FINRA Investigations

This is the investigation and sanction infrastructure that feeds the formal disciplinary process under FINRA's Code of Procedure.

Definitions

The procedural vocabulary used throughout the investigations framework includes key terms such as:

• Adjudicator: A FINRA decision-making body or officer (Hearing Officer, Hearing Panel, NAC, FINRA Board)
• Department: The FINRA Department of Enforcement (the prosecutorial arm) or other FINRA staff department conducting the investigation
• Hearing Officer: A full-time FINRA attorney who chairs Hearing Panels
• National Adjudicatory Council (NAC): FINRA's internal appellate body for disciplinary decisions
• Office of Hearing Officers (OHO): The FINRA office where Hearing Officers conduct disciplinary trials
• Person associated with a member: Defines the scope of FINRA enforcement jurisdiction over individuals tied to member firms

Provision of Information and Testimony

The investigative-testimony rule is the information-gathering authority that drives most FINRA investigations.

What FINRA Can Compel

FINRA staff may require any member, AP, or person subject to FINRA's jurisdiction to:

• Provide information orally, in writing, or electronically
• Testify at a deposition or on-the-record (OTR) interview at a location specified by FINRA
• Permit inspection and copying of books, records, and accounts

The compulsion applies to any matter involved in an investigation, complaint, examination, or proceeding before FINRA.

The 2-Year Jurisdictional Tail

FINRA retains investigative-testimony jurisdiction over former APs for 2 years after termination of registration, under the FINRA By-Laws.

• A rep who left the industry 18 months ago is still subject to FINRA information requests
• A rep who left 30 months ago is generally outside FINRA's jurisdiction (but may still be subject to other regulators)

Failure to Respond

Failure to respond to a FINRA information request is itself a separate violation, and the consequences are severe:

The sanction for non-cooperation is often harsher than the underlying matter would have produced if the AP had cooperated. A failure-to-respond bar may issue even where the underlying conduct, if proven, would only have warranted a censure or short suspension.

The Contractual Authority Theory

FINRA information requests are not subpoenas in the constitutional sense. FINRA is a private SRO, not a government agency.

• FINRA's authority is contractual: members and APs agree to comply with FINRA rules (including the investigative-testimony obligation) by signing the FINRA By-Laws as part of registration
• The remedy for refusal is not contempt of court; it is FINRA's regulatory sanction power
• The contractual basis is the reason failure to respond is so heavily sanctioned: the AP is in breach of the agreement that allows industry registration in the first place

Exam Tip: Gotchas

• Failure to respond to a FINRA information request is itself a separate violation, and the typical sanction is a bar, not just a fine. Even if the underlying matter would have produced no liability, the AP who refuses to cooperate is barred. Cooperate-and-defend is almost always a better posture than refuse-and-stall.
• FINRA's investigative-testimony jurisdiction over former APs lasts 2 years, not indefinitely. A rep who left the industry 30 months ago is generally outside FINRA's reach. A rep who left 18 months ago is still inside it. The 2-year tail runs from termination of registration, not from the underlying conduct.

Sanctions for Violation of the Rules

The sanctions menu lists the penalties FINRA may impose on a member or AP found to have violated FINRA rules, MSRB rules, or federal securities laws.

Sanction Guidelines

The NAC publishes recommended sanction ranges in the Sanction Guidelines.

• The Guidelines are not absolute; adjudicators may depart based on aggravating or mitigating factors
• Aggravating factors include intentional or reckless misconduct, supervisory failures, history of prior discipline, customer harm, financial gain
• Mitigating factors include acceptance of responsibility, voluntary remediation, no prior discipline, lack of customer harm

Exam Tip: Gotchas

• There is no statutory cap on FINRA fines, even though Sanction Guidelines provide ranges. Adjudicators may depart from the Guidelines based on aggravating factors. A fine in the millions is permissible under FINRA's sanctions authority itself; the Guidelines are an internal benchmark, not a ceiling.
• A bar, and revocation or cancellation of registration, applies to an associated person; expulsion and membership cancellation apply to a member firm. Do not say a firm was "barred" or that an individual was "expelled." Revocation ends a person's registration, not a firm's membership. The Series 24 exam tests this terminology distinction.

BrokerCheck Disclosure

The BrokerCheck disclosure framework governs the information FINRA releases through the public BrokerCheck system.

What BrokerCheck Discloses

• Information from currently and previously filed registration forms (Forms BD, U4, U5)
• Final regulatory actions (FINRA, SEC, state, federal, foreign)
• Customer complaints that meet defined materiality thresholds
• Investment-related civil judicial actions
• Arbitration awards in securities and commodities disputes with public customers
• Restricted Firm designations (firms with significant disciplinary history subject to enhanced restrictions)

Form U5 Release Timing

Events reported on the disclosure-questions portion of Form U5 (other than "Internal Review Disclosure") are normally withheld for 3 business days after FINRA processing. If the same event is reported on Form U4 before that period expires, FINRA releases both forms together when it processes the Form U4; the withholding period may be shorter.

• The 3-day window allows the broker to file a contemporaneous Form U4 explanation if applicable
• The three-business-day period is a normal withholding window, not an absolute publication delay or a deadline after which the broker can never submit an explanation

What BrokerCheck Does NOT Disclose

BrokerCheck is not a complete record. Information not released includes:

• Personal identifying information beyond name and employment history
• Certain old or vacated complaints (per the BrokerCheck disclosure framework)
• Internal Review Disclosures from Form U5 (until they ripen into final actions)

Exam Tip: Gotchas

• BrokerCheck is not a complete record of regulatory history. Customers and members should not assume an absence of BrokerCheck disclosures means an absence of regulatory history. The disclosure framework lists what FINRA releases; the rest stays internal.
• Form U5 disclosure-question entries (other than Internal Review Disclosure) become public 3 business days after FINRA processing. The 3-day window is the broker's opportunity to file a U4 explanation. Missing the window means the U5 disclosure stands alone.

Payment of Fines

The payment-of-fines rule covers payment of fines, monetary sanctions, and costs when due under FINRA rules.

The summary nature of this remedy is a powerful collection tool. A firm that has been fined and refuses to pay can lose membership without going through a full Hearing Panel proceeding.

What Should You Check on Exam Day?

• Can you state how long FINRA's investigative-testimony jurisdiction over a former associated person lasts after termination of registration?
• Do you know what sanction typically results from failing to respond to a FINRA information request beyond 90 days?
• Can you distinguish the sanctions that end an associated person's status (bar, revocation or cancellation of registration) from those that end a member firm's status (expulsion, membership cancellation)?
• Do you know how many business days after FINRA processing a Form U5 disclosure-question entry becomes public on BrokerCheck?