Table of Contents
SERIES 24 | FINANCIAL REGULATION COURSES
FINRA Rule 9270 governs the post-complaint settlement procedure in FINRA disciplinary proceedings — the mechanism through which a respondent who has been served with a formal complaint and is in an active disciplinary proceeding may resolve the matter through a written offer of settlement rather than proceeding to or continuing through a contested hearing.
The rule is the post-complaint complement to FINRA Rule 9216's pre-complaint AWC mechanism — while FINRA Rule 9216 governs settlements reached before a complaint is issued, FINRA Rule 9270 governs settlements reached after the complaint has been filed and the proceeding has formally commenced.
The rule establishes the respondent's right to submit a written offer of settlement at any time after notice of commencement, the seven required contents of every offer, the standard waivers that attach to submission, the two distinct pathways for uncontested and contested offers, the finality standards for accepted settlements, the consequences for rejected offers, the rules governing multi-respondent proceedings with partial settlements, and the critical no-prejudice-from-rejection protection that prevents a rejected offer from being used as evidence against the respondent.
Together these provisions create the complete framework for post-complaint resolution — enabling parties to achieve negotiated outcomes at any stage of a disciplinary proceeding without requiring the full hearing and decision process.
FINRA Rule 9270 sits within the 9260 Hearing and Decision subsection of the 9200 Disciplinary Proceedings section of the 9000 Code of Procedure series. It was adopted by SR-NASD-97-28 effective August 7, 1997, and has been amended multiple times. The most recent amendment was SR-FINRA-2018-027 effective August 3, 2018 reflecting the internal enforcement reorganization.
FINRA Rule 9270(a) establishes the fundamental post-complaint settlement right: a respondent may submit to the Department of Enforcement a written offer of settlement, without admitting or denying the allegations or findings of the pending complaint, at any time after receipt of notice that a disciplinary proceeding has commenced under FINRA Rule 9211(b).
The without admitting or denying formulation is the defining feature of FINRA Rule 9270 settlements — unlike an AWC under FINRA Rule 9216 which requires the respondent to accept a finding of violation, a FINRA Rule 9270 offer allows the respondent to consent to the imposition of sanctions without affirmatively admitting the charged conduct.
This distinction makes FINRA Rule 9270 settlements potentially more attractive to respondents who contest liability but wish to avoid the expense and uncertainty of a contested hearing.
The at any time formulation means that an offer may be submitted from the moment of commencement through the close of post-hearing briefing — before any hearing, during the hearing itself, or even after the hearing has concluded but before the Panel issues its decision. FINRA's Guide to the Disciplinary Hearing Process confirms this continuous availability: a respondent may submit a written offer of settlement without admitting or denying liability at any time after receipt of notice that a disciplinary proceeding has commenced.
FINRA Rule 9270(b) specifies seven required elements that every offer of settlement must contain. Each element serves a distinct function in ensuring that the offer is substantively complete and procedurally proper.
The first required element — a statement that the offer is made without admitting or denying the allegations or findings of the pending complaint, or that the offer admits all or some of the findings — acknowledges the dual nature of FINRA Rule 9270 settlements. The default is without admitting or denying, but a respondent who wishes to fully admit the charges may do so — and such an admission may affect the sanction determination.
The second required element — a statement consenting to findings of fact and violations consistent with the terms of the offer of settlement — is the consent component. Even a without-admitting-or-denying offer must include a consent to the specific factual findings and rule violations that the settlement proposes to resolve — enabling the order of acceptance to specify the precise violations for which sanctions are being imposed.
The third required element — a statement agreeing to the imposition of specific sanctions — defines the settlement's sanction terms. The offer must specify exactly what sanctions the respondent is consenting to: the fine amount, the suspension period and scope, any conditions, any undertakings, and any other sanction elements. FINRA's Guide confirms that a respondent may not make a frivolous settlement offer or propose a sanction inconsistent with the seriousness of the alleged violation and FINRA's Sanction Guidelines.
The fourth required element — a statement agreeing to waive rights to a hearing and appeal if the offer is accepted — is the conditional waiver component. Unlike the AWC's unconditional waiver, FINRA Rule 9270's waiver only takes effect if the offer is accepted — a respondent whose offer is rejected retains all rights to hearing and appeal. This conditional structure is the mechanism underlying the no-prejudice-from-rejection protection in FINRA Rule 9270(j).
The fifth required element — if applicable, a proposed permanent cease and desist order consistent with FINRA Rule 9291(a) — applies when the offer proposes a PCDO as part of the sanction package. The FINRA Rule 9291(a) consistency requirement mirrors FINRA Rule 9268(b)(7)'s requirement for contested decisions, ensuring that PCDO language in settlements is as precise and enforceable as PCDO language in contested decisions.
The sixth required element — a proposed effective date for the sanctions, or a statement that the effective date will be a date determined by FINRA staff — addresses sanction timing. A respondent who has made arrangements for clients and business operations may propose a specific effective date that accommodates those arrangements, subject to FINRA's acceptance.
The seventh required element — any other information requested by the Hearing Officer, Hearing Panel, or Extended Hearing Panel — preserves Adjudicator flexibility to require additional information specific to the particular case.
FINRA Rule 9270(c) establishes the institutional review framework: before an offer of settlement and order of acceptance become effective they must be submitted to and accepted by the NAC. The Review Subcommittee or ODA may accept the offer on behalf of the NAC, or refer it to the full NAC. The Review Subcommittee may reject the offer or refer it to the full NAC. The full NAC may accept or reject. This three-tier review structure mirrors FINRA Rule 9216(a)(3)'s AWC review framework, ensuring consistent institutional oversight of all FINRA settlement outcomes regardless of whether they are pre-complaint AWCs or post-complaint FINRA Rule 9270 settlements.
FINRA Rule 9270(d) establishes the standard waivers that attach to the submission of an offer of settlement — directly paralleling FINRA Rule 9216(a)(2)'s AWC waivers. By submitting an offer of settlement, the respondent waives any right to claim bias or prejudgment by the Chief Hearing Officer, Hearing Officer, Hearing Panel, General Counsel of FINRA, or NAC based on their consideration or discussion of the offer. The respondent also waives any right to claim violations of FINRA Rule 9143's ex parte prohibitions or FINRA Rule 9144's separation of functions prohibitions in connection with the consideration of the offer.
These waivers are permanent for accepted offers — once accepted the respondent cannot challenge the settlement process. For rejected offers FINRA Rule 9270(d)(2) provides that the respondent remains bound by the FINRA Rule 9270(d) waivers only for conduct occurring during the period from submission to rejection — preventing a rejected offer from tainting the subsequent contested proceeding through pre-submission conduct claims.
The FINRA Rules 9143(c) and 9144(c) explicitly reference this waiver mechanism — confirming that settlement discussions necessarily involve communications and participatory decisions that would otherwise trigger ex parte and separation of functions protections, and that the waiver ensures those protections do not derail the settlement process.
FINRA Rule 9270(e) governs uncontested offers — where the Department of Enforcement does not oppose the respondent's settlement proposal. If an offer is determined to be uncontested before a hearing on the merits has begun, Enforcement transmits the offer and a proposed order of acceptance to the NAC with its recommendation. If the offer is uncontested but after a hearing on the merits has begun, it must first be approved by the Hearing Panel before being transmitted to the NAC.
The ODA may accept an uncontested offer on behalf of the NAC, constituting FINRA's final disciplinary action, or may refer it for full NAC consideration. The Review Subcommittee may accept, reject, or refer. The NAC itself may accept or reject. If an uncontested offer is accepted by ODA, the Review Subcommittee, or the NAC, FINRA issues an order of acceptance that constitutes the complaint, answer, and decision in the matter — the same triple-document effect as an accepted AWC under FINRA Rule 9216(a)(4).
FINRA Rule 9270(f) governs contested offers — where the Department of Enforcement opposes the respondent's settlement proposal. When Enforcement rejects an offer and the respondent still wishes to submit it, the offer is presented as a contested offer to the Hearing Panel. The Hearing Panel considers the contested offer and either accepts or rejects it. If the Panel accepts a contested offer, it is transmitted to the NAC for the same three-tier review. If the Panel rejects it, the offer is not transmitted to the NAC for consideration — the Hearing Panel's rejection is the final institutional determination on a contested offer, subject only to the no-prejudice protection of FINRA Rule 9270(j).
When an offer of settlement and order of acceptance are accepted and become final, the order of acceptance constitutes FINRA's final disciplinary action and is reported to the SEC under SEA Rule 19d-1(c)(1). The sanctions become effective on the date specified in the order or on a date determined by FINRA staff if no date is specified — with bars and expulsions effective immediately upon finality consistent with FINRA Rule 9268(f)'s default effectiveness rules.
FINRA Rule 9270(h) establishes the consequences when an offer is rejected. When an uncontested offer is rejected by the Hearing Panel, the Review Subcommittee, or the NAC, the respondent is notified in writing and the offer and proposed order are deemed withdrawn. When a contested offer is rejected at any level, the same withdrawal consequences apply.
In both cases the rejected offer and proposed order shall not constitute a part of the record in any proceeding against the respondent making the offer — the non-record status of rejected offers is the foundational component of the no-prejudice protection, which FINRA Rule 9270(j) makes explicit.
FINRA Rule 9270(i) addresses the situation where not all respondents in a multi-respondent proceeding submit or have their offers accepted. Proceedings are terminated as to those respondents whose offers are accepted, but such settling respondents may be required to participate in any hearing conducted as to non-settling respondents. This participation requirement prevents settling respondents from entirely avoiding the proceeding that continues against their co-respondents — particularly when the settling respondent's testimony or documentary records are relevant to the charges against remaining respondents.
FINRA Rule 9270(j) is the critical respondent protection at the heart of the settlement framework: if an offer of settlement is rejected by the Hearing Panel, the Review Subcommittee, or the NAC, the respondent shall not be prejudiced by the offer, which may not be introduced into evidence in connection with the determination of the issues involved in the pending complaint or in any other proceeding. This non-prejudice protection is what makes the offer-of-settlement mechanism viable as a settlement tool — without it, a respondent who proposes to settle by admitting certain facts would risk having those proposed admissions used as evidence against them if the offer was rejected. The protection enables candid settlement negotiations without litigation risk.
The Guide to the Disciplinary Hearing Process cautions, however, that if the Hearing Panel rejects an offer, the Panel may assume that the person who submitted the offer is guilty of the rule violation — a significant practical risk that practitioners must weigh when advising respondents about whether to submit contested offers of settlement.
FINRA Rule 9270 and FINRA Rule 9216 together define FINRA's complete settlement framework — FINRA Rule 9216 governing pre-complaint settlements through AWCs and minor rule violation letters, FINRA Rule 9270 governing post-complaint settlements through offers of settlement. The critical difference between the two mechanisms is the without-admitting-or-denying option in FINRA Rule 9270 — AWC respondents must accept a finding of violation, while FINRA Rule 9270 respondents may settle without admission. This structural difference makes FINRA Rule 9270 potentially more attractive to respondents who face significant contested charges and whose litigation risk assessment suggests that settlement is preferable to hearing but whose denial of liability is genuine and important to them for professional or personal reasons.
FINRA Rule 9270 is tested on the Series 24 General Securities Principal examination as the post-complaint settlement rule — the counterpart to FINRA Rule 9216's pre-complaint AWC mechanism.
The key points to retain are these: FINRA Rule 9270 permits a respondent to submit a written offer of settlement without admitting or denying the complaint allegations at any time after notice of commencement; offers must contain seven required elements including the without-admitting-or-denying statement, consent to findings of fact and violations, agreement to specific sanctions, conditional waiver of hearing and appeal rights, if applicable a FINRA Rule 9291(a)-compliant PCDO, a proposed effective date, and any other Adjudicator-requested information; before any offer and order of acceptance become effective they must be submitted to and accepted by the NAC with the ODA and Review Subcommittee having delegated acceptance authority; by submitting an offer the respondent waives bias and prejudgment claims and ex parte and separation of functions claims for the duration of the settlement process; uncontested offers — where Enforcement does not oppose — are transmitted directly to the NAC before hearing begins and require Hearing Panel approval if submitted after the hearing has begun; contested offers — where Enforcement opposes — must first be presented to and accepted by the Hearing Panel before NAC consideration; if a contested offer is rejected by the Hearing Panel it is not transmitted to the NAC; rejected offers are not part of the record and may not be introduced into evidence in any proceeding — the no-prejudice protection of FINRA Rule 9270(j); however the Hearing Panel may assume guilt from a rejected offer creating significant practical risk for respondents submitting contested offers; in multi-respondent proceedings settling respondents may be required to participate in hearings against non-settling co-respondents; and the rule was last amended August 3, 2018 through SR-FINRA-2018-027.
