5.d

Question 1

What is the primary purpose of FINRA’s Code of Arbitration Procedure?

Answer 1

To settle disputes, most commonly monetary disputes, between members, associated persons, and customers. It is used instead of going to court.

Question 2

What is the significance of the predispute arbitration agreement that customers sign when opening a new account?

Answer 2

By signing it, the customer agrees to resolve any disputes with the firm through binding arbitration rather than by suing in court.

In the absence of this agreement, a customer can force a member into arbitration, but a member cannot force a customer.

Question 3

When is simplified arbitration used, and how does it work?

Answer 3

It is used for disputes of $50,000 or less. It works by having a single arbitrator review all information submitted in writing from both parties. A physical hearing is not required.

Question 4

For disputes over $50,000 up to $100,000, how many arbitrators are assigned? What about for disputes over $100,000?

Answer 4

> $50k up to $100k: One arbitrator (unless both parties agree to three).

> $100k: Three arbitrators (unless both parties agree to one).

Question 5

How quickly must a monetary award from an arbitration be paid? Are arbitration decisions appealable?

Answer 5

Payment: Within 30 days of the decision date.

Appeals: All decisions are final and binding. There is no appeals process.

Question 6

What is the time limit for submitting a claim to arbitration?

Answer 6

A claim is not eligible for arbitration if six years or more have passed since the event that caused the dispute.

Question 7

What is the primary purpose of FINRA’s Code of Procedure?

Answer 7

To handle disciplinary actions for alleged violations of FINRA rules, MSRB rules, and federal securities laws. This is FINRA’s process for policing its members.

Question 8

Who initiates a complaint under the Code of Procedure, and how long does the respondent have to answer?

Answer 8

Initiator: FINRA’s Department of Enforcement issues the complaint.

Response Time: The respondent has 25 days to file an answer.

Question 9

If a member or associated person is found guilty under the Code of Procedure, name three possible sanctions.

Answer 9

1. Censure (a written warning).
2. Fine.
3. Suspension of registration.
4. Bar from the industry.
5. Expulsion of the member firm.

Question 10

If a registered representative is suspended, can they continue to work for their firm in a non-registered (e.g., clerical) capacity?

Answer 10

No. During the suspension period, the person cannot be associated with the member firm in any capacity and cannot be paid any salary or commission they might have earned during that time.

Question 11

If a decision is made under the Code of Procedure, what is the order of the appeals process?

Answer 11

1. First, appeal to the National Adjudicatory Council (NAC).
2. Then, to the SEC.
3. Finally, to the Federal Court System.