Table of Contents
SERIES 24 | FINANCIAL REGULATION COURSES
FINRA Rule 9344 addresses two distinct situations that can arise in NAC appellate proceedings involving non-participating or non-engaging parties: the situation where an appealing party did not participate in the OHO disciplinary proceeding below, and the situation where an appealing party who properly participated below subsequently fails to engage in the appellate process itself.
The rule establishes that a party who did not participate in the OHO proceeding and cannot show good cause for that failure will have their appeal considered on the written record without the benefit of raising new issues or presenting additional evidence — a consequence calibrated to prevent parties from using the appellate process as a substitute for the first-level proceeding they chose not to engage.
The rule also establishes that a party who fails to provide the NAC with the basis for seeking review, or fails to respond to information or briefing requests, may have their appeal dismissed as abandoned — making the Hearing Panel's decision final FINRA disciplinary action. Together these provisions enforce the Code's expectation that appellate proceedings are engaged meaningfully by the parties who initiate them.
FINRA Rule 9344 sits within the 9340 Proceedings subsection of the 9300 Review of Disciplinary Proceeding series. It was adopted by SR-NASD-97-28 effective August 7, 1997, amended by SR-NASD-97-81 effective January 16, 1998, amended by SR-FINRA-2008-021 effective December 15, 2008, and most recently amended by SR-FINRA-2011-044 effective March 30, 2012 as announced in Regulatory Notice 12-12. Two selected notices are associated with the rule — 08-57 and 12-12.
FINRA Rule 9344(a) governs the appellate consequences when a party appeals a disciplinary decision despite having failed to participate in the OHO proceeding that produced it. The scenario most commonly arises when a respondent defaulted at the OHO level — failing to answer the complaint under FINRA Rule 9215, failing to appear at a pre-hearing conference, or failing to appear at the hearing itself — and then seeks to use the NAC appellate process to effectively relitigate the first-level proceeding they chose not to engage.
The rule creates two pathways depending on whether the non-participating party can show good cause for their failure to participate. When the party fails to show good cause, the matter shall be considered by the Subcommittee or NAC on the basis of the record and other documents as provided in FINRA Rules 9346 and 9347.
This record-based consideration without new evidence or new issues preserves the integrity of the first-level proceeding — the defaulting party cannot raise new defenses, introduce new evidence, or contest factual findings as if the OHO proceeding never occurred, simply by filing a notice of appeal. The appellate review is limited to assessing whether the OHO proceeding and decision complied with the Code and whether the sanctions are appropriate given the violations established by default.
When the party shows good cause for the failure to participate — demonstrating genuine extenuating circumstances that explain why they did not engage at the OHO level — FINRA Rule 9344(a) provides a fundamentally different outcome. The NAC or Review Subcommittee shall remand the disciplinary proceeding with instructions. Remand with instructions is the appropriate remedy when a party had a legitimate reason for non-participation — it sends the matter back to OHO with specific instructions for how the proceeding should be reconstituted or re-conducted to give the party a genuine opportunity to participate in the first-level proceeding they missed.
The definition of failure to participate below is specifically articulated. It includes failure to file an answer or otherwise respond to a complaint — the most complete form of non-participation — and failure to appear at a scheduled hearing. It expressly excludes failure to request a hearing pursuant to FINRA Rule 9221 — a party who received the complaint, filed an answer, but chose not to request a hearing has participated in the disciplinary proceeding even if they elected not to pursue their right to a contested evidentiary hearing. This exclusion reflects the Code's recognition that proceeding on the record without a hearing is a legitimate procedural choice, not a form of non-participation that should affect appellate rights.
FINRA Rule 9344(b) governs the abandonment consequence when an appealing party initiates an appeal but then fails to engage in the appellate process itself. The abandonment provision addresses a different failure than FINRA Rule 9344(a) — not failure to participate in the OHO proceeding below, but failure to participate in the NAC appellate proceeding the party voluntarily initiated.
Three specific forms of appellate non-engagement trigger the potential abandonment dismissal. First, failing to advise the NAC or Review Subcommittee of the basis for seeking review — the party filed a notice of appeal under FINRA Rule 9311 but has not provided any substantive grounds for the appeal through a brief or other communication. Second, failing to provide information in response to a FINRA Rule 9346 or FINRA Rule 9347 request — the Subcommittee or Counsel to the NAC has made a specific request for information or briefing and the party has not responded. Third, failing to submit a written brief in response to a FINRA Rule 9347 briefing schedule — the most common form of appellate abandonment, where the party fails to file their opening brief by the deadline despite being given adequate time and notice.
When any of these failures occurs, the NAC or Review Subcommittee may dismiss the appeal as abandoned. The may formulation preserves discretion — if a party's delay is brief, accompanied by an explanation, and unlikely to prejudice other parties, the NAC or Review Subcommittee may choose to provide an additional opportunity rather than immediately dismissing. When abandonment is found and the appeal is dismissed, the Hearing Panel's decision shall become the final disciplinary action of FINRA — the same finality standard that applies when an appeal is not filed at all within the FINRA Rule 9311 twenty-five-day window.
The parallel provision for cross-appeals under FINRA Rule 9344(b) — applying the same abandonment analysis to cross-appealing parties — enables the NAC or Review Subcommittee to dismiss a cross-appeal as abandoned without also dismissing the main appeal. A party who cross-appealed but then failed to file a cross-appeal brief faces cross-appeal dismissal while the main appeal by the original appellant continues.
FINRA Rule 9146(j) confirms the institutional authority for abandonment dismissal motions — a motion to dismiss a case for abandonment made under FINRA Rule 9344 may be decided by the Review Subcommittee rather than requiring full NAC consideration, enabling efficient processing of abandonment motions at the Review Subcommittee level.
The good cause analysis under FINRA Rule 9344(a) is the pivotal determination that separates the two very different outcomes — record-based review versus remand with instructions. The good cause standard applied here is the same general Code good cause standard that appears throughout the Code in contexts ranging from FINRA Rule 9222's scheduling modifications to FINRA Rule 9269's default set-aside motion. In the FINRA Rule 9344(a) context, good cause requires demonstrating that the failure to participate in the OHO proceeding was the result of genuine extenuating circumstances beyond the party's reasonable control — not deliberate strategic choices, not simple neglect, and not post-hoc dissatisfaction with a default outcome.
Regulatory Notice 12-12 confirmed that the March 2012 amendment to FINRA Rule 9344(a) — SR-FINRA-2011-044 — clarified that the NAC or Review Subcommittee has discretion in how to proceed when an appealing party did not participate below. This discretion encompasses the determination of whether the party has shown good cause, and if good cause is shown, the specific instructions that should accompany the remand. Instructions on remand might specify that the respondent must be given a genuine opportunity to answer the complaint and request a hearing, that a new Hearing Panel must be constituted, or that specific procedural steps must be completed to ensure a fair first-level proceeding.
FINRA Rule 9344's failure-to-participate-below framework is closely connected to FINRA Rule 9269's default decision framework at the OHO level. FINRA Rule 9269(c) provides a mechanism for a defaulted party to seek relief from a default decision through a good cause motion at the OHO level — before an appeal is filed. FINRA Rule 9344(a) provides the appellate-level counterpart for parties who either did not seek or did not obtain FINRA Rule 9269(c) relief and instead filed an appeal of the default decision.
The two provisions together create a layered default relief system. A defaulted party's first opportunity for relief is at the OHO level through FINRA Rule 9269(c). If that opportunity is missed or unsuccessful, the defaulted party's second opportunity is through the good cause showing under FINRA Rule 9344(a) in the NAC appellate proceeding. If good cause cannot be shown at either level, the default decision stands on the record alone without additional evidence or new issue development. This layered structure provides meaningful opportunities for genuine excusable defaults to be corrected while preventing the appellate process from becoming a routine vehicle for strategic re-litigation of deliberate non-participation.
FINRA Rule 9344 connects to FINRA Rule 9146(j) — which specifically confirms that abandonment dismissal motions under FINRA Rule 9344 may be decided by the Review Subcommittee. It connects to FINRA Rule 9221 — whose failure-to-request-hearing exclusion from the definition of failure to participate below preserves the appellate rights of parties who participated in the OHO proceeding but chose to proceed on the record. It connects to FINRA Rule 9269 — whose default decision framework creates the OHO-level decisions most frequently challenged through FINRA Rule 9344(a)'s failure-to-participate provisions. It connects to FINRA Rule 9343 — as the default appellate review mode for parties who failed to participate below without good cause. It connects to FINRA Rule 9345 — as the output of the Subcommittee's review including cases addressed under FINRA Rule 9344. It connects to FINRA Rules 9346 and 9347 — whose evidence and briefing provisions govern the record and written materials available to the Subcommittee in failure-to-participate cases.
FINRA Rule 9344 is tested on the Series 24 General Securities Principal examination as the rule governing two distinct forms of appellate non-engagement — non-participation in the OHO proceeding below and abandonment of the appellate proceeding itself.
The key points to retain are these: FINRA Rule 9344(a) governs appellate proceedings where the party failed to participate in the OHO disciplinary proceeding — defined as failure to answer the complaint or failure to appear at a scheduled hearing, but specifically not including failure to request a hearing under FINRA Rule 9221; without a good cause showing the matter is considered on the written record without new evidence or new issues; with a good cause showing the NAC or Review Subcommittee shall remand with instructions; FINRA Rule 9344(b) governs abandonment of the appellate proceeding itself — failure to advise the NAC of the basis for seeking review, failure to provide requested information, or failure to file a required brief; when abandonment is found the NAC or Review Subcommittee may dismiss the appeal as abandoned making the Hearing Panel decision final FINRA disciplinary action; a cross-appeal may be dismissed as abandoned independently of the main appeal; abandonment dismissal motions under FINRA Rule 9344 may be decided by the Review Subcommittee pursuant to FINRA Rule 9146(j) without requiring full NAC consideration; the March 2012 amendment through SR-FINRA-2011-044 clarified NAC discretion in failure-to-participate cases as announced in Regulatory Notice 12-12; and the rule was last amended March 30, 2012 through SR-FINRA-2011-044.
