One category FINRA Rule 11111 covers is a final decision of the UPC Committee under the Uniform Practice Code. How far does that category reach?

Its interpretations and rulings, and decisions it makes in its review capacity

Its interpretations and rulings alone, review decisions falling under the second category instead

Only rulings issued on a question a member has formally submitted to the Committee

Only decisions issued after a panel has been constituted to hear the matter

FINRA Rule 11111 reaches final decisions of a FINRA officer, not only final decisions of the UPC Committee. What does extending the rule to those officer decisions achieve?

It allows a member to seek the Committee's review even after the officer's own decision has become final

It closes a gap — a decision that became final without the Committee reviewing it is still covered

It gives the officer's decision the same appellate route the Committee's own decisions carry

It transfers responsibility for effectuating the decision from the member to the officer concerned

A FINRA officer makes a final decision under a FINRA rule outside the Uniform Practice Code that gives the UPC Committee no power to review it. A member refuses to take the action the decision requires. Does FINRA Rule 11111 reach that refusal?

Yes, provided the UPC Committee adopts the officer's decision as its own before the member's refusal occurs

Yes — it reaches every final decision of a FINRA officer, whichever of FINRA's rules the decision was made under

No — an officer's decision comes within it only after the UPC Committee has actually reviewed and upheld it

No — outside the Code it reaches officer decisions made under rules that let the UPC Committee review them

A member tenders a security, and the UPC Committee rules that it is good delivery under the contract concerned. What would a refusal to effectuate that ruling look like?

Declining to accept the security and complete settlement on that basis

Accepting the security but reserving the right to reclaim it within the applicable period

Asking the Committee to reconsider on facts the member says were not before it

Accepting the security and settling, while noting its disagreement with the ruling in its own records

A FINRA officer makes a clearly erroneous transaction determination under FINRA Rule 11892. What decides the point at which that determination becomes final for the purposes of FINRA Rule 11111?

A fixed period in FINRA Rule 11111 itself, counted from the day the clearly erroneous determination issues

The counterparty's written acceptance of the clearly erroneous determination, which makes it binding between the two members

The finality mechanism that the clearly erroneous rules themselves establish for such determinations

A notice from the UPC Committee declaring that it has decided not to review the clearly erroneous determination

Before the UPC Committee ruled against it, a member settled its trades on a reading of the Code that was reasonable and held in good faith. The ruling is now final, and the member goes on settling according to its own reading. Does the reasonableness of that reading keep it outside FINRA Rule 11111?

Yes, until the Committee repeats the ruling in a further decision addressed to that member

Yes — a violation needs a reading that was unreasonable when the member first adopted it

Yes — the rule reaches refusals, and acting on a sincere reading of the Code is not a refusal

No — once the ruling is final, carrying on under its own reading is itself sanctionable conduct

To resolve a conflict over the settlement of a "when, as and if issued" contract between two members, the UPC Committee cancels the contract, and the cancellation is final. How does FINRA Rule 11111 apply to it?

It does not apply, since cancelling a contract ends the members' obligations under it and leaves nothing that could be refused

It reaches a member's refusal to take any action necessary to give the cancellation effect, the cancellation being a Committee decision

It applies only once a FINRA officer has issued a determination of its own adopting the cancellation as a decision of FINRA

It applies only where both members had asked the Committee in writing to resolve their conflict over the contract's settlement

A final UPC Committee ruling settles a dispute over one contract between two members, and the member it went against takes every step the ruling requires. The other member then asks it to bring forward settlement of an unrelated open trade between them, which the ruling did not touch, and it declines. Does FINRA Rule 11111 reach that refusal?

Yes — a member that has lost a ruling must then meet its counterparty's related requests arising in their further dealings

Yes — the rule reaches any refusal passing between two members for as long as a ruling between them remains in effect

No — the ruling does not need that step to take effect, so declining it is no refusal under the rule

No, but solely because the request came from the other member rather than from a FINRA officer or the Committee

One member's erroneous order executes against three counterparties, and a FINRA officer declares all three trades null and void. One counterparty appeals to the UPC Committee; the other two bring no appeal. What is the position of the determination as to those other two trades?

It becomes final once the two other counterparties confirm to FINRA in writing that they will not be bringing an appeal

It stays open until the Committee decides the pending appeal, since all three trades were voided by a single determination

It becomes final only if the Committee affirms on the appeal, and falls away for all three trades if the Committee reverses

Not being appealed, it is final and binding as to those two trades, the pending appeal not holding it open

Working jointly with another self-regulatory organization, a FINRA officer declares null and void a member's over-the-counter trade in an exchange-listed security. That ruling cannot be appealed. The member refuses to unwind the trade, arguing that FINRA Rule 11111 cannot reach a ruling the UPC Committee will not review on an appeal. Is the member right?

No — the ruling is still a final decision of a FINRA officer under the UPC Code, a kind of decision the rule names

Yes — a ruling that no appeal can reach sits outside the rule, because its officer category turns on the Committee's power of review

Yes — a ruling made jointly with another regulator binds the member only through that other regulator's own rules and procedures

No, because the other regulator's part in the ruling turns it into a decision of the UPC Committee itself

Is FINRA Rule 11111 the only provision under which FINRA could sanction a member that refuses to comply with a final decision of the UPC Committee?

Yes — without it a Committee ruling would be mere advisory guidance that a member could disregard without facing any defined consequence

Yes — FINRA's sanctions reach a member's misconduct toward customers and the markets, not its compliance with FINRA's own decisions

No — FINRA Rule 11112 lets a panel of the Committee fine a member directly, without a proceeding, for ignoring one of the Committee's rulings

After a FINRA officer voids a trade between two members, the buyer appeals and the UPC Committee reverses the determination. The selling member had been content with the officer's declaration and refuses to complete settlement, pointing to that declaration. Does FINRA Rule 11111 reach its refusal?

No — the officer's declaration stays operative for the selling member until FINRA brings proceedings to enforce the reversal

No — a decision on an appeal binds the member that brought it, and the selling member brought no appeal of its own

Yes — with the declaration reversed, completing settlement is an action necessary to give the Committee's decision effect

Yes, but only after the selling member has had its own chance to appeal the reversal to the full membership of FINRA

A person associated with a member refuses to take an action that is necessary to effectuate a final UPC Committee decision. FINRA Rule 11111 is written in terms of members. How does the duty it describes bear on that person?

It reaches the person only after the member firm itself has refused and has been found in violation of the rule

It does not — the rule's words reach member firms, leaving individuals to their firm's own supervisory procedures

It reaches the person only where the Committee's decision names that person individually as a party to the trade

Two members disagree over the price of an OTC Equity Security trade. With no FINRA determination made, they agree between themselves to cancel it. Later one of them refuses to give effect to that agreement. Does FINRA Rule 11111 reach the refusal?

No — a settlement the parties reached privately is not a final decision of a FINRA officer or of the UPC Committee

Yes — FINRA expects such disputes to be settled privately, so the parties' settlement takes effect just as a FINRA decision would

Yes, once either member has reported the cancellation to FINRA, which then turns the parties' agreement into a FINRA determination

No — the rule reaches decisions on exchange-listed securities only, and FINRA leaves disputes over OTC Equity Securities to the members

FINRA disciplines a member that refused the action a final UPC Committee decision required, and wants the sanction to run until the member takes that action. Which of the sanctions FINRA may impose is framed that way?

A censure that stays in force until the member performs the act, and then lapses of its own accord

A suspension of membership for a period contingent on the performance of a particular act

An expulsion that FINRA withdraws automatically once the member performs the act it refused

A fine that FINRA refunds in full once the member performs the act it refused to take

A panel of three members of the UPC Committee decides a Uniform Practice Code question against a member. The member declines to act on the decision, saying it will first ask the full Committee to review the panel's decision under FINRA Rule 11112. Does that rule give it such a review?

Yes, provided the member asks for it in writing within thirty minutes of being notified of the panel's decision

Yes — a panel's decision becomes final only once the full Committee has confirmed it at the request of a member that disputes it

No — it allows a decision of the Committee to be rendered by a panel, and gives a member no further review of it

No — it lets the member seek review only from a FINRA officer, who may then affirm, modify or reverse the panel's decision

How does FINRA Rule 2010 set out the conduct it requires of members in the conduct of their business?

A set of quantitative conduct thresholds that FINRA revises by Regulatory Notice from time to time

A numbered catalogue of prohibited trading practices, each carrying its own fixed range of sanctions

A residual standard that reaches only conduct some other specific FINRA rule already prohibits

A broad, principles-based ethical baseline that does not list the specific conduct it prohibits

A FINRA officer voids a trade between two members, and the seller, which wants the trade to stand, files a timely written appeal with the UPC Committee. Once the buyer has been told of the appeal, the seller informs FINRA that it is withdrawing it, and the buyer does not consent. The Committee then upholds the officer's determination, and the seller declines to unwind the trade on the ground that its appeal had been withdrawn. Does FINRA Rule 11111 reach that refusal?

Yes — the Committee's affirmance on the appeal is a final decision, and declining to unwind the trade is refusing to give it effect

No — an appellant may withdraw at any time before a decision is rendered, so the Committee had no appeal before it to decide

No — once the appellant has tried to withdraw, the Committee may only remand the matter to the officer, and a remand is not final

Yes, but only if the buying member had asked the Committee in writing to decide the appeal before the seller's withdrawal reached FINRA

A FINRA officer, with no other regulator involved, voids a large number of after-hours over-the-counter trades in a single exchange-listed security, and FINRA publicizes the determination through a press release rather than contacting the parties one by one. A member on one side of several of those trades does not appeal, and neither do its counterparties. It later declines to unwind the trades, arguing that FINRA never reached it directly. Does FINRA Rule 11111 reach the refusal?

No — a determination binds a party only once FINRA has notified that party individually by facsimile, electronic mail or telephone, voicemail included

Yes — the press release counted as notice of the voiding, so not being contacted individually gives the member no ground to refuse

No — an officer acting alone, without another self-regulatory organization, cannot void over-the-counter trades in an exchange-listed security after hours

No — a press release announces a determination to the market as guidance, so it binds no member that was not separately named in it

No delivery date has been set by the UPC Committee for a security traded "when, as and if issued", and the security is not in a public offering through a syndicate or selling group. On a Monday the seller leaves written notice of its intention to deliver at the purchaser's office; on Tuesday, a business day, it tenders the securities, and the purchaser rejects them. Does FINRA Rule 11111 reach the purchaser's refusal?

Yes — a delivery date fixed by the Code's default provision carries the same standing as a date the Committee itself declares

Yes — by leaving the date undeclared the Committee in effect decided that the seller should fix it, a decision the purchaser must effectuate

No — the Tuesday date comes from the Code's own provision for undeclared dates, not from any final decision of the Committee

No, because delivery may be tendered no sooner than the second business day after notice, so the seller's Tuesday tender came too early

While it serves a suspension from membership ordered in a separate matter, a member is named as the Respondent in a new FINRA disciplinary proceeding. It files its answer and asks for a hearing. What is the position?

The suspension removes its privileges of membership, so it may file an answer but no hearing need be held for it

It may request a hearing only after reinstatement, the proceeding being held in abeyance until its suspension has ended

It keeps every privilege of membership while the proceeding runs, so the unrelated suspension cannot take effect until it ends

The suspension leaves it its privileges under the Code of Procedure, so the hearing it has requested shall be granted

A FINRA officer voids a run of trades in one OTC Equity Security and, because so many trades are affected, further determines that immediate finality is necessary. A member that was party to some of the trades refuses to unwind them, arguing that a determination nobody could ever appeal has never become final, so FINRA Rule 11111 cannot reach it. Is the member right?

No — with no appeal lying, it is a determination that is not appealed, and such a determination is final and binding upon all parties

Yes — a determination becomes final only when an appeal period runs out unused, and one that allows no appeal has no such period to run

Yes — a determination that allows no appeal binds the parties only once the UPC Committee has confirmed it on its own motion

No, because a determination made with immediate finality is treated as a decision of the UPC Committee itself rather than of the officer

The UPC Committee has declared a delivery date for "when, as and if issued" contracts in a security, and the declaration is final. On that date the seller tenders delivery at the purchaser's office. The purchaser, which raises no objection to the securities themselves, refuses them because it would prefer to settle a week later. Does FINRA Rule 11111 reach the refusal?

No — a declared delivery date only sets the timing of settlement, and a disagreement about timing is left to the two members to resolve

Yes — the declared date is a decision of the Committee under the Code, and taking delivery on it is action that gives the declaration effect

No — FINRA Rule 11111 reaches decisions that resolve a dispute between two members, and a delivery date declared for every contract in the security resolves none

Yes, but only after the seller has obtained a further ruling of the Committee directing this particular purchaser, by name, to take the delivery tendered

A FINRA officer voids a trade between two members, and the determination may be appealed; the selling member files a timely written appeal with the UPC Committee. Before the buying member has been notified of the appeal, the seller tells FINRA that it withdraws it. The buyer later insists that the Committee must still review the determination and render a decision. Must it?

Yes — once a written appeal has been received it must be reviewed and decided, unless both parties to the transaction agree to its withdrawal

Yes — a timely appeal can be withdrawn only with the UPC Committee's consent, and the buyer's objection is reason enough to refuse it

No — the party that filed the appeal may withdraw it on its own so long as the counterparty has not yet been notified of it

No — an appellant may withdraw at any point before the Committee renders its decision, whether or not the counterparty has yet been told of it

A FINRA officer declares one trade between two members null and void. By what means does FINRA Rule 11894(d)(2) provide for FINRA to give the affected parties prompt notice of that determination?

By registered letter to each party's address on file, a telephone message not counting as notice

By a notice posted on FINRA's website, which each member is expected to check through the trading day

Through the clearing agency handling the trade, which passes the notice on to each of its participants

By facsimile, electronic mail or telephone, and a voicemail message left for a party counts

A FINRA officer declares a trade between two members null and void, and the seller appeals. The UPC Committee accepts that the trade's price was clearly erroneous but modifies the determination so that the trade stands at an adjusted price. The buyer refuses to recognise the adjusted price, arguing that the Committee could only uphold or overturn the officer's declaration. Does FINRA Rule 11111 reach the buyer's refusal?

No — on an appeal the Committee's choice lies between affirming and reversing, so a decision fixing a new price leaves the buyer nothing to effectuate

No — a decision adjusting a price binds the parties once the officer has reissued it as a fresh determination of the officer's own, and not before

Yes — the Committee may modify a determination on appeal, and accepting the adjusted price is action needed to give its decision effect

Yes, but only once the buyer has had its own chance to appeal the adjusted price to the Committee and has let that chance pass

FINRA Rule 11111 | Financial Regulation Courses

Refusal to Abide by Rulings of the Committee

SERIES 7 | SERIES 24 | FINANCIAL REGULATION COURSES

FINRA Rule 11111 is the enforcement mechanism that gives the UPC Committee's interpretive authority under FINRA Rule 11110 genuine binding force — the provision that converts a member's refusal to comply with a final decision of a FINRA officer or the UPC Committee under the UPC Code or other FINRA rules that permit review of FINRA decisions by the UPC Committee, into a disciplinary violation.

The rule consists of a single sentence: it shall be considered conduct inconsistent with just and equitable principles of trade for any member to refuse to take any action that is necessary to effectuate a final decision of a FINRA officer or the UPC Committee under the UPC Code (FINRA Rule 11000 Series) or other FINRA rules that permit review of FINRA decisions by the UPC Committee.

This single sentence accomplishes a critical structural function for the entire Uniform Practice Code — it bridges the operational, committee-based interpretive framework of FINRA Rule 11110 with the disciplinary framework of FINRA Rule 2010's just and equitable principles of trade standard, ensuring that UPC Committee rulings and covered FINRA officer decisions are not merely advisory guidance that members may disregard without consequence, but final decisions whose non-effectuation constitutes an independent disciplinary violation.

FINRA Rule 11111 sits within the 11000 Uniform Practice Code as the second rule of the governance cluster, immediately following FINRA Rule 11110's establishment of the UPC Committee and immediately preceding FINRA Rule 11112's review-by-panels framework.

The rule was amended by SR-FINRA-2010-030 effective December 15, 2010, as part of the Uniform Practice Code's transfer into the Consolidated FINRA Rulebook. One selected notice is associated — Regulatory Notice 10-49.

The Just and Equitable Principles of Trade Mechanism

FINRA Rule 11111's core operative mechanism is its invocation of conduct inconsistent with just and equitable principles of trade — the foundational ethical standard codified in FINRA Rule 2010 that underlies a substantial portion of FINRA's disciplinary framework. FINRA Rule 2010 itself is a broad, principles-based standard — it does not enumerate specific prohibited conduct but instead establishes a general ethical baseline that members must observe in the conduct of their business. Many specific FINRA rules operate by defining particular conduct and then providing that engaging in that conduct constitutes a violation of FINRA Rule 2010 — converting the specific conduct into a disciplinary violation through the just and equitable principles framework.

FINRA Rule 11111 operates through exactly this mechanism. It does not create an independent disciplinary standard with its own sanctions framework, its own adjudicative procedures, or its own appellate structure. Instead, it defines a specific category of conduct — refusing to take action necessary to effectuate a final UPC Committee decision or a final FINRA officer decision under the UPC Code or under other FINRA rules that permit UPC Committee review — and declares that conduct to constitute a violation of FINRA Rule 2010's just and equitable principles standard. The practical consequence is that a member who refuses to comply with such a final decision becomes subject to the full FINRA Rule 9200 series disciplinary proceedings framework for a FINRA Rule 2010 violation — the same disciplinary machinery, with the same procedural protections and the same range of available sanctions under FINRA Rule 8310, that applies to any other FINRA Rule 2010 violation.

This design choice is significant. Rather than building a separate enforcement mechanism specifically for UPC Committee decision non-compliance — which would require its own notice provisions, its own hearing procedures, its own sanctions framework, duplicating much of the architecture already established in the 9000 Code of Procedure — FINRA Rule 11111 simply channels non-compliance into the existing FINRA Rule 2010 and Rule 9200 series disciplinary framework. A member who refuses to effectuate a final UPC Committee decision faces the same kind of disciplinary proceeding, with the same procedural rights, as a member charged with any other FINRA Rule 2010 violation.

The Two Categories of Covered Decisions

FINRA Rule 11111 identifies two distinct categories of final decisions whose non-effectuation triggers the rule's application.

The first category — a final decision of the UPC Committee under the UPC Code or under other FINRA rules that permit review of FINRA decisions by the UPC Committee — encompasses the Committee's own interpretations and rulings issued pursuant to FINRA Rule 11110's grant of authority, as well as any decisions the Committee issues in its review capacity under FINRA Rule 11894, including a decision rendered by a panel of the Committee under FINRA Rule 11112. When the UPC Committee issues a final ruling on a Uniform Practice Code question — for example, a ruling on whether a tendered security constitutes good delivery, or a final determination on review of a clearly erroneous transaction question under FINRA Rule 11894 — that ruling becomes binding, and a member's refusal to take the action necessary to effectuate it triggers FINRA Rule 11111.

The second category — a final decision of a FINRA officer under the UPC Code or under other FINRA rules that permit review of FINRA decisions by the UPC Committee — addresses a different but related scenario. Here, the initial decision is made by a FINRA officer — not the UPC Committee itself. A FINRA officer's decision under the UPC Code is named without any review condition; for a decision under another FINRA rule, that rule must permit review of FINRA decisions by the UPC Committee. FINRA Rule 11894's framework for review of clearly erroneous transaction determinations is a paradigmatic example within the UPC Code itself, since FINRA Rules 11892 through 11894 are part of the FINRA Rule 11000 Series — the initial clearly erroneous transaction determination may be made by FINRA staff pursuant to FINRA Rules 11892 and 11893, with FINRA Rule 11894 providing for UPC Committee review of that determination. FINRA Rule 11111 ensures that even at this initial FINRA officer decision stage — where the decision has become final, whether because the UPC Committee review period has expired without review being sought, or through whatever finality mechanism the specific rule establishes — a member's refusal to effectuate that final decision triggers the same FINRA Rule 2010 consequence. Where an appeal is taken, the final decision is no longer the officer's: under FINRA Rule 11894(c), the decision of the UPC Committee pursuant to an appeal, or a determination by a FINRA officer that is not appealed, is final and binding, so a decision on appeal falls within the first category.

This second category's significance lies in closing a potential gap. Without it, a member might argue that FINRA Rule 11111 applies only to decisions actually issued by the UPC Committee itself, and that a FINRA officer's initial decision — even one that has become final through the applicable review framework without the UPC Committee ever actually reviewing it — falls outside FINRA Rule 11111's scope. By explicitly including final FINRA officer decisions, whether made under the UPC Code or under other FINRA rules that permit UPC Committee review, FINRA Rule 11111 ensures that those decisions carry the same binding effect whether or not UPC Committee review was actually invoked in a specific case.

What Constitutes Action Necessary to Effectuate a Decision

FINRA Rule 11111 applies to a member's refusal to take any action that is necessary to effectuate a final decision. The breadth of this formulation — any action that is necessary — means the rule is not limited to a narrow category of compliance steps but encompasses whatever specific actions a particular final decision requires for it to have its intended operative effect.

In the good delivery context, for example, if the UPC Committee rules that a tendered security does constitute good delivery in settlement of a specific contract, the action necessary to effectuate that decision would include the receiving member's acceptance of the tendered security and completion of the settlement on that basis — a refusal to accept the security notwithstanding the Committee's good delivery ruling would constitute the refusal FINRA Rule 11111 addresses.

In the clearly erroneous transactions context, if a final decision under FINRA Rules 11892 through 11894 determines that a specific transaction was clearly erroneous and should be adjusted to a specific price or busted entirely, the action necessary to effectuate that decision would include the affected members' acceptance of the adjusted price or the unwinding of the busted transaction in their respective books and records — a member's refusal to recognize the adjustment or unwinding notwithstanding the final determination would constitute the refusal FINRA Rule 11111 addresses.

The necessary to effectuate standard is inherently contextual — what action is necessary depends entirely on the substance of the specific final decision at issue. FINRA Rule 11111's generality on this point is appropriate given the wide range of substantive questions the UPC Committee and covered FINRA officer decisions can address across the entire Uniform Practice Code framework spanning FINRA Rules 11100 through 11900.

FINRA Rule 11111 as the Capstone of Committee Authority

FINRA Rule 11111's position immediately following FINRA Rule 11110 reflects a deliberate structural pairing — FINRA Rule 11110 establishes the UPC Committee's authority to issue interpretations and rulings, and FINRA Rule 11111 immediately establishes the consequence for disregarding that authority once exercised. FINRA Rule 11111 is not the only route to a sanction — FINRA Rule 8310(a) already permits FINRA to impose sanctions for any neglect or refusal to comply with an order, direction, or decision issued under the FINRA rules — but it is the provision that names a member's refusal to take the action necessary to effectuate a covered final decision as conduct inconsistent with just and equitable principles of trade, so that no member can treat FINRA Rule 11110's grant of interpretive authority to the UPC Committee as producing merely advisory rulings.

FINRA Rule 11111 forecloses this possibility by making non-compliance itself an independent disciplinary violation under the well-established FINRA Rule 2010 framework. This gives the UPC Committee's interpretive role genuine regulatory teeth — where the governing rule provides for it, a member that disputes a FINRA officer's determination may appeal it to the UPC Committee, as FINRA Rule 11894 permits for clearly erroneous transaction determinations, while FINRA Rule 11112 only allows a decision of the UPC Committee to be rendered by a panel of that Committee and gives a member no further review; once a decision becomes final, compliance is mandatory and non-compliance is itself sanctionable conduct.

Connection to FINRA Rules 2010, 8310, 9200, 11110, 11112, and 11894

FINRA Rule 11111 connects to FINRA Rule 2010 as the substantive disciplinary standard whose violation FINRA Rule 11111 defines — refusal to effectuate a covered final decision is conduct inconsistent with just and equitable principles of trade. It connects to FINRA Rule 8310 and the FINRA Rule 9200 series as the sanctions framework and disciplinary procedure through which a FINRA Rule 11111 violation, as a FINRA Rule 2010 violation, would be prosecuted and sanctioned. It connects to FINRA Rule 11110 as the source of the UPC Committee's interpretive and ruling authority whose final decisions FINRA Rule 11111 makes binding. It connects to FINRA Rule 11112 as the provision under which a decision of the UPC Committee may be rendered by a panel of three or more members of that Committee — a panel's decision is a decision of the UPC Committee and, once final, carries FINRA Rule 11111's binding effect. And it connects to FINRA Rule 11894 as a rule within the UPC Code itself that permits review of FINRA decisions by the UPC Committee — the clearly erroneous transactions review framework whose final determinations, by a FINRA officer or by the UPC Committee on appeal, fall within FINRA Rule 11111's covered decisions.

Officer Determinations Under the Clearly Erroneous Rules

Under FINRA Rules 11892 and 11893 a FINRA officer may declare a transaction null and void if the officer determines that the transaction is clearly erroneous, or that such actions are necessary for the maintenance of a fair and orderly market or the protection of investors and the public interest. FINRA Rule 11891's Supplementary Material .01 makes, for the clearly erroneous rules in particular, the provision FINRA Rule 11111 makes: for any member to refuse to take any action necessary to effectuate a final decision of a FINRA officer or the UPC Committee under the Rule 11890 Series is conduct inconsistent with just and equitable principles of trade.

Some of these determinations cannot be appealed. Under FINRA Rule 11892, rulings made by FINRA in conjunction with one or more other self-regulatory organizations are not appealable. Under FINRA Rule 11893, no appeal lies where the officer making the determination also determines that the number of affected transactions is such that immediate finality is necessary to maintain a fair and orderly market and to protect investors and the public interest.

Suppose a FINRA officer, acting in conjunction with another self-regulatory organization, declares a member's over-the-counter trade in an exchange-listed security null and void. The ruling cannot be appealed, so the UPC Committee will not review it on an appeal. It is still a decision of a FINRA officer under the UPC Code, and that is a kind of decision FINRA Rule 11111 names. Now suppose an officer declares a series of trades in an OTC Equity Security null and void and also determines, because of the number of trades affected, that immediate finality is necessary. No appeal lies, so there is no appeal for any party to bring. The determination is one that is not appealed, and FINRA Rule 11894(c) makes such a determination final and binding upon all parties.

Appeals and Finality Under FINRA Rule 11894

Where an appeal does lie, FINRA Rule 11894 governs it. A member or person associated with a member may appeal to the UPC Committee a determination by a FINRA officer under FINRA Rule 11892 or 11893 to declare a transaction null and void. The scope of the appeal is limited to trades to which the person making the appeal is a party. Upon consideration of the record, the UPC Committee shall affirm, modify, reverse or remand the determination.

Suppose a FINRA officer declares a trade between two members null and void, the buying member appeals, and the UPC Committee reverses the determination. The final decision is now the Committee's, and it reverses the declaration that the trade was null and void. The action necessary to effectuate that decision includes completing settlement of the trade. That holds for the selling member too, even though the officer's determination had suited it. If the selling member refuses to complete settlement because the officer had voided the trade, that refusal falls within FINRA Rule 11111.

Now suppose one member's erroneous order executes against three counterparties, and an officer declares all three trades null and void. One counterparty appeals. Its appeal is limited to the trade to which it is a party. If no appeal is brought on the other two trades, the determination as to those trades is not appealed, so under FINRA Rule 11894(c) it is final and binding upon all parties. The appeal on the first trade does not hold it open.

Outcomes That Are Not Decisions of FINRA

For OTC Equity Securities, FINRA has historically applied its clearly erroneous authority in only very limited circumstances. In the vast majority of situations relating to OTC Equity Securities, FINRA does not expect to use that authority, and expects the parties to settle any dispute privately. FINRA Rule 11111 names final decisions of a FINRA officer or the UPC Committee.

Suppose two members dispute the price of a trade in an OTC Equity Security, FINRA makes no determination, and the two members agree between themselves to cancel the trade. One of them later refuses to give effect to that agreement. The agreement is a settlement the parties reached privately. It is not a decision of a FINRA officer or of the UPC Committee, so FINRA Rule 11111 does not reach that refusal.

Committee Decisions Under Other Rules of the Code

FINRA Rule 11130 gives the UPC Committee decisions of its own to make about "when, as and if issued" and "when, as and if distributed" contracts. Under FINRA Rule 11130(h)(1), the Committee may, pursuant to FINRA Rule 11110, cancel or terminate "when, as and if issued" and "when, as and if distributed" contracts as necessary to resolve conflicts over the settlement of such contracts. Under FINRA Rule 11130(g), the Committee determines a date for the settlement of those contracts when a sufficient percentage of the issue is outstanding, and delivery is made at the office of the purchaser on the date the Committee declares.

Each of these is a decision of the UPC Committee under the UPC Code. Suppose the Committee cancels a "when, as and if issued" contract between two members to resolve a conflict over its settlement, and the cancellation is final. FINRA Rule 11111 then reaches a member's refusal to take any action that is necessary to give the cancellation effect. In the same way, where the Committee has declared a delivery date for such contracts, delivery at the office of the purchaser on that date is an action that gives the declaration effect.

Who the Obligation Binds, and a Sanction Tied to Performance

FINRA Rule 11111 speaks of "any member". FINRA Rule 0140(a) provides that the Rules apply to all members and persons associated with a member, and that persons associated with a member have the same duties and obligations as a member under the Rules. So the duty FINRA Rule 11111 describes is not confined to firms. An associated person whose action is necessary to effectuate a final decision has the same duty as a member.

A suspension does not lift the duty either. Under FINRA Rule 0140(c), a member that has been suspended from membership is considered a non-member during the suspension for purposes of applying the provisions of the Rules that govern dealings between members and non-members. It still has all of the obligations imposed by the Rules. A suspended member that refuses to take the action a final UPC Committee decision requires of it cannot rely on its suspension as a reason.

Among the sanctions FINRA may impose under FINRA Rule 8310(a), after compliance with the Rule 9000 Series, is a suspension of the membership of a member, or of the registration of a person associated with a member, for a definite period or for a period contingent on the performance of a particular act. So a member found to have refused the action a final decision requires may be suspended for a period contingent on the performance of a particular act, such as the action it refused.

Withdrawing an Appeal Once the Counterparty Has Been Notified

Under FINRA Rule 11894(a), once a written appeal has been received, the counterparty to the trade that is the subject of the appeal is notified of it. Once a party has appealed a determination to the UPC Committee, the determination is reviewed and a decision rendered, unless both parties to the transaction agree to withdraw the appeal before a decision is rendered, or the party filing the appeal withdraws it before the counterparty is notified.

Suppose a FINRA officer declares a trade between two members null and void in a determination that may be appealed, and the selling member, which wants the trade to stand, appeals in writing within the time allowed. The buying member, as the counterparty, is notified of the appeal. The selling member then tells FINRA that it withdraws its appeal, but the buying member does not agree to the withdrawal. Neither exception applies: the counterparty had already been notified, and the two parties have not both agreed to withdraw. So the determination is reviewed and a decision rendered. Suppose the UPC Committee affirms the determination. Under FINRA Rule 11894(c), the decision of the UPC Committee pursuant to an appeal is final. If the selling member then refuses to take an action necessary to give that decision effect, on the ground that it had withdrawn its appeal, the refusal falls within FINRA Rule 11111.

Notice of a Determination Given by Press Release

FINRA Rule 11894(d)(2) provides that FINRA shall give affected parties prompt notice of determinations under FINRA Rule 11894 by facsimile, electronic mail or telephone, including voicemail. Where an officer nullifies a large number of transactions under FINRA Rule 11892 or 11893, FINRA may instead give notice to parties by a press release or any other method reasonably expected to provide rapid notice to many market participants.

Suppose a FINRA officer, acting alone, declares null and void a large number of over-the-counter trades in one exchange-listed security that occurred after Normal Market Hours, and FINRA announces the determination by press release instead of contacting each party. One member that was a party to some of the trades brings no appeal. Later it refuses to unwind its trades, saying that FINRA never contacted it individually. For a determination covering a large number of transactions, FINRA Rule 11894(d)(2) allows notice by press release in place of individual notice. No appeal was brought by it or by any counterparty on any of its trades, and under FINRA Rule 11894(c) a determination by a FINRA officer that is not appealed is final and binding upon all parties. The member's refusal falls within FINRA Rule 11111.

Delivery Dates the Committee Has Not Declared

FINRA Rule 11130(g)(2) also provides for the case in which no delivery date has been declared by the Committee. Delivery on a transaction in a security "when, as and if issued" may then be made by the seller on the business day following the day on which the seller has delivered written notice of intention to deliver at the office of the purchaser. Open market "when, as and if issued" contracts in securities currently being publicly offered through a syndicate or selling group are instead settled on the date the syndicate or selling group contracts are settled.

Suppose the Committee has declared no delivery date for a "when, as and if issued" security that is not being publicly offered through a syndicate or selling group. On a Monday the seller delivers written notice of intention to deliver at the purchaser's office, and on the Tuesday, a business day, it tenders delivery. The Tuesday date comes from FINRA Rule 11130(g)(2) itself, not from any decision of the Committee. FINRA Rule 11111 names final decisions of a FINRA officer or the UPC Committee. If the purchaser refuses the delivery, there is no final decision of the Committee that the refusal fails to effectuate, so FINRA Rule 11111 does not reach that refusal. That is a conclusion about FINRA Rule 11111 only.

A Suspended Member Charged Under FINRA Rule 11111

FINRA Rule 0140(b) provides that a member or person associated with a member who has been suspended from membership or registration ceases to have any privileges of membership or registration other than those under the Code of Procedure as set forth in the Rule 9000 Series or insurance programs sponsored by FINRA.

Suppose a member is serving a suspension from membership imposed in an unrelated matter when FINRA brings a disciplinary proceeding alleging that it refused to take an action necessary to effectuate a final decision of the UPC Committee. The suspension takes away its privileges of membership other than those under the Code of Procedure or insurance programs sponsored by FINRA, and it keeps the privileges under the Code of Procedure. Under FINRA Rule 9221(a), a Respondent may request a hearing with the filing of its answer, and if a Respondent requests a hearing, a hearing shall be granted. The suspended member may make that request.

Examination Relevance and Key Takeaways

FINRA Rule 11111 is tested on the Series 7 and Series 24 examinations as the enforcement mechanism giving binding force to UPC Committee decisions and FINRA officer decisions under the Uniform Practice Code.

The key points to retain are these: FINRA Rule 11111 declares that a member's refusal to take any action necessary to effectuate a final decision of a FINRA officer or the UPC Committee under the UPC Code, or under other FINRA rules that permit UPC Committee review of FINRA decisions, constitutes conduct inconsistent with just and equitable principles of trade under FINRA Rule 2010; this mechanism channels non-compliance into the existing FINRA Rule 2010 and Rule 9200 series disciplinary framework rather than creating a separate enforcement apparatus; the rule covers two categories of final decisions — UPC Committee decisions and FINRA officer decisions, in each case under the UPC Code itself or under other FINRA rules permitting UPC Committee review, with FINRA officer determinations under the FINRA Rule 11894 clearly erroneous transactions review framework an example within the Code itself — regardless of whether UPC Committee review was actually invoked in a given case; the action necessary to effectuate standard is contextual and depends on the substance of the specific final decision, encompassing whatever steps — acceptance of a delivery, recognition of a price adjustment, unwinding of a transaction — the decision requires to have its intended operative effect; FINRA Rule 11111 gives FINRA Rule 11110's UPC Committee interpretive authority genuine binding force by making non-compliance with final decisions an independent disciplinary violation; and the rule was amended December 15, 2010 through SR-FINRA-2010-030 as part of the Uniform Practice Code's transfer into the Consolidated FINRA Rulebook, with one selected notice — 10-49.