcommittee, a quorum for the transaction of business shall consist of not less than 50 percent of the members of the Review Subcommittee, including not less than 50 percent of the Non-Industry Members.
      Renumbered from Sec. 5.11 and amended by SR-FINRA-2008-046 eff. Nov. 6, 2008.
      Amended by SR-NASD-97-71 eff. Jan. 15, 1998.