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Guide to Expedited Proceedings

In addition to disciplinary proceedings brought by FINRA’s Department of Enforcement, the Office of Hearing Officers also hears expedited proceedings. This Guide describes some of the Rules for expedited proceedings, which are fully set forth in the Rule 9550 and 9100 Series of FINRA’s Code of Procedure.

The purpose of this Guide is to assist the reader in understanding FINRA’s procedures for expedited proceedings. This Guide is not an interpretation of, or a substitute for reading, the rules for expedited proceedings in FINRA’s Code of Procedure. Nor is the Guide a substitute for legal advice. All participants in FINRA’s expedited proceedings are encouraged to read FINRA’s Code of Procedure and consult legal counsel. This Guide is primarily for pro se respondents and attorneys unfamiliar with practice before FINRA’s Office of Hearing Officers.

Questions about expedited proceedings should be directed to the Office of Hearing Officers at (202) 728-8008. Please ask to speak to the Expedited Proceedings Coordinator.

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About the Office of Hearing Officers


The Office of Hearing Officers is an independent office of impartial adjudicators who preside over expedited proceedings and other matters. The Office of Hearing Officers reports to FINRA’s Chief Executive Officer (CEO), maintains strict independence from FINRA’s regulatory and enforcement programs, and is physically separated from other FINRA departments. Hearing Officers are not involved in the investigative process. Furthermore, employment protections exist for Hearing Officers to ensure their independence. Only FINRA’s CEO can terminate a Hearing Officer, and the termination can be appealed to the Audit Committee of FINRA’s Board of Governors.

Origin of the Rules for Expedited Proceedings


The Securities and Exchange Commission (SEC) approved FINRA’s Rules for expedited proceedings in 2004. The Rule 9550 Series was adopted to consolidate and streamline a number of existing rules that provided for expedited treatment of certain types of actions. These Rules are intended for actions that involve misconduct that could cause further harm to the investing public or the integrity of the markets and those that could reasonably be expedited for administrative ease.

The Rule 9550 Series simplifies the hearing process and creates procedural uniformity for all expedited actions. The Rule 9550 Series also streamlines the procedures for final FINRA action by requiring that hearings be conducted and matters resolved within a shortened timeframe once a Respondent requests a hearing.

Actions Covered by the Rules for Expedited Proceedings


The Rules for expedited proceedings cover eight types of actions. The most common actions brought by FINRA staff, however, involve a member firm’s or associated person’s failure to provide FINRA with required information, report, data or testimony (Rule 9552) and an associated person’s failure to comply with arbitration awards (Rule 9554).

The following are the types of actions are covered in expedited proceedings:

  1. Failure to Comply with Public Communications Standards (Rule 9551)
  2. Failure to Provide Information or Keep Information Current (Rule 9552)
  3. Failure to Pay FINRA Dues, Fees and Other Charges (Rule 9553)
  4. Failure to Comply with an Arbitration Award or Related Settlement (Rule 9554)
  5. Failure to Meet the Eligibility or Qualification Standards or Prerequisites for Access to Services (Rule 9555)
  6. Failure to Comply with Temporary and Permanent Cease and Desist Orders (Rule 9556)
  7. Procedures for Regulating Activities under Rule 4110, 4120, and 4130 Regarding a Member Experiencing Financial or Operational Difficulties (Rule 9557)
  8. Summary Proceedings for Actions Authorized by Section 15A(h)(3) of the Securities Exchange Act of 1934 (Rule 9558)

Representation


As in disciplinary proceedings, individuals in expedited proceedings may appear on their own behalf or represented by an attorney. A partnership may be represented by a member of the partnership, an attorney, or both. A corporation, trust, or association may be represented by an officer of the entity, an attorney, or both. See Rule 9141.

A Respondent who is represented by an attorney must inform FINRA staff and the Office of Hearing Officers of the attorney’s address, telephone number, and email address. Attorneys must file a notice of appearance with the Office of Hearing Officers. Rule 9141.

Ex Parte Communications


The parties to an expedited proceeding and their legal representatives may not communicate with a Hearing Officer or panelist about the merits of the proceeding unless all parties receive prior notice and have the opportunity to participate in the communication. A violation of the rule against ex parte communications may result in remedial action that could adversely affect a party’s claims, defenses, and interests in the proceeding.

Notice of Suspension


In certain circumstances, a FINRA department may issue a Notice of Suspension (Notice) to a Respondent, which can be a member firm or an associated person. The basis for FINRA’s decision to send the Notice varies by the violation alleged. The Notice states that the Respondent will be subject to a requirement, restriction, or sanction unless, by a date specified in the Notice (usually 21 days), the Respondent (1) undertakes a specific action set forth in the Notice or (2) requests a hearing. Upon receipt of the Notice, a Respondent can request a hearing. The Respondent’s Hearing Request initiates the expedited proceeding in the Office of Hearing Officers.

As set forth in the Notice, a Respondent who is suspended as a result of an expedited proceeding may file a written request for termination of the suspension on the grounds of full compliance with the Notice or a decision issued by the Hearing Officer or, if applicable, a Hearing Panel. The request must be filed with the head of the FINRA department or office that issued the Notice—in most expedited proceedings, this is Enforcement. If a suspended Respondent does not comply with the requirements of the Notice or decision and request termination of the suspension within a specified timeframe, the suspension may automatically convert to a bar or expulsion.

Commencement of an Expedited Proceeding


Request for a Hearing and Statement of Defenses

Except for certain expedited proceedings (brought under Rules 9555, 9558, and 9556(h)), a Respondent’s timely filing of a Hearing Request stays the effectiveness of the Notice. A Hearing Request must set forth with specificity any and all defenses to the Notice. See, e.g., Rules 9552(e), 9553(e), and 9554(e).

Under the rules for expedited proceedings, if a Respondent timely files a Hearing Request, a hearing must be held within a short time frame. For a Notice issued under Rules 9551 through 9555, a hearing must be held within 30 days after a Respondent files a Hearing Request. When a Respondent files a Hearing Request in response to a Notice issued under Rules 9556 (except Rule 9556(h)) and 9558, a hearing must be held within 14 days after a Respondent timely files a Hearing Request. A hearing must be held within five days of the filing of a Hearing Request when the Notice is issued under Rule 9557. Rule 9559(f).

Defenses to a Rule 9554 Proceeding

In an expedited proceeding brought under Rule 9554 for an associated person’s failure to comply with an arbitration award or a settlement agreement, the Respondent must specify one of the following allowable defenses in a Hearing Request:

  1. the Respondent paid the award or fee in full, complied fully with the arbitration or settlement agreement;
  2. the arbitration claimant has agreed to installment payments or has otherwise settled the matter with the Respondent;
  3. the Respondent has filed a timely motion to vacate or modify the arbitration award and the motion has not been denied;
  4. the Respondent has filed a petition in bankruptcy court and the bankruptcy proceeding is pending, or the award or remaining amount owed has been discharged by the bankruptcy court; or
  5. only in arbitration cases not involving customers, the Respondent is financially unable to pay the award.

The Hearing Officer will not consider a Respondent’s challenge to an arbitration award. If a Respondent claims as a defense to have filed a motion to vacate the arbitration award or a bankruptcy petition, the Respondent should file proof of such a filing with the Office of Hearing Officers.

Failure to Requests a Hearing

If a Respondent fails to timely file a Hearing Request within the time set forth in the Notice, the suspension, cancellation, or bar specified in the Notice becomes effective and constitutes FINRA’s final action in the matter.

Pre-Hearing Procedures


After a Respondent Files a Hearing Request

When a Respondent timely files a written Hearing Request with the Office of Hearing Officers, the Chief Hearing Officer will assign the expedited proceeding to a Hearing Officer. In the event a Respondent’s Hearing Request is untimely, the Chief Hearing Officer will reject the Hearing Request and inform the Respondent that the Notice has become FINRA’s final action.

Scheduling

Promptly upon being assigned to preside over an expedited proceeding, the Hearing Officer will issue a Notice of Hearing and Case Management and Scheduling Order. This Order will inform the parties of the date and time of the hearing and establish deadlines by which the parties must submit pre-hearing materials. The Hearing Officer selects the hearing date and imposes various deadlines without consultation with the parties because the deadlines are largely bound by the Rules. The Order will also explain how to file papers and the proper format to use. [Sample Expedited CMSO] Unlike in a disciplinary proceeding, the Hearing Officer will not conduct a pre-hearing conference with the parties unless, in the Hearing Officer’s judgment, one is necessary, or if the parties request one.

In a proceeding brought under Rule 9554, the Order will give the Respondent a deadline within which he or she must provide FINRA staff with a completed financial statement and supporting documents if the Respondent is asserting as a defense an inability to pay the arbitration award. [Sample Financial Statement] At this stage, the Respondent is not required to file this information with the Office of Hearing Officers.

For good cause shown, or with the consent of all parties, the Hearing Officer may extend or shorten any time limits set forth in Rule 9559 (except those relating to Rule 9557). Rule 9559(d)(6). A party may also request that a deadline be extended during the pendency of an expedited proceeding by filing with the Office of Hearing Officers a written motion stating the reason for the request, demonstrating good cause for an extension, and certifying that the party requesting the extension has conferred with the other party and tried to obtain its consent to the request. Requests by any party for lengthy or multiple extensions of time are strongly disfavored in expedited proceedings.

Enforcement Produces Information to the Respondent 

After a Respondent files a timely Hearing Request, FINRA staff must provide the Respondent all documents that were considered in issuing the Notice (unless a document meets the criteria of Rule 9251(b)(1)(A), (B), (C), or (b)(2)). Enforcement’s production of these documents to a Respondent helps ensure that the Respondent is fully apprised of the facts underlying the Notice and can effectively prepare his or her defense. The deadline for production of these documents will be specified in the Case Management and Scheduling Order, but it is driven by the Rules for expedited proceedings. Rules 9251(b) and 9559(h).

Because the Rule 9550 Series was adopted to promote the quick disposition of matters, and given the nature of the alleged underlying misconduct, the Rules for expedited proceedings do not provide for pre-hearing motions practice.

Pre-Hearing Submissions

The parties in expedited proceedings are obligated to exchange certain information before the hearing and file it with the Office of Hearing Officers. Not less than seven days before the hearing in an action brought under Rules 9551 through 9555, not less than three days before the hearing in an action under Rules 9556 and 9558, and not less than two business days before the hearing in an action under Rule 9557, the parties must exchange, and file the Office of Hearing Officers, their proposed witness lists, exhibit lists, and copies of their proposed exhibits. The Case Management and Scheduling Order provides detailed information for how to prepare these materials. A sample exhibit is shown on the Resource tab and reflects the proper formatting for exhibits. [Sample Exhibit]

Failure to Appear at a Pre-Hearing Conference or Hearing

The failure of a Respondent to appear before the Hearing Officer or Hearing Panel at a status conference, pre-hearing conference, or hearing, or to comply with an order of the Hearing Officer requiring production of information to support any defense to the Notice is considered an abandonment of the Respondent’s defense and a waiver of an opportunity for a hearing. In this event, the Notice is deemed the final FINRA action. Rule 9559(m).

The Hearing


Conduct of Hearing

The hearing provides a Respondent with the opportunity to contest the Notice by providing evidence and arguments supporting his or her defenses to the statements in the Notice.

Hearings in expedited proceedings are held by telephone conference, unless the Hearing Officer orders otherwise for good cause. Rule 9559(d)(5). The hearing is transcribed by a court reporter who generates a transcript of the hearing. A Respondent may purchase the transcript of the hearing from the court reporter.

Proceeding Heard by a Hearing Officer or a Hearing Panel

The rules for expedited proceedings determine whether the proceeding will be adjudicated by a Hearing Officer or a Hearing Panel. In expedited proceedings that require a Hearing Panel, the Chief Hearing Officer will appoint a Hearing Panel composed of a Hearing Officer and two panelists. The Chief Hearing Officer will select as panelists persons drawn from a pool of current and former securities industry members. A panelist must meet the qualifications set forth in Rules 9231 and 9232.

Presentation of Evidence

In an expedited proceeding hearing, as with a disciplinary proceeding, each party presents its case by submitting relevant documents and testimony under oath of witnesses.

The Hearing Officer will allow the presentation of evidence and arguments that are relevant and material to the disputed issues, but may exclude evidence that is irrelevant, immaterial, unduly repetitious, or unduly prejudicial. Formal rules of evidence do not apply to any hearing in FINRA proceedings, but the Hearing Officer may consult the Federal Rules of Evidence as a guide when making evidentiary rulings. Rules 9262 and 9263 govern the testimony and the admissibility of evidence. Rule 9559(i).

Because the hearing is conducted by telephone, an oath or affirmation cannot be administered in person to each witness. Therefore, any witness who is subject to FINRA jurisdiction or is a FINRA employee must produce a signed and notarized affirmation or affidavit stating that his or her testimony at the hearing will be truthful. [Sample Affirmation] Any other witness must sign a written sworn statement that testimony will be truthful. [Sample Declaration] The party presenting the witness is responsible for filing the witness affirmation, affidavit, or statement.

Post-Hearing Procedures


Timing and Contents of Decision

The Rules for expedited proceedings also provide for deadlines within which a Hearing Officer or Hearing Panel must prepare a written decision.

For proceedings under Rules 9551 through 9555, within 60 days of the end of the hearing, the Hearing Officer, or the Hearing Officer on behalf of the Hearing Panel, must provide a proposed written decision to the Review Subcommittee of the National Adjudicatory Council (NAC).

For proceedings under Rules 9556 and 9558, within 21 days of the end of the hearing, the Hearing Officer, on behalf the Hearing Panel, must provide a proposed written decision to the NAC’s Review Subcommittee. Rule 9559(o).

In an expedited proceeding required to be heard by a Hearing Panel, the decision is determined by a majority vote of the Hearing Panel. A decision must include findings of fact and conclusions of the Hearing Officer or Hearing Panel regarding the alleged violation or condition specified in the Notice, as well as any sanction, requirement, restriction, or limitation imposed on the Respondent, including the date they become effective. Rule 9559(p).

Sanctions

In any action brought under the Rule 9550 Series (other than an action under Rules 9556(h) and 9557), the Hearing Officer or Hearing Panel may approve, modify, or withdraw any sanctions, requirements, restrictions, or limitations imposed by the Notice. Pursuant to Rule 8310(a), the Hearing Officer or Hearing Panel may also impose any other fitting sanctions.

In an action under Rule 9556(h) (failure to comply with temporary cease and desist order), the Hearing Officer may impose any fitting sanction. In an action under Rule 9557 (procedures for regulating activities under Rules 4110, 4120, and 4130 regarding a member experiencing financial or operational difficulties), the Hearing Panel can approve or withdraw the requirements or restrictions imposed by the Notice.

A Hearing Officer or Hearing Panel may also impose costs on a Respondent for any action brought under the Rule 9550 Series. Rule 9559(n).

Call for Review by the NAC

The NAC has the authority to call a proposed decision for review in a condensed timeframe before it is issued to the parties.

For proceedings under the Rule 9550 Series (except Rule 9557), the NAC Review Subcommittee may call for review a proposed decision prepared by a Hearing Officer or Hearing Panel within 21 days after receipt of the decision from the Office of Hearing Officers. If the Review Subcommittee timely calls the proceeding for review, a Subcommittee of the NAC meets and conducts a review within 40 days of the call for review. The Subcommittee may hold a hearing or elect to decide the matter based on the record made before the Hearing Officer or Hearing Panel. The Subcommittee has 60 days after the call for review to make a recommendation to the NAC. Within 60 days of receiving the Subcommittee’s recommendation, the NAC has 60 days to serve a final written decision on the parties. The NAC may affirm, modify, or reverse the decision of the Hearing Officer or Hearing Panel and may impose any other fitting sanction and costs. Rule 9559(q).

If the decision is not timely called for review by the NAC Review Subcommittee, the Office of Hearing Officers will serve on the parties the Hearing Officer’s or Hearing Panel’s written decision, which constitutes final FINRA action.

Right to Appeal to the SEC

Decisions in expedited proceedings are not appealable to the NAC. Instead, a party may appeal a decision issued by a Hearing Officer or Hearing Panel (or by the NAC if the matter was called for review) by filing an application for review with the SEC within 30 days of receipt of the decision. The filing of an application for review does not stay the effectiveness of the final FINRA action, unless the SEC orders otherwise. Rule 9559(r).