A prospective FINRA member asks whether FINRA Rule 1012 tells it what it must show in order to be admitted to membership. How does Rule 1012 relate to the admission standards?

It sets the admission standards for new members, while Rule 1014 supplies the procedure for filing and serving the application papers

It supplies the procedure for the application — filing, service, lapse, ex parte limits, recusal and time — while Rule 1014 sets the standards

It sets the standards for continuing membership applications, while the standards for new members are fixed by Rule 1013's interview provisions

It restates the Rule 1014 standards in summary form, so that an Applicant shown to satisfy Rule 1012 is treated as meeting them as well

An Applicant wants to file the documents the Department has requested by delivering paper copies by hand rather than by electronic mail. Under FINRA Rule 1012, when may it do so?

Only where the Applicant certifies that it cannot send electronic mail, the Department having no discretion to agree otherwise

At any time it chooses, hand delivery being one of the methods for which the rule fixes the date on which a filing is complete

Where FINRA has prescribed an alternative filing process, or where the Department and the Applicant agree to that other method

Only for the application itself, documents requested after filing always having to go through FINRA's electronic filing system

An Applicant hands its response to an overnight courier on Monday, and the airbill shows Monday. The courier delivers the package to FINRA on Tuesday, and Department staff log it as received on Wednesday. Under FINRA Rule 1012, when is the filing deemed complete?

On Monday, the date of delivery to the courier as the airbill specifies it

On Tuesday, the date on which the courier hands the package over to FINRA

On Wednesday, the date on which Department staff log the package as received

On Tuesday or Wednesday, whichever the Department records as the date of receipt

An Applicant faxes its response to a Department request on a Thursday. The document is dated that Thursday, and the Applicant's written confirmation of transmission also shows Thursday. Department staff first collect the pages from their fax tray the following Monday. Under FINRA Rule 1012, when is the filing deemed complete?

On Monday, the date on which Department staff first collect the pages from the fax tray

On Friday, the first business day after transmission, once the Department's equipment has printed the pages

On the day the Applicant telephones the Department and the Department confirms that the pages arrived

When an Applicant files through an electronic filing system rather than by electronic mail, on what date is the filing deemed complete under FINRA Rule 1012?

The date the Applicant uploads its last document, whatever date the system records

The date on which Department staff first access the submission in the system

The date specified on the confirmation page that the filing system generates

The date on which the Department tells the Applicant the filing is substantially complete

The Department emails its written decision on a membership application to the Applicant's outside counsel and sends nothing to the Applicant directly. Has the decision been served under FINRA Rule 1012?

Yes, but the periods that run from service begin only on the date counsel forwards the decision to the Applicant

No — service on counsel counts only where the Applicant has designated counsel in writing to accept service for it

No — counsel may be sent a copy, but service is made only on the Applicant itself, from which any time periods run

Yes — FINRA serves a notice or decision on the Applicant or on its counsel, so service on counsel alone is enough

An Applicant has never agreed to receive anything from FINRA by electronic mail, and the Department emails it a notice issued under the Rule 1000 Series. No rule specifies a different method for that notice. Is the notice validly served?

Yes — electronic mail is one of the methods by which FINRA serves notices and decisions, and needs no agreement

No — FINRA may serve by electronic mail only on an Applicant that has consented to it in writing beforehand

Yes, but only once FINRA also sends a paper copy by first-class mail, the email serving as a courtesy copy

No — FINRA serves notices by courier or by hand delivery, electronic mail being kept for Applicants' filings

The Department serves a membership agreement on an Applicant by electronic mail on 1 June. No other period has been agreed and no good cause is shown, and the Applicant files the executed agreement on 10 July. What is the position under FINRA Rule 1012?

The agreement takes effect, a late filing exposing the Applicant to a fine but leaving the application standing

The application has lapsed, the executed agreement having been due within 25 days after service of the agreement

The agreement takes effect, the 25 days running from the Applicant's signature of it rather than from its service

The Department must decide whether to deny membership, treating the delay as a ground for denial on the merits

Two Applicants are each served with an initial request for information, one on a new membership application under Rule 1013 and one on a continuing membership application under Rule 1017. Each responds fully on the 45th day after service, with no other period agreed and no good cause shown. How does FINRA Rule 1012(b) treat them?

Both lapse, each rule allowing fewer than 45 days for an initial request

The Rule 1017 application survives and the Rule 1013 application lapses

The Rule 1013 application survives and the Rule 1017 application lapses

Both survive, each rule allowing longer than 45 days for an initial request

An Applicant for new membership answers the Department's initial request in time, and the Department then serves a further request for information. The Applicant responds fully on the 40th day after service of the further request, with no other period agreed and no good cause shown. What follows under FINRA Rule 1012(b)?

The application lapses only after the Department has warned the Applicant in writing and allowed ten further days

The application survives, a new membership applicant having the same period for a later request as for the first

The Department decides the application on what it holds, the late reply bearing on the merits rather than on lapse

The application lapses, a response to a subsequent request being due within 30 days after service of it

An Applicant attends its scheduled membership interview, but its representatives refuse to answer any of the Department's questions about the application, and no good cause is shown. What does FINRA Rule 1012(b) provide?

The application lapses, the rule reaching a failure to participate in a scheduled interview as well as a failure to appear at it

The application stands, the lapse ground being confined to an Applicant that fails to attend the scheduled interview at all

The application lapses only if the Applicant also fails to answer a later written request for information within the period

The Department must first reschedule the interview once, the application lapsing only if the Applicant then refuses to take part a second time

Under FINRA Rule 1012, what follows for an Applicant whose new membership application has lapsed and which still wants to become a member?

It must file a new application but pays no further fee, the fee for the lapsed application being applied to the new one

It must file a new application with a new application fee, the fee paid for the lapsed application not being refunded

It may ask the Department to reinstate the lapsed application, the fee already paid carrying over to the reinstated filing

It must wait twelve months before it reapplies, the fee for the lapsed application being refunded when that wait ends

While National Adjudicatory Council review of a membership decision is pending, how does FINRA Rule 1012 treat a private merits call from a Subcommittee member to the Applicant's counsel, compared with a private merits call from that counsel to the Subcommittee member?

Neither is prohibited, a telephone call leaving no writing behind that could later be put before the NAC

The call from counsel is prohibited and the member's is not, the rule binding the Applicant's side rather than the deciders

Both are prohibited, the rule barring merits communications from the decision side as well as those made to it

Only the call from the member is prohibited, counsel being entitled to press the Applicant's case on its behalf

While NAC review of a membership decision is pending, a Department employee who directly participated in deciding the application, and so is Interested FINRA Staff in the proceeding, emails a FINRA employee advising the NAC, privately setting out why the Applicant should be denied. Does FINRA Rule 1012 permit the email?

No, unless the email only answers a question that the adviser had first put to the examiner in writing

Yes — the prohibition protects reviewers from the Applicant's side, FINRA's own staff being free to brief them

Yes — staff may brief the advisers on the record already made, provided that they introduce no new facts

No — Interested FINRA Staff are bound by the prohibition just as the Applicant and its counsel are

While NAC review of a membership decision is pending, the Applicant's counsel wants to put a point about the merits to a Subcommittee member. Which arrangement takes the communication outside FINRA Rule 1012's ex parte prohibition?

Making it on notice to every side of the proceeding, with an opportunity for each side to take part

Making it in writing and copying it to every other Subcommittee member at once, so that each decision-maker sees it

Making it through the Applicant's own representative rather than through counsel, whom the prohibition names expressly

Making it only after the Subcommittee's hearing has closed, once the record on which the review will rest is complete

During NAC review of a membership decision, the Applicant's chief executive telephones a NAC member and argues the merits, and the member answers briefly before ending the call. What does FINRA Rule 1012 require to be done about the exchange?

The request for review is dismissed, a prohibited contact from the Applicant's side forfeiting the Applicant's review

Memoranda stating the substance of the call and of the member's oral reply are placed in the record of the proceeding

The call is disregarded and kept off the record, so that the NAC decides only on what was properly put before it

The member is disqualified at once, and a replacement is appointed to consider the whole matter again from the start

A member files an application under Rule 1017 for approval of a change in its ownership. A Department examiner who examined that member last year takes no part in deciding the application. For the Rule 1000 Series, is the examiner Interested FINRA Staff in that proceeding?

Yes, but only if the examiner also directly supervises, or sits in the chain of command above, the employees who decide the application

No — the definition is limited to employees who directly participate in the decision and those who directly supervise them, an examiner being neither

Yes — on a Rule 1017 application the definition also reaches an examiner of the member, even one taking no part in deciding

Yes, but only if the examination turned up a violation by the member that bears on the change it is seeking approval for

A member of a Subcommittee appointed under Rule 1015 has a conflict of interest in a membership review but declines to step aside. What does FINRA Rule 1012(d) provide for that situation?

The Department may replace the member, the Subcommittee having been appointed to hear its decision

Nothing further, stepping aside being a matter the rule leaves to the Subcommittee member's own judgment

The Applicant may raise the member's conflict only later, in an application to the SEC for its review

The Chair of the National Adjudicatory Council has authority to direct that member's disqualification

A 25-day period and a 7-day period under the Rule 1000 Series each run across at least one intermediate weekend. Under FINRA Rule 1012(e), how are those weekends treated in counting each period?

Intermediate weekends are counted in the 25-day period and left out of the 7-day period

Intermediate weekends are left out of both periods, the series counting in business days

Intermediate weekends are counted in both periods, every day being a calendar day alike

Intermediate weekends are left out of the 25-day period and counted in the 7-day period

A notice is served on an Applicant on a Tuesday, starting a period under the Rule 1000 Series that runs from service. Which day is the first day counted?

Thursday, one full day being allowed first for the notice to reach the Applicant

Wednesday, the day of the act or event from which the period runs being excluded

Tuesday, the day of service itself being included as the first day of the period

The next Monday, the count beginning with the first full week following service

The last day of a period under the Rule 1000 Series falls on a Friday that is a Federal holiday, and the following Monday is an ordinary business day. When does the period end?

At the end of the Friday itself, a Federal holiday falling on the last day leaving the period unchanged

At the end of the Thursday before, the period being brought back to the last day that is not a holiday

At the end of the following Monday, the next day that is not a Saturday, Sunday or Federal holiday

At the end of the Saturday, the period running on only to the next calendar day after the holiday

A new membership applicant has its membership interview on 3 March and files additional information that the Department asked for on 17 March. From which event does the Department's 30-day period to serve its decision run?

From the filing of the application itself, neither of the later events affecting it

From the membership interview on 3 March, the earlier of the two events to take place

From whichever of the two events the Department elects to designate in its notice

From the filing of the additional information on 17 March, the later of the two events

The Department sends its decision on a membership application by first-class mail. The envelope is postmarked 3 May and reaches the Applicant on 7 May. On what date does the decision take effect?

On 3 May, the decision being effective on service and mailed service being complete on the date of postmark

On 7 May, the decision being effective on service and mailed service being complete when the Applicant receives it

On the date the Applicant files its executed membership agreement, which is what brings the decision into operation

On 6 May, three days being added to the postmark date because the decision was served by mail rather than by email

The FINRA Board calls a membership decision for discretionary review under Rule 1016, and one Governor taking part has a bias concerning the Applicant. Do FINRA Rule 1012's recusal provisions reach that Governor?

No — Governors are constrained by the ex parte prohibition alone, Rule 1012 imposing no recusal duty on the Board

Yes — Governors in the Board's discretionary review are subject to them, as NAC and Subcommittee members are in NAC review

No — they reach NAC and Subcommittee members, the Board's discretionary review lying outside their terms altogether

Yes, but only if the Applicant asks for the Governor's removal before the Board decides to call the matter for review

After an adverse Department decision, the Applicant's president tells the Department examiner that the firm will be asking the National Adjudicatory Council to review it. Before any request is filed, the president emails a NAC member privately arguing the merits. Is the email within FINRA Rule 1012's ex parte prohibition?

Yes — the prohibition has applied since the application was filed, covering the Department too

No — the prohibition takes effect only when the written request for review is actually filed

Yes — the prohibition took effect when FINRA staff learned the Applicant intended to seek review

No — the prohibition takes effect only once a Subcommittee has been appointed to the matter

On a new membership application, the Department serves the Applicant with written notice of its membership interview by electronic mail. Has the Department used the method of service that the Rule 1000 Series prescribes for that notice?

No — an interview notice must be delivered by hand, the Applicant signing for it to confirm the date it was received

Yes — any method the Applicant itself may use to file documents with FINRA may also be used to serve that notice on it

No — the notice must go by first-class mail and by electronic mail together, each copy serving as a check on the other

No — the Department must serve an interview notice by facsimile or by overnight courier, a method the rules set for it

At least seven days before a membership interview on a new membership application, the Department must serve the Applicant with written notice of the interview. What must that notice specify under Rule 1013(b)?

The date and time of the interview and the names of the Department staff who will conduct it and decide the application

The date and time of the interview and the documents the Applicant must bring to it for the Department to review there

The date and time of the interview and the matters in the application on which the Department intends to question it

The Department serves a notice on an Applicant by electronic mail and, within minutes, receives a bounce-back message indicating that the email was not delivered. What has FINRA said it will do in that situation?

Resend the notice to the same address by electronic mail until a message goes through, then count periods from that delivery

Serve the notice by the other permissible methods of service until the Applicant's electronic mail address has been verified

Treat the failed message as the Applicant's failure to keep its address current, so the application lapses absent good cause

Withdraw the notice and serve it afresh only once the Applicant files a written change of its electronic mail address

An Applicant in a membership proceeding lacks the technology needed to file documents, serve them or accept service by electronic mail. What has FINRA said it will provide to the Applicant?

A reduction of the application fee under Schedule A to the FINRA By-Laws, to offset the cost of filing on paper

An extension of every period under the Rule 1000 Series, running until the Applicant obtains the technology it lacks

Reasonable accommodations, requested through a process that FINRA has said it would post on its website

A Department staff member assigned to file documents and accept service electronically on the Applicant's own behalf

A Department staff member deciding a continuing membership application under Rule 1017 has a conflict of interest concerning the Applicant. Does Rule 1012(d)'s recusal and disqualification provision apply to that staff member?

No — Rule 1012(d) reaches Department staff on a new membership application under Rule 1013, though not on a continuing one

Yes — Rule 1012(d) reaches every FINRA person who takes part in a membership decision, the Department's deciding staff included

Yes, on a continuing membership application under Rule 1017, though not on a new membership application under Rule 1013

No — the Department staff who decide an application are not among the persons to whom the provision is addressed

FINRA Rule 1012: General Provisions of the Rule 1000 Series

What Are the General Provisions Under FINRA Rule 1012?

FINRA Rule 1012 establishes the procedural infrastructure that governs the administration of new membership applications (NMAs) and continuing membership applications (CMAs) throughout the Rule 1000 Series — addressing the mechanics of how applications and communications are filed and delivered, how notices and decisions are served, when an application lapses, the prohibitions on ex parte communications once review proceedings are initiated, the recusal and disqualification standards for those participating in membership decisions, and the computation of time periods used throughout the Rule 1000 Series.

The rule operates as the procedural backbone for the substantive admission standards FINRA Rule 1014 establishes and the application requirements FINRA Rules 1013 and 1017 prescribe, ensuring the MAP process operates with consistent procedural fairness regardless of whether a given application is a first-time membership application or a continuing membership application for approval of a change in ownership, control, or business operations.

FINRA Rule 1012 traces its history, as FINRA's rulebook records it, to NASD rule filing SR-NASD-82-24, effective July 20, 1984, and to the NASD's revised Rule 1010 Series of membership rules, effective August 7, 1997; it was transferred without substantive change into the Consolidated FINRA Rulebook as part of the FINRA Rule 1000 Series effective May 8, 2019, and has been amended since, most recently with amendments effective August 22, 2022 that made electronic mail the default method of filing and service.

FINRA Rule 1012 sits within the 1000 Member Application and Associated Person Registration series, immediately following FINRA Rule 1011's definitions and immediately preceding FINRA Rule 1013's new member application and interview provisions.

Methods for Filing Applications and Delivering Communications

FINRA Rule 1012 requires an Applicant for membership to file an application in the manner prescribed in Rule 1013, and an Applicant seeking approval of a change of ownership, control, or business operations to file in the manner prescribed in Rule 1017, in each case including the timely submission of the application fee under Schedule A to the FINRA By-Laws. Except where FINRA has prescribed an alternative filing process, an Applicant files an application, and any document or information requested under the Rule 1000 Series, by electronic mail, and the Applicant may use another method if the Department and the Applicant agree.

FINRA serves a notice or decision issued under the Rule 1000 Series on the Applicant or its counsel by electronic mail or first-class mail, unless a rule specifies a different method of service.

This electronic-first framework reflects the amendments effective August 22, 2022, under which electronic mail became the default method for filing and for FINRA's service; electronic mail was not among the methods of filing and service in the rule as originally written, and FINRA first permitted it under temporary amendments filed in May 2020 during the COVID-19 pandemic, which the 2022 amendments made permanent with some modifications. An Applicant may also file through an electronic filing system, in which case the filing is deemed complete on the date specified on the confirmation page the system generates.

FINRA Rule 1012 also specifies when filing or service is deemed complete, which matters because the Rule 1000 Series establishes numerous time periods — for responding to document requests, requesting review of Department decisions, and so on — that run from the date of service. Service or filing by first-class mail is deemed complete on the date of postmark; by overnight courier, on the date of delivery to the courier as specified in the airbill; by hand delivery, on the date of receipt as evidenced by a date stamp; by facsimile, on the date specified in the document and on the written confirmation of transmission; and by electronic mail, upon sending the notice, decision, or other document.

Service of Notices and Decisions

FINRA Rule 1012(a)(4) provides that FINRA serves a notice or decision issued under the Rule 1000 Series on the Applicant or its counsel by electronic mail or first-class mail, unless a rule specifies a different method of service. This applies to the formal communications through which the Department transmits the results of its review to the Applicant, including its written decision on an application. FINRA Rule 1014 separately provides that the Department serves its decision and the membership agreement on the Applicant in accordance with Rule 1012.

Service dates matter because the periods that follow run from service. An Applicant has 25 days after service of a decision under Rule 1014 or 1017 to file a written request for review by the National Adjudicatory Council under Rule 1015, and an Applicant has 25 days after service of a membership agreement, or such other period as the Department and the Applicant agree, to file the executed agreement before the application lapses under Rule 1012(b).

Under Rule 1014(e), the Department's decision becomes effective upon service and remains in effect during the pendency of any review until a decision constituting final action of FINRA is issued under Rule 1015 or 1016, unless otherwise directed by the National Adjudicatory Council, the FINRA Board, or the Securities and Exchange Commission. A Department decision imposing restrictions or conditions therefore takes immediate operational effect, and an Applicant cannot defer compliance merely by filing a request for review.

Rules That Prescribe Their Own Method of Service

The qualification in Rule 1012(a)(4), unless a rule specifies a different method of service, has real work to do, because other rules in the Rule 1000 Series prescribe their own methods for particular notices. Rule 1013(b) requires the Department to serve on the Applicant a written notice of the membership interview on a new membership application, and it directs that the Department serve that notice by facsimile or overnight courier. Rule 1017 makes the same provision for the notice of a membership interview on an application for approval of a change in ownership, control, or business operations. For an interview notice, therefore, neither electronic mail nor first-class mail, the two methods Rule 1012(a)(4) otherwise gives FINRA, is the method the rule prescribes.

The interview notice also has a prescribed content and lead time. Under Rule 1013(b), the Department serves it at least seven days before the membership interview, and the notice must specify the date and time of the interview and the representative or representatives of the Applicant who are required to participate in it, so that the Applicant knows not only when the interview will take place but also which of its people must attend.

The National Adjudicatory Council's notice of a hearing on review is a further example. Under Rule 1015(f)(1), when a hearing is requested or directed, the National Adjudicatory Council serves written notice of the date and time of the hearing on the Applicant by electronic mail, facsimile, or overnight courier not later than 14 days before the hearing. First-class mail, although one of the two methods Rule 1012(a)(4) gives FINRA generally, is not among the methods Rule 1015(f)(1) names for that notice.

When Electronic Mail Service Cannot Be Used or Fails

Where Rule 1012(a)(4) leaves FINRA a choice between electronic mail and first-class mail, FINRA has said which it prefers. In Regulatory Notice 22-16, which announced the amendments effective August 22, 2022, FINRA stated that while the temporary amendments adopted during the COVID-19 pandemic were in effect it had elected electronic mail service whenever possible, and that it intended to continue doing so.

Service by electronic mail is deemed complete upon sending, but FINRA does not treat a message it knows has failed as an adequate substitute for service. FINRA stated in the same notice that if it has knowledge that the address used for service is not current or not functional, as where it receives a bounce-back or other message indicating that there was a failure to deliver the electronic mail, it will use other permissible methods of service until it can verify the party's electronic mail address.

FINRA also addressed the position of a party that lacks the technology on which electronic filing and service depend. It stated that it will provide reasonable accommodations to an applicant, respondent, or other party that lacks the technology needed to file, serve, or accept service by electronic mail, and that it would post on its website the process for requesting an alternative method of service or filing.

Lapse of Application

FINRA Rule 1012(b) provides that, absent a showing of good cause, an application filed under Rule 1013 or 1017 lapses if the Applicant fails to respond fully to a request for information or documents within the applicable period — 60 days after service of an initial request under Rule 1013, 30 days after service of an initial request under Rule 1017, 30 days after service of a subsequent request under either rule, or such other period as the Department and the Applicant agree; fails to appear at or otherwise participate in a scheduled membership interview; or fails to file an executed membership agreement within 25 days after service of the agreement, or such other period as the Department and the Applicant agree.

Once lapsed, FINRA does not refund any fee paid for the lapsed application. If the Applicant still wishes to pursue membership or approval of the contemplated change in ownership, control, or business operations following a lapse, it must submit a new application in the manner prescribed under Rule 1013 or 1017, respectively — including the timely submission of the application fee under Schedule A to the FINRA By-Laws. This no-refund, fresh-application requirement upon lapse imposes a meaningful consequence for Applicants whose applications lapse due to non-response or delay, creating an incentive for Applicants to remain responsive throughout the MAP process and to engage actively with the Department's requests for information.

Prohibition on Ex Parte Communications

FINRA Rule 1012 establishes comprehensive prohibitions on ex parte communications that become effective when FINRA staff has knowledge that an Applicant intends to file a written request for review by the National Adjudicatory Council under Rule 1015. Once triggered, the prohibition prevents private, one-sided communications about the merits of the membership proceeding from taking place between covered parties.

The prohibition operates in two directions. Unless on notice and opportunity for the Applicant and Interested FINRA Staff to participate, or to the extent required for the disposition of ex parte matters, an Applicant, its counsel or representative, and Interested FINRA Staff — as defined under Rule 1011 — shall not make or knowingly cause to be made an ex parte communication relevant to the merits of the proceeding to a Governor, a member of the NAC or a Subcommittee thereof, or a FINRA employee participating or advising in the decision. In the other direction, a Governor, NAC member, Subcommittee member, or FINRA employee participating or advising in the decision may not make or knowingly cause to be made such a communication to the Applicant, its counsel or representative, or Interested FINRA Staff.

This bilateral prohibition ensures that the NAC review conducted under Rule 1015 proceeds on the basis of the record developed in the Department proceeding and the parties' formal submissions — not on the basis of off-the-record private communications from either side. The prohibition reflects fundamental principles of procedural fairness familiar throughout administrative law — the decision-maker hearing an appeal should base its determination on the full record available to all parties, not on information or arguments communicated privately by one side.

When a prohibited ex parte communication is nonetheless made, FINRA Rule 1012 requires that the written communications, memoranda stating the substance of any oral communications, and any written responses and memoranda stating the substance of oral responses be placed in the record of the proceeding. This mechanism keeps the communication in the record rather than leaving it off the record.

Recusals and Disqualifications

FINRA Rule 1012(d) provides that a Governor or a member of the National Adjudicatory Council or a Subcommittee shall not participate in a matter governed by the Rule 1000 Series as to which that person has a conflict of interest or bias, or if circumstances otherwise exist where his or her fairness might reasonably be questioned. The rule also assigns the authority to direct disqualification: the Chair of the FINRA Board for a Governor, a majority of the Governors excluding the Chair for the Chair of the FINRA Board, the Chair of the National Adjudicatory Council for an NAC member or a member of a Subcommittee appointed under Rule 1015, and the Vice Chair of the National Adjudicatory Council for the Chair of the National Adjudicatory Council.

This framework mirrors the conflict-of-interest and bias disqualification standards found throughout administrative adjudication contexts generally, adapted to the specific institutional structure of FINRA's membership review proceedings. The recusal and disqualification provisions protect the integrity of the NAC review process under Rule 1015 and the FINRA Board's discretionary review under Rule 1016 — ensuring that the reviewing body is composed of individuals who can evaluate the record and the applicable standards without compromising conflicts.

Department Staff and the Recusal Provision

The recusal and disqualification provision of Rule 1012(d) is addressed to Governors and to members of the National Adjudicatory Council or a Subcommittee thereof. It does not name the Department staff who review and decide an application under Rule 1014 or Rule 1017, so the conflict-of-interest, bias, and reasonably-questioned-fairness grounds in Rule 1012(d), and the Chair and Vice Chair authorities that direct disqualification, operate on the reviewing bodies rather than on the Department.

The position of Department staff in a membership proceeding is defined instead through the term Interested FINRA Staff in Rule 1011, which reaches an employee who directly participates in a decision under Rule 1014 or Rule 1017, an employee who directly supervises such an employee with respect to that decision, the District Director for the relevant district, and the head of the Department. For an application under Rule 1017 the definition also reaches an employee who conducted an investigation or examination of the member that files the application, so that an examiner who examined the member is Interested FINRA Staff in the proceeding even if that examiner takes no part in deciding the application.

Computation of Time

FINRA Rule 1012(e) provides that in the Rule 1000 Series "day" means calendar day. In computing a period of time, the day of the act, event, default, or lapse from which the period begins to run is not included, and the last day of the period is included unless it is a Saturday, Sunday, or Federal holiday, in which case the period runs until the end of the next day that is not a Saturday, Sunday, or Federal holiday. In addition, intermediate Saturdays, Sundays, and Federal holidays are excluded from the computation when the period prescribed is 10 days or less.

This computation standard provides predictability for Applicants navigating the numerous time-sensitive obligations the Rule 1000 Series imposes — the 25-day period to file an executed membership agreement, the 25-day period to request review under Rule 1015, and the 30-day period within which the Department serves its decision on a new membership application after the membership interview or the filing of additional information, whichever is later. By establishing a uniform time-computation rule applicable across all these varying periods, Rule 1012 eliminates potential confusion about when the first day of a period begins and when weekend days and Federal holidays are counted.

Connection to FINRA Rules 1011, 1013, 1014, 1015, 1016, and 1017

FINRA Rule 1012 connects to FINRA Rule 1011 — whose definition of Interested FINRA Staff identifies the personnel subject to the ex parte communication prohibitions Rule 1012 establishes.

It connects to FINRA Rule 1013 — whose new member application, Form NMA, and interview requirements Rule 1012(a)(1) incorporates and whose requests for information Rule 1012(b) enforces through lapse.

It connects to FINRA Rule 1014 — which requires the Department to serve its decision and the membership agreement in accordance with Rule 1012, tying the effectiveness of the decision to Rule 1012's service standards.

It connects to FINRA Rule 1015 — as the review proceeding whose anticipated filing triggers Rule 1012's ex parte communication prohibitions, and under which the Subcommittee members subject to Rule 1012's recusal framework are appointed.

It connects to FINRA Rule 1016 — as the FINRA Board's discretionary review, in which Governors are subject to Rule 1012's recusal and disqualification provisions.

And it connects to FINRA Rule 1017 — the application for approval of a change in ownership, control, or business operations that Rule 1012(a)(2) requires an Applicant to file in the manner Rule 1017 prescribes, and whose requests for information and membership interview Rule 1012(b) enforces through lapse.

Examination Relevance and Key Takeaways

FINRA Rule 1012 is the general procedural framework for the membership application process, governing filing methods, service completion, application lapse, ex parte communication prohibitions, recusals, and time computation throughout the Rule 1000 Series. Securities professionals involved in firm formation, changes in ownership or control, or membership compliance should understand how its filing, service, lapse, and time-computation provisions operate.

The key points to retain are these: FINRA Rule 1012 requires an Applicant to file applications, and any requested documents or information, by electronic mail unless FINRA has prescribed an alternative filing process or the Department and the Applicant agree to another method, and FINRA serves notices and decisions by electronic mail or first-class mail on the Applicant or its counsel unless a rule specifies a different method; filing or service by first-class mail is deemed complete on the postmark date, by overnight courier on the date of delivery to the courier, by hand delivery on the date-stamped date of receipt, by facsimile on the date in the document and the written confirmation of transmission, by electronic mail upon sending, and, for filings, through an electronic system on the date on the confirmation page; under Rule 1014(e) a Department decision is effective upon service and remains in effect during review unless the NAC, the FINRA Board, or the SEC directs otherwise; an application lapses, absent good cause, if the Applicant fails to respond fully to a request for information within the applicable period (60 days for an initial request under Rule 1013, and 30 days for an initial request under Rule 1017 and for any subsequent request), fails to appear at or participate in a scheduled membership interview, or fails to file an executed membership agreement within 25 days after service, with no fee refund and a new application required; ex parte communication prohibitions take effect when FINRA staff has knowledge an Applicant intends to seek NAC review and bar communications relevant to the merits between the Applicant, its counsel or representative, and Interested FINRA Staff on one side and Governors, NAC and Subcommittee members, and the FINRA employees advising them on the other, absent notice and opportunity to participate, with prohibited communications placed in the record; a Governor or an NAC or Subcommittee member may not participate where there is a conflict of interest or bias or where fairness might reasonably be questioned, with disqualification directed by the Board Chair or NAC Chair, or by a majority of the Governors or the NAC Vice Chair for the chairs themselves; and time periods under the Rule 1000 Series are counted in calendar days, exclude the triggering day, include the last day unless it is a Saturday, Sunday, or Federal holiday, and exclude intermediate Saturdays, Sundays, and Federal holidays when the period is 10 days or less.