How are FINRA’s Disciplinary Decisions Rendered Appealed?

By Alisa Radut, Fall 2017 IAC Student Intern

If FINRA determines that a firm has violated the securities laws, the Enforcement Department or Market Regulation Department can file a complaint with the Office of Hearing Officers, which arranges an impartial three-person panel to hear and decide the case.

The panel is comprised of mostly current or former FINRA District Committees and Market Regulation Committee security industry members, former FINRA Governors, or former members of the National Adjudicatory Council. Upon issuing a decision, the FINRA hearing panel will provide a written explanation setting forth the reasons for its ruling, as well as determine what sanctions are appropriate for certain violations.

To ensure that hearings are fair to all parties involved, they are conducted in accordance with FINRA’s Code of Procedure.  Under FINRA’s disciplinary procedures, a firm or individual may appeal the decision of a hearing panel to the National Adjudicatory Council (NAC).  The NAC is the national committee which reviews initial decisions issued in FINRA disciplinary and membership proceedings.  The NAC may also initiate a review of a decision on its own.  During the hearing, the parties may present evidence to support a determination of conduct that violates FINRA rules, SEC regulations or federal securities laws, to support their case.  The NAC will then determine if a hearing panel’s findings were legally correct, factually supported and consistent with FINRA’s Sanction Guidelines, by doing any number of things: affirming, reversing, modifying, setting aside, or remanding the decision for further proceeding.