About the Office of Hearing Officers
The Office of Hearing Officers is an office of impartial adjudicators of disciplinary cases brought by FINRA’s Enforcement Department or Market Regulation Department against FINRA members. The Office of Hearing Officers maintains strict independence from FINRA’s regulatory programs and is physically separated from other FINRA departments. Hearing Officers are not involved in the investigative process. Employment protections exist for Hearing Officers to further ensure their independence; they may not be terminated except by the FINRA Chief Executive Officer, with a right to appeal to the Audit Committee of FINRA’s Board of Governors.
1. Filing of Complaints and Appointment of Hearing Panel; Conflicts Procedure
When FINRA determines that violations of securities rules have occurred and that formal disciplinary action is necessary, the Enforcement Department or Market Regulation Department files a complaint with the Office of Hearing Officers. The Office arranges a three-person panel to hear the case. The panel is chaired by a Hearing Officer who is an employee of the Office of Hearing Officers. The Chief Hearing Officer appoints two industry panelists, drawn primarily from a pool of current and former securities industry members of FINRA’s District Committees, as well as its Market Regulation Committee, former members of FINRA’s National Adjudicatory Council, and former FINRA Governors.
Before a Hearing Officer or industry panelist is appointed to serve on a hearing panel, the Office of Hearing Officers evaluates the candidate to ensure that he or she is free of conflicts of interest and that there are no circumstances existing where the candidate’s fairness might reasonably be questioned. Following appointment, if a Hearing Officer or an industry panelist learns of a conflict of interest or other circumstance in which his or her fairness might reasonably be questioned, he or she must inform the Chief Hearing Officer and withdraw from the matter.
Hearings are conducted at locations throughout the United States for the convenience of the respondents. The hearing is governed by FINRA’s Code of Procedure, which was approved by the Securities and Exchange Commission. The Code ensures that hearings are conducted in a manner that is fair to the parties, that the hearing panels act in an impartial and objective manner, and that cases are concluded as expeditiously as possible.
The Hearing Officer administers each case by issuing orders, conducting pre-hearing conferences, ruling on motions and the admissibility of evidence, and issuing any necessary default decisions and other orders under the Code of Procedure. Before each hearing, the parties submit lists or their proposed witnesses and exhibits together with pre-hearing briefs that set forth a summary of their case and legal theories. At the conclusion of the hearing or shortly thereafter, the hearing panel deliberates and the Hearing Officer prepares a draft hearing panel decision that includes factual findings, legal conclusions, and, when appropriate, imposes sanctions. The draft is circulated among the panel members, who have an opportunity to comment upon and edit the draft. The time required to develop a final decision can depend upon the complexity of the legal issues in the case and the nature of facts in dispute.
Hearing Officers also conduct a variety of expedited proceedings, including temporary cease and desist proceedings, under the Code of Procedure.
3. Possible Sanctions
FINRA’s Enforcement Department and Market Regulation Department can seek, and a hearing panel may impose, a variety of sanctions, including the suspension or expulsion of a broker-dealer from FINRA membership, the suspension or bar of individuals from association with any FINRA member, fines, restitution, disgorgement of ill-gotten gains, censures, and cease-and-desist orders against broker-dealers and individuals. In determining the appropriate sanction to be imposed where a violation is found, the hearing panel considers FINRA’s Sanction Guidelines.
4. Decisions and Appeals
Hearing panel decisions and significant orders are posted on the Office of Hearing Officers’ website, www.finra.org/oho. Parties may appeal a hearing panel decision to the National Adjudicatory Council, which performs a de novo review and can affirm, reverse, modify, set aside, or remand for further proceedings.
Appeals from decisions of the National Adjudicatory Council are made to the Securities and Exchange Commission.