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Interacting With FINRA

Interacting With FINRA

FINRA monitors the activities of FINRA firms and their registered representatives for compliance with FINRA’s rules, as well as the rules and regulations of the federal government, Municipal Securities Rulemaking Board (MSRB) and other self- regulatory organizations. In this regard, FINRA conducts examinations of firms as well as their representatives.

FINRA Examinations

FINRA conducts more than one thousand on-site firm and branch office examinations each year. These examinations are meant to determine whether firms and their registered representatives are in compliance with federal securities laws, rules and regulations. Member firms and their brokers are also subject to “cause examinations” which may stem from a customer complaint or disclosure in a regulatory filing.

Cooperation With FINRA Staff

You may be asked to provide information, documentation or to testify on the record during the examination or investigative process. If you are contacted by FINRA staff in conjunction with an examination or investigation, you must cooperate fully and answer all written and oral inquiries clearly and truthfully in accordance with your obligations under FINRA Rule 8210. You should always feel free to ask the examiner any questions that you have about the requests. Failure to respond to requests for information or for making misrepresentations to FINRA may lead to you being permanently barred from the securities business.

The obligation to respond to FINRA continues for at least two years after you have left the securities industry, during which time FINRA retains regulatory and enforcement jurisdiction over you. However, the two-year period may be extended if your 

 is amended to disclose certain reportable misconduct. Your firm may be notified of any FINRA investigation in which you could be involved. You may have to update and amend your   with your firm as a result of a FINRA investigation or customer complaint, among other factors, just as your firm may have to update your Form U5 if these issues present themselves after you have left the firm.

Violations

FINRA prepares a report at the conclusion of a FINRA staff examination or investigation, and if apparent violations of rules and regulations are discovered FINRA may initiate a disciplinary action. Our Adjudication page discusses the system FINRA uses for disciplining firms and individuals who break the rules.

Public Information

In addition to the information in BrokerCheck, arbitration awards and disciplinary actions, FINRA also makes public fines greater than $10,000 and when a firm or registered representative is suspended or barred from the securities business. The 

, which are published by the FINRA Board of Governors, lists typical sanctions that may be expected for various rule violations and are a good resource in helping you better understand the importance of maintaining compliance with FINRA rules and regulations.

Notification to State and Federal Authorities

FINRA may inform state or federal authorities if it uncovers suspected fraud, criminal behavior or other violations by member firms and their associated persons. Federal and state regulatory authorities likewise have the power to discipline firms and registered representatives and may bring civil or criminal proceedings for violations of their laws and rules.

FINRA Office of the Ombudsman

The FINRA Office of the Ombudsman provides a forum for firms and their associated persons, public investors, and FINRA staff members to voice their concerns of unfair practices or disparate treatment. The objective of the Ombudsman’s Office, as an independent, neutral and confidential source of assistance, is to receive and address concerns and complaints from any source concerning the operations, enforcement or other activities of FINRA or any of its staff. Where established procedures currently exist regarding the application of rules, policies, procedures or interpretations, the Ombudsman will direct the matter to the appropriate office, department or company. The function of the Ombudsman’s Office is not intended to be an appeals forum for decisions made in other forums, or an arbitrary alternative to a program that already exists. Instead, it serves as an alternative channel of communication—complementing but not replacing FINRA’s comprehensive program of formal resolution channels that include adjudication and dispute resolution.

The Ombudsman will attempt to assist you in identifying the appropriate method of resolving your problem or complaint, even if the office does not become directly involved in the matter.

The Ombudsman’s Office functions independently from all other FINRA business line functions; as such, it reports directly to the Audit Committee of FINRA’s Board of Governors. It has unrestricted access to all company functions, records and personnel. The Ombudsman’s Office does not have direct authority over FINRA personnel or the departments it reviews.

The Office of the Ombudsman is a department staffed with several Ombudsmen who are trained and have experience in handling a variety of matters. The Ombudsman, as a designated neutral party, has the responsibility of maintaining strict confidentiality concerning matters that are brought to the Office of the Ombudsman’s attention unless given explicit permission to do otherwise, or unless (a) there appears to be imminent risk of serious harm; (b) in response to binding legal or judicial process; or (c) in response to a request from the SEC. In addition, notice to the office is deemed notice to FINRA in those instances where FINRA is required by law to take corrective or other action upon being put on notice of specific facts or allegations. In such instances, where confidential information is required to be disclosed or corporate action is required, the Office will take reasonable steps to maintain confidentiality as to the identity of the provider of the information where possible. The Ombudsman will take all reasonable steps to protect any records or files pertaining to confidential discussion from inspection by all other persons, including management.

FINRA Office of Dispute Resolution

FINRA operates and administers an arbitration and mediation forum that resolves disputes in a fair, expeditious, and cost effective manner between customers and brokerage firms and their associated persons and between associated persons and brokerage firms. Arbitration panels composed of one or three arbitrators read the pleadings filed by the parties, consider the evidence, and then decide how to resolved the dispute between the parties. The panel’s decision, called an “award,” is final and binding on all the parties. All parties must abide by the award, unless it is successfully challenged in court. Arbitrators must keep the proceedings confidential, and, unlike court filings, documents submitted in arbitration are not publicly available. To learn more about FINRA’s arbitration process, including which cases are eligible, please visit the Dispute Resolution page. 

FINRA rules require a member firm to disclose to an associated person signing or acknowledging an initial or amended Form U4 that it contains a predispute arbitration clause, wherein the associated person is agreeing to arbitrate and dispute, claim or controversy that may arise the association person and the member firm, or a customer, or any other person, that is required to be arbitrated under FINRA rules. For more information on this requirement please refer to FINRA Rule 2263.

Mediation is an informal, voluntary, and non-binding process in which the mediator, an impartial person trained in facilitation and negotiation techniques, helps the parties reach a mutually consensual resolution of the dispute. In mediation, as distinguished from arbitration, the mediator does not decide who is right or wrong, or how much the parties pay. Once the parties sign a settlement agreement, it is as enforceable as any other contract. For additional information please review the overview and comparison of the arbitration and mediation processes.