18.4  FINRA Adjudicatory Procedures

Conduct rules don’t have a lot of bite, of course, without an enforcement mechanism. The Exchange Act was well aware of that, and Section 15A provides self-regulatory organizations like FINRA with the authority to discipline member firms and associated persons for violations of any applicable laws or regulations, including its own rules. FINRA has the power to expel, suspend, fine, or censure its members, as long as it offers the accused a fair procedure.

Self-regulatory organizations must bring specific charges, notify the member firm or person under accusation, give the accused an opportunity for defense, and keep a record of the proceedings. Any record of decision must clearly state (1) the act or practice that the accused has been said to have engaged in or omitted; (2) the specific law, rule, or regulation that has been violated; and (3) the sanction imposed, if found guilty, and the reason.

FINRA’s interpretation of these guidelines is described next.

Investigations. FINRA staff has the right