FINRA Rule 9348

The second sentence grants the NAC five dispositions with respect to sanctions — affirm, modify, reverse, increase, or reduce — plus the authority to impose any other fitting sanction, with a specific parenthetical confirming that this sanction authority includes the terms of any permanent cease and desist order. 

Together these two sentences define the fullest possible appellate authority — an authority that is granular to each individual finding and each individual sanction, unconstrained by deference to the Hearing Panel, and extending to the ability to increase sanctions beyond what the Hearing Panel imposed. 

FINRA Rule 9348 is the institutional expression of the NAC's status as a genuine appellate body with independent adjudicative authority rather than a deferential rubber stamp on first-level decisions.

FINRA Rule 9348 sits within the 9300 Review of Disciplinary Proceeding series as a free-standing rule outside the subsection headers. 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-2015-019 effective November 2, 2015 as announced in Regulatory Notice 15-35 — which added the parenthetical clarification that the NAC's sanction authority expressly includes the terms of any permanent cease and desist order. Two selected notices are associated — 08-57 and 15-35.

The First Sentence: Dispositional Authority Over Findings

FINRA Rule 9348's first sentence grants the NAC four dispositional options with respect to each finding in a disciplinary proceeding under review, plus the authority to remand.

The affirm power — the NAC may affirm with respect to each finding — is the power to accept the Hearing Panel's factual and legal determination as correct. When the NAC concludes that a finding of violation is supported by substantial evidence in the record as a whole and that the Hearing Panel correctly applied the applicable legal standards, it affirms that finding. 

Affirmance on every finding produces the same outcome as the Hearing Panel's decision on the merits, though the NAC may still modify the sanctions independently.

The dismiss power — the NAC may dismiss with respect to each finding — is the power to eliminate a cause of action entirely, either because the evidence does not support the violation or because the charge is legally insufficient. Dismissal of a specific finding means that the respondent is absolved of that particular violation charge, though other charges against the same respondent may be affirmed.

The modify power — the NAC may modify with respect to each finding — is the power to change the substance of a finding without fully reversing or dismissing it. Modification might involve narrowing the scope of a violation finding — accepting that some but not all of the charged conduct constituted a violation — or adjusting the factual characterization of the violation's nature or extent while accepting that a violation occurred.

The reverse power — the NAC may reverse with respect to each finding — is the power to completely overturn a Hearing Panel determination, converting a finding of violation into a finding of no violation, or vice versa. Reversal is the most dramatic exercise of the NAC's appellate authority — it directly contradicts the Hearing Panel's conclusion on the merits of a specific charge.

The remand power — the NAC may remand with instructions — is the power to return the proceeding to OHO with specific directions for how it should be reconsidered or re-conducted. Remand with instructions is appropriate when the NAC identifies a procedural error, evidentiary deficiency, or analytical gap in the OHO proceeding that cannot be corrected at the appellate level — the proceeding must be re-examined at the first level to correct the problem. Instructions might direct the Hearing Officer to hold additional hearings, reconsider specific findings in light of a correct legal standard, or address issues that the original hearing failed to address.

The granularity of the finding-by-finding authority — the NAC may affirm, dismiss, modify, or reverse with respect to each finding — is operationally significant. The NAC is not limited to all-or-nothing dispositions. In a case with multiple causes of action the NAC may affirm some findings, reverse others, and modify others — producing a disposition that is tailored to each individual violation determination rather than treating the entire decision as a single reviewable outcome. This granular authority enables the NAC to correct specific errors while preserving the first-level adjudication's valid determinations.

The Second Sentence: Sanction Authority

FINRA Rule 9348's second sentence grants the NAC five dispositional options with respect to each sanction — affirm, modify, reverse, increase, or reduce — plus the open-ended authority to impose any other fitting sanction.

The affirm, modify, reverse, and reduce powers over sanctions mirror the finding dispositions. The NAC may accept the Hearing Panel's sanction as appropriate, change it to a different sanction of equivalent or different severity, eliminate it entirely if the finding it was based on has been reversed, or reduce it to a lower fine, shorter suspension, or less severe consequence.

The increase power — the NAC may increase any sanction — is one of the most consequential features of FINRA Rule 9348 and one that respondents must carefully consider before filing an appeal. A respondent who appeals a Hearing Panel's decision hoping to reduce sanctions faces the genuine possibility that the NAC will find the Hearing Panel's sanctions insufficiently severe and increase them beyond the Hearing Panel's levels. This increase authority means that FINRA Rule 9311 appeals are not risk-free for respondents — the appellate process can make their situation worse as well as better. The Department of Enforcement's cross-appeal right under FINRA Rule 9311(d) provides an additional mechanism through which inadequate sanctions can reach the NAC for potential increase.

The any other fitting sanction power — the NAC may impose any other fitting sanction — gives the NAC authority to impose sanctions that the Hearing Panel did not impose at all, including sanctions for violations the Hearing Panel found but chose not to additionally sanction. This open-ended power ensures that the NAC is not constrained to choosing from among the sanctions the Hearing Panel considered — it can determine the full appropriate sanction response to the violations it has affirmed.

The permanent cease and desist order parenthetical — including the terms of any permanent cease and desist order — was added by SR-FINRA-2015-019 effective November 2, 2015, concurrent with the adoption of FINRA Rule 9291's content requirements for PCDOs. The parenthetical clarifies that the NAC's authority to affirm, modify, reverse, increase, or reduce any sanction expressly includes the authority to modify the specific terms and scope of a PCDO — enabling the NAC to adjust the precise language of a PCDO that the Hearing Panel imposed without being limited to an all-or-nothing choice between upholding or eliminating the PCDO entirely.

The Standards of Review Underlying FINRA Rule 9348's Authority

While FINRA Rule 9348 does not itself specify the standards of review the NAC applies when exercising its powers, those standards are well-established in FINRA's appellate jurisprudence and SEC enforcement decisions reviewing NAC determinations.

For factual findings, the NAC applies a substantial evidence in the record as a whole standard — the same standard that federal courts apply to administrative agency factual determinations under the Administrative Procedure Act. A Hearing Panel's factual finding is sustained on appeal if it is supported by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. The substantial evidence standard gives some deference to the Hearing Panel's factual determinations — particularly on credibility questions, where the Hearing Panel observed the witnesses' demeanor and the NAC reviews the paper record alone — while still enabling the NAC to reverse findings that are not adequately supported.

For legal conclusions, the NAC applies a de novo standard — reviewing the Hearing Panel's legal analysis without deference to its conclusions. The Hearing Panel's determination that specific conduct violated a specific rule provision, that a particular supervision system was inadequate as a matter of law, or that a specific legal standard applies to the facts found is reviewed anew by the NAC applying its own independent legal analysis.

For sanctions, the NAC applies its independent judgment informed by the March 2024 Sanction Guidelines — assessing whether the Hearing Panel's sanction determination correctly applied the Guidelines' principal considerations, aggravating and mitigating factors, and sanction ranges. The NAC may exercise its own sanction judgment independently of the Hearing Panel's determination, which is why FINRA Rule 9348's increase authority is a genuine risk rather than a theoretical possibility.

FINRA Rule 9348 in Published NAC Decisions

Published NAC decisions demonstrate the full exercise of FINRA Rule 9348's authority across all five sanction dispositions and all four finding dispositions. NAC decisions affirming Hearing Panel outcomes in their entirety confirm that the NAC independently assessed the record and found the first-level decision correct — not that the NAC was deferring to the Hearing Panel. NAC decisions reversing specific findings or reducing sanctions demonstrate that the NAC applies its own independent analysis rather than mechanically affirming the first-level outcome. Most significantly for respondents, published NAC decisions that increase sanctions — finding that the Hearing Panel's sanctions were insufficient given the violations' severity — demonstrate that the increase authority of FINRA Rule 9348 is a genuine feature of FINRA's appellate system actively exercised in appropriate cases.

Connection to FINRA Rules 9268, 9291, 9311, 9345, 9349, and 9351

FINRA Rule 9348 connects to FINRA Rule 9268 — whose Hearing Panel decision is the subject of the NAC's exercise of FINRA Rule 9348's powers. It connects to FINRA Rule 9291 — whose PCDO content requirements are specifically referenced in the parenthetical that FINRA Rule 9348's 2015 amendment added. It connects to FINRA Rule 9311 — whose appeal right activates the NAC review in which FINRA Rule 9348's powers are exercised, including the risk of sanction increase that respondents must weigh when deciding whether to appeal. It connects to FINRA Rule 9345 — whose recommended decision informs but does not bind the NAC's exercise of FINRA Rule 9348's independent authority. It connects to FINRA Rule 9349 — which governs the NAC's formal consideration process through which FINRA Rule 9348's powers are exercised in the final decision. And it connects to FINRA Rule 9351 — which gives the FINRA Board discretionary authority to call the NAC's proposed decision for further review.

Examination Relevance and Key Takeaways

FINRA Rule 9348 is tested on the Series 24 General Securities Principal examination as the NAC powers-on-review rule — one of the most important rules in the entire 9300 series because it defines the scope of FINRA's primary appellate body's authority.

The key points to retain are these: FINRA Rule 9348 grants the NAC four dispositional powers with respect to each finding — affirm, dismiss, modify, or reverse — plus the authority to remand with instructions; the finding-by-finding granularity means the NAC may reach different dispositions on different causes of action in the same proceeding; FINRA Rule 9348 grants the NAC five dispositional powers with respect to each sanction — affirm, modify, reverse, increase, or reduce — plus the authority to impose any other fitting sanction; the increase power means a respondent who appeals faces the genuine risk that the NAC may impose more severe sanctions than the Hearing Panel did; the parenthetical confirming that the sanction authority includes the terms of any PCDO was added by SR-FINRA-2015-019 effective November 2, 2015 concurrent with FINRA Rule 9291's adoption; the NAC applies a substantial evidence standard for factual findings and de novo review for legal conclusions; the NAC's independent sanction authority is informed by but not bound by the Subcommittee's FINRA Rule 9345 recommended decision; the NAC's powers under FINRA Rule 9348 are exercised in the formal consideration process of FINRA Rule 9349; and the rule was last amended November 2, 2015 through SR-FINRA-2015-019.