Dispute Resolution Procedures
FINRA, through its Code of Procedure, has the authority to bring punitive action against member firms and associated persons for statutory and rules violations. Customers, member firms, and associated persons do not. Customers may file complaints to FINRA’s Department of Enforcement, which may trigger an investigation that leads to a hearing and judgment, but FINRA will be the complainant. Additionally, member firms and associated persons are not allowed to drag one another into a formal proceeding.
As we have just seen, customers generally sign away their right to take a disputed matter to court. Associated persons, too, sign away this right. This is because Form U4 contains a predispute arbitration clause, and upon signing this form, an associated