FINRA Rule 1013

FINRA Rule 1013(a): Filing the Application — Form NMA and Its Required Contents

FINRA Rule 1013(a)(1) establishes the baseline requirement for how a prospective FINRA member applies — an Applicant for FINRA membership shall file its application with the Department in the manner prescribed by FINRA. This manner-prescribed formulation leaves the mechanics of filing to the procedures FINRA prescribes, including the electronic filing of Form NMA.

The required contents of the application are extensive. An Applicant shall submit an application that includes: (A) Form NMA; (B) an original signed and notarized paper Form BD, with applicable schedules; (C) an original FINRA-approved fingerprint card for each Associated Person who will be subject to SEA Rule 17f-2; (D) a new member assessment report; (E) a detailed business plan that comprehensively describes the material aspects of the business, including financial statements and a net capital computation, projected monthly income and expenses for twelve months, an organizational chart, office locations, the types of securities and customers the Applicant will target, how it will acquire customers, its facilities, any market-making, underwriting, or proprietary activity, and a description of its communications and operational systems; (F) copies of any adverse actions taken by federal or state authorities or self-regulatory organizations; (G) a list of all Associated Persons; (H) documentation of specified regulatory actions, investment-related civil actions, customer complaints and arbitrations, criminal actions, and terminations for cause that have not already been reported to the Central Registration Depository; (I) a description of any remedial actions, such as special training, continuing education, or heightened supervision, imposed on Associated Persons; (J) a written acknowledgment that heightened supervisory procedures and educational programs may be required for Associated Persons with disciplinary histories; (K) copies of final or proposed contracts with banks, clearing entities, and service bureaus; (L) a description of the nature and source of the Applicant's capital; (M) a description of its internal financial controls; (N) a description and copies of its supervisory system, including written supervisory procedures; (O) information about its supervisory personnel; (P) a description of its recordkeeping procedures; (Q) its written training plan to comply with Firm Element continuing education requirements; and (R) the FINRA entitlement forms.

The detailed business plan requirement — comprehensively describing the material aspects of the business — is among the application items that most directly map to the admission standards FINRA Rule 1014 will apply. Because Rule 1014's fourteen standards for admission address the Applicant's business model, capitalization, supervisory systems, personnel, compliance infrastructure, and operational capacity, the business plan is a central document through which an Applicant demonstrates it can meet those standards before the membership interview even takes place.

Additional Documents and Registration Forms

Under Rule 1013(a)(2), once FINRA approves the Applicant's entitlement forms, the Applicant must submit Forms U4 for its registered Associated Persons, any amendments to Forms BD and U4, and any Form U5 electronically through Web CRD.

Under Rule 1013(a)(4), the Department must serve an initial request for any additional information or documents necessary to render a decision within 30 days after the filing of the application, and may make subsequent requests at any time. Unless the Department and the Applicant agree otherwise, the Applicant must file the additional materials within 60 days after the initial request or within 30 days after a subsequent request.

FINRA Rule 1013(a)(3): The "Substantially Complete" Standard and the Department's Right to Reject

FINRA Rule 1013(a)(3) establishes a threshold check on every application — if the Department determines within 30 days after the filing of an application that the application is not substantially complete, it may reject the application and deem it not to have been filed. The Department must serve written notice of the determination and the reasons for it.

This substantially complete standard serves an important gating function — it prevents the Department from expending significant review resources on applications that are so deficient that meaningful review is not yet possible. When an application is rejected, FINRA refunds the application fee less a $500 processing fee, and an Applicant that wishes to proceed must file a new application and pay a new fee under Schedule A to the FINRA By-Laws.

FINRA Rule 1013(b): The Membership Interview

FINRA Rule 1013(b) establishes the membership interview as a required component of the NMA process — before the Department serves its decision on an application for new membership, it shall conduct a membership interview with a representative or representatives of the Applicant. The membership interview serves as the primary forum in which the Department and the Applicant engage directly to discuss the application's contents, clarify any issues or deficiencies the Department has identified, and address questions about the Applicant's capacity to meet Rule 1014's admission standards.

The rule also sets the practical framework for the interview. The Department must serve written notice specifying the date and time at least seven days before the interview. Unless the Department directs otherwise for good cause, the interview is scheduled to occur within 90 days after the filing of the application or within 60 days after the filing of all additional information or documents requested, whichever is later. Unless the Department and the Applicant agree otherwise, the interview is conducted in the district office for the district in which the Applicant has or intends to have its principal place of business. On or before the interview date, the Applicant must file an updated trial balance, balance sheet, supporting schedules, and computation of net capital, and must promptly notify the Department in writing of any material adverse financial change before final FINRA action.

During the membership interview, the Department reviews the application and the standards for admission with the Applicant's representative or representatives. Crucially, the Department is required to provide to the Applicant's representative any information or document that the Department has obtained from the Central Registration Depository or from any source other than the Applicant, and upon which the Department intends to base its decision under Rule 1014. This disclosure obligation — providing the third-party information the Department intends to rely upon during the interview — ensures the Applicant has a full and fair opportunity to address that information before the Department issues its decision.

If the Department receives additional third-party information after the membership interview, or decides to base its decision on such information discovered after the interview, it must promptly serve that information and an explanation on the Applicant — again ensuring the Applicant has the opportunity to respond before the Department's decision is finalized. This procedural protection prevents the Department from issuing an adverse decision based on information the Applicant has never had the opportunity to see and address, consistent with the fundamental due process principle that an Applicant should know the case against it.

FINRA Rule 1013(c): Notification of Pending Arbitration Claims

FINRA Rule 1013(c) establishes a continuing notification obligation that extends throughout the entire pendency of the NMA proceeding — the Applicant shall promptly notify the Department in writing of any arbitration claim involving the Applicant or its Associated Persons that is filed, awarded, or becomes unpaid before a decision constituting final action of FINRA is served on the Applicant.

This notification obligation connects directly to Rule 1014(a)(3)(D) and (E), under which the Department considers whether the Applicant or its Associated Persons are subject to unpaid arbitration awards, other adjudicated customer awards, or unpaid arbitration settlements, or to a pending arbitration claim — and to Rule 1011's Covered Pending Arbitration Claim definition, which establishes threshold criteria for when pending arbitration claims require mandatory materiality consultations under Rule 1017(a)(6).

The ongoing character of this obligation — extending through final action of FINRA rather than merely through the initial application filing — reflects the reality that a membership proceeding can take months, during which the Applicant's regulatory and litigation profile may change. A new arbitration claim filed against the Applicant after the initial NMA is submitted but before the Department issues its final decision could materially affect the Department's assessment of whether the Applicant meets the Rule 1014(a) standards. The prompt notification requirement ensures the Department's review reflects the Applicant's current regulatory profile, not merely the snapshot captured at initial filing.

The Withdrawal Provision and Fee Treatment

FINRA Rule 1013(a)(5) also addresses the consequences of an Applicant's voluntary withdrawal of a new member application. If an Applicant withdraws an application within 30 days after filing, FINRA refunds the application fee less a $500 processing fee that FINRA retains, and an Applicant that later reapplies must pay a new fee under Schedule A to the FINRA By-Laws. The rule provides this refund only for withdrawals within the 30-day window, which parallels the no-refund consequence for lapsed applications under Rule 1012. This structure creates an incentive for prospective Applicants to complete preliminary due diligence before filing a formal NMA, since the filing itself represents a financial commitment that is only partly recoverable.

IM-1013-1 and IM-1013-2: NYSE and NYSE American Waive-In Processes

Interpretive Material IM-1013-1 and IM-1013-2 establish expedited membership approval processes for two specific categories of member organizations. IM-1013-1 applies to certain NYSE member organizations — those that were approved NYSE member organizations as of July 25, 2007 (or that applied and were approved afterward) and that were not also NASD members as of July 30, 2007. IM-1013-2 applies the same waive-in concept to certain NYSE American LLC member organizations that hold a valid 86 Trinity Permit as of the date the firm transfers its equities operations to the NYSE American Trading Systems and that are not already FINRA members.

Under both interpretations, an eligible firm submits a signed waive-in membership application to the Department in place of the full NMA process. The application includes general information about the firm, attestations as to the accuracy of its registration data, the identity of its executive representative, completed entitlement forms, and a signed FINRA membership agreement. The Department reviews the submission within three business days and, if the documentation is complete, issues an approval notification. Waived-in firms initially operate within a restricted scope — floor-based activities (or, under IM-1013-1, floor brokerage on the NYSE) and the routing of ancillary orders — and must obtain approval under Rule 1017 before expanding beyond it.

These waive-in processes reflect a recognition that redundant, full-length membership proceedings for organizations already subject to another exchange's equivalent membership review would impose unnecessary regulatory burden without meaningful additional investor protection benefit. By expediting membership approval while confining waived-in firms to a limited scope of business until they obtain Rule 1017 approval, IM-1013-1 and IM-1013-2 enable these firms to become FINRA members efficiently while preserving FINRA's review of any business expansion.

IM-1013-3: The SEA Rule 15b9-1 Application Process

Interpretive Material IM-1013-3, titled Membership Application Process for Certain Firms Applying Due to Amended SEA Rule 15b9-1, was adopted in connection with the amendments to SEA Rule 15b9-1 that the SEC adopted on August 23, 2023, which narrowed the exemption from FINRA membership available to certain exchange-member broker-dealers. It establishes a specialized application process for firms that must become FINRA members because of those amendments. Eligible firms under IM-1013-3 are SEC-registered, non-FINRA-member firms that must join FINRA due to the amended SEA Rule 15b9-1 and that were members of a national securities exchange with which FINRA has a regulatory service agreement for the entire 12-month period preceding August 23, 2023.

Eligible firms must submit their applications at least 120 calendar days before the compliance date of the amended SEA Rule 15b9-1, although FINRA retains discretion to accept a later filing made before the compliance date. This advance-application requirement ensures that FINRA has adequate time to process the potentially large volume of membership applications generated by the Rule 15b9-1 amendments before the compliance date arrives. Under IM-1013-3, an eligible firm applies in the manner prescribed by FINRA and pays a reduced application fee of one-half the standard amount, although the Department may require additional information or a complete Form NMA under Rule 1013 — particularly where the firm seeks a material business expansion — and may then assess the full fee.

Connection to FINRA Rules 1011, 1012, 1014, 1015, 1017, and Form NMA

FINRA Rule 1013 connects directly to FINRA Rule 1011 — whose definitions of Applicant, Associated Person, and sales practice event are the foundational terms the Rule 1013 application content requirements employ. It connects to FINRA Rule 1012 — whose general provisions on filing and service, lapse of applications, and computation of time apply throughout Rule 1013's application process. It connects directly and substantively to FINRA Rule 1014 — as the destination toward which Rule 1013's application process leads, with the membership interview specifically designed to review the fourteen Rule 1014(a) admission standards with the Applicant. It connects to FINRA Rule 1015 — as the review mechanism available to an Applicant whose Rule 1014 Department decision is adverse, with the ex parte communication prohibitions under Rule 1012 applying once the Applicant anticipates seeking that review. It connects to FINRA Rule 1017 — as the rule governing applications by existing members for approval of material changes to ownership, control, or business operations, to which the Rule 1014(a) standards also apply. And Form NMA, the first item the Applicant must submit under Rule 1013(a)(1), is the application form through which the Applicant presents the information the Department evaluates under those standards.

Examination Relevance and Key Takeaways

Candidates preparing for the Series 24 examination should be familiar with the new member application and interview framework in FINRA Rule 1013 — the Form NMA filing requirement, the substantially complete threshold, the membership interview process, and the ongoing arbitration notification obligation.

The key points to retain are these: FINRA Rule 1013(a) requires new membership applicants to file with the Department via Form NMA and accompanying required materials including an original notarized Form BD, fingerprint cards for SEA Rule 17f-2 personnel, a new member assessment report, a detailed business plan comprehensively describing the material aspects of the proposed business, and additional supporting disclosures addressing personnel regulatory history, remedial actions, contracts, capital, financial controls, supervisory system, recordkeeping, and training; FINRA Rule 1013(a)(3) permits the Department, within 30 days after filing, to reject an application that is not substantially complete and deem it not to have been filed; FINRA Rule 1013(a)(5) provides a refund of the application fee, less $500, for a withdrawal within 30 days after filing; FINRA Rule 1013(b) requires a membership interview at which the Department reviews the application and the Rule 1014(a) standards with the Applicant, and must provide to the Applicant any third-party information (from the Central Registration Depository or other sources) upon which the Department intends to base its decision, with the same obligation arising for such information received after the interview; FINRA Rule 1013(c) requires the Applicant to promptly notify the Department of any arbitration claim involving the Applicant or its Associated Persons that is filed, awarded, or becomes unpaid before final action of FINRA is served; IM-1013-1 and IM-1013-2 establish expedited waive-in processes for certain NYSE and NYSE American member organizations; and IM-1013-3 establishes a specialized process, with applications due at least 120 calendar days before the compliance date, for firms required to join FINRA due to the amended SEA Rule 15b9-1 adopted by the SEC on August 23, 2023.