Membership Decision

This section provides information concerning the types of decisions FINRA staff make once an application is complete and submitted, the timing of decisions, and related considerations.

General Overview of the New Member Application Process       

Start Applicant prepares and submits original, notarized Form BD & Web CRD Entitlement Forms.

Orientation Applicant accesses and reviews Applicant Interface to understand NMA Process.

Registration Requirements Applicant prepares and submits Forms U4 and BR.

Membership Application Applicant prepares and submits Form NMA and any additional information required.

Interview Staff schedules and conducts interview.

Decision Staff issues decision on Application and Membership Agreement as appropriate.

This section provides information on the following topics. You may click on any link to skip directly to that topic.

• Decision Issuance
• The Membership Agreement
• Appealing the Decision
• Dependencies/Timing

Decision Issuance

After considering the application, the membership interview, other information and documents provided by the Applicant, the public interest and the protection of investors, FINRA Staff will issue a written decision on the application. This decision will state whether the application is approved, approved with restrictions or denied. This decision will be based on whether the Applicant meets the standards for admission to membership contained in NASD Rule 1014. Decisions to approve the application subject to restrictions or to deny the application will include the rationale for the restriction(s) or denial based on the standards for admission in Rule

1014.

The Membership Agreement

Membership approvals or approvals with restrictions are accompanied by a Membership Agreement; application denials do not include Membership Agreements. The Membership Agreement is normally executed at the conclusion of the application process, so that there is a clear understanding of the full scope of the Applicant's proposed business. Membership approval is contingent upon the Applicant's returning an executed Membership Agreement to FINRA.

• Contents of the Membership Agreement. The Membership Agreement sets forth key terms governing the Applicant's admission to membership. Among other things, it:
  
• • Memorializes the contractual relationship between the Applicant and FINRA.
    
    
  • Outlines the Applicant's business activities as indicated on Form BD and in the Applicant's business plan. 
    
    
  • Includes certifications that the Applicant will comply with various securities rules and regulations, as well as maintain high standards of commercial honor and just and equitable principles of trade. 
    
    
  • Sets forth any restrictions imposed on the Applicant.
    
    
  • Identifies notifications that the Applicant is required to make when changes occur with respect to the firm's ownership, control or business operations, pursuant to NASD Rule 1017.
    
    
• Restrictions. Restrictions are specific limitations on the scope of the firm's business or conditions on the manner in which the firm must conduct its business. Restrictions are imposed in a Membership Agreement only when an Applicant is unable to satisfy one or more of the standards for admission to membership. Restrictions are fashioned to remedy or address the shortcoming(s), thus permitting the application to be approved, consistent with the public interest and the protection of investors.
  
  Examples of circumstances where restrictions may be imposed include: 
  
• • An Applicant seeking to make markets may be restricted to a more limited number of issues than proposed in the application, based on concerns about the financial capacity of the firm, qualifications and experience of registered persons, number of qualified traders, or shortcomings in operational, supervisory or financial controls. 
    
    
  • Limitations imposed on the nature of the firm's business activities because of concerns about the disciplinary history of the firm, its principals and proposed registered persons. 
    
    
• Removing Restrictions. A restriction imposed on an Applicant for FINRA membership remains in effect and is binding upon the Applicant and all successors to the ownership or control of the Applicant unless it is (1) removed or modified by a decision constituting final action of FINRA (pursuant to NASD Rule 1015, 1016, or 1017); or (2) stayed by the National Adjudicatory Council, the FINRA Board, or the Securities and Exchange Commission (See section below entitled Appealing the Decision.) 
  
• • By Application. An Applicant may file an application for removal or modification of the restriction pursuant to Rule 1017. FINRA staff's consideration regarding whether maintenance of the restriction is appropriate will be based on: 
    
  • • The standards for admission in NASD Rule 1014
      
      
    • The circumstances that gave rise to the imposition of the restriction
      
      
    • The applicant's operations since imposition of the restriction
      
      
    • A change in ownership or control or supervisors and principals of the Applicant
      
      
    • Any new evidence submitted by the Applicant.
      
      
    If circumstances warrant, the Staff will issue a decision approving the application. The decision will be in writing and will include a detailed rationale. 
    
    
  • By Filing an Appeal. An Applicant may also seek removal or modification by appealing the decision to impose that restriction. See Appealing the Decision below.
    
    
  Note that in the course of a routine examination of a Member firm, the Staff reviews business restrictions to determine whether they continue to be necessary and appropriate. If not, the Staff may amend, modify, or delete them, as appropriate under the facts and circumstances. Note that removal of a restriction under these circumstances typically occurs where the restriction is obsolete and/or no longer serves a regulatory purpose.
  

Appealing the Decision

Pursuant to NASD Rule 1015, within 25 days after service of the membership decision, the Applicant may file a written request for review of the decision with FINRA's National Adjudicatory Council (NAC).

Here are a few key pointers regarding an appeal:

• A copy of the request for review of the decision must simultaneously be sent to the district office where the membership application was processed.
  
  
• The request for review must include, with specificity, the reasons why the Applicant believes that the decision is inconsistent with membership standards set forth in NASD Rule 1014 or otherwise should be set aside. 
  
  
• If the Applicant would like to present information at a hearing, the written request for review must indicate that a hearing is requested. 
  
  
• The decision of the FINRA National Adjudicatory Council is the final action of FINRA, subject to review at the discretion of the FINRA Board. 
  
  
• Pursuant to NASD Rule 1019, an Applicant aggrieved by final action of FINRA under the NASD Rule 1010 Series may apply for review by the SEC pursuant to Section 19(d)(2). The filing of an application for review will not stay FINRA's decision, until the SEC orders otherwise.

Dependencies/Timing

Pursuant to Rule 1014, a decision on a membership application must be issued within 30 days after the conclusion of the membership Interview or after the filing of additional information or documents, whichever is later. Overall, FINRA is required to issue a written decision on the application within 180 days of the application filing date, or such other date to which FINRA and the Applicant have agreed.