FINRA Rule 9522

Together these provisions define the complete framework for the threshold phase of every eligibility proceeding — from the identification of the disqualification through the establishment of the interim supervision framework that governs the disqualified person's activities during review.

FINRA Rule 9522 sits within the 9520 Eligibility Proceedings series of the 9500 Other Proceedings section of the 9000 Code of Procedure. It was adopted by SR-NASD-97-28 effective August 7, 1997 and has been amended twelve times — most recently by SR-FINRA-2022-009 effective August 22, 2022 as announced in Regulatory Notice 22-16, which added email as an authorized service method for notices under this rule. Seven selected notices are associated — 99-16, 00-56, 05-12, 08-57, 09-19, 21-09, and 22-16.

FINRA Rule 9522(a): Initiation by FINRA

FINRA Rule 9522(a) establishes FINRA's notice-based initiation authority — the mechanism through which FINRA staff formally notifies a member or membership applicant that a disqualification or ineligibility exists requiring an eligibility proceeding.

When FINRA staff has reason to believe that a disqualification exists or that a member or associated person otherwise fails to meet FINRA's eligibility requirements, staff shall issue a written notice to the member or applicant. The notice must specify the grounds for the disqualification or ineligibility — enabling the member to understand precisely what event or condition is at issue and to assess whether to file an application, request relief, or challenge the factual basis for the notice.

One important categorical exclusion applies to FINRA's notice obligation: staff shall not issue a notice regarding disqualifications arising solely from findings or orders under Exchange Act Sections 15(b)(4)(D), (E), or (H), or under Exchange Act Section 3(a)(39)(E), unless the member is required to file an application pursuant to the SD Regulatory Notice. These section references encompass certain categories of less serious regulatory findings and orders for which FINRA has determined that automatic notice-issuance is not appropriate — the SD Regulatory Notice that Regulatory Notice 14-55 announced provides the specific guidance on which matters in these categories require applications.

The response obligations differ depending on whether the notice concerns the member firm itself or an associated person. A notice to a disqualified member requires the member to apply for relief or file a written request for relief within ten business days after service, failing which the member's FINRA membership shall be canceled unless DMR grants a good cause extension. A notice regarding a disqualified person requires the sponsoring member to file an application or request for relief within ten business days, failing which the disqualified person's registration shall be revoked unless DMR grants an extension. These ten-business-day deadlines — not calendar days — are deliberately short, reflecting the urgency of addressing disqualification status promptly to protect investors.

Service of notices under FINRA Rule 9522(a) may be accomplished by facsimile, electronic mail, or pursuant to FINRA Rules 9131 and 9134. The August 2022 amendment added email service with service complete upon sending — the same electronic service modernization applied broadly across the Code of Procedure by SR-FINRA-2022-009.

FINRA Rule 9522(b): The Member's Self-Initiation Obligation

FINRA Rule 9522(b) establishes one of the most practically significant compliance obligations in the eligibility proceedings framework — the member's independent duty to initiate an eligibility proceeding without waiting for FINRA to issue a notice. When a member determines on its own that it has become a disqualified member, that an associated person has become a disqualified person, or that it wishes to sponsor the association of a known disqualified person, the member must file an application or request for relief with FINRA's CRED department without waiting for FINRA staff to discover the disqualification and issue a formal notice.

This self-initiation obligation is a critical compliance requirement for Series 24 principals and compliance officers. A member firm that discovers a registered representative has been convicted of a felony, has received a bar from another SRO, or has become subject to any other statutory disqualifying event must immediately assess whether an eligibility proceeding is required and promptly file if it is. Failure to self-initiate — waiting until FINRA discovers the disqualification through examination or other means — is itself a compliance failure that compounds the underlying eligibility issue.

The same categorical exclusion that applies to FINRA's notice authority applies to the self-initiation obligation — for disqualifications arising solely from Exchange Act Section 15(b)(4)(D), (E), or (H) or Section 3(a)(39)(E), members shall not file applications unless instructed to do so by the SD Regulatory Notice. This exclusion prevents unnecessary applications for less serious disqualifications that FINRA's framework does not require members to address through the full eligibility proceeding process.

FINRA Rule 9522(c): Withdrawal of Application

FINRA Rule 9522(c) establishes the pre-hearing and post-hearing withdrawal mechanisms for applications. Before a hearing, a member may withdraw its application by filing a written notice with CRED pursuant to FINRA Rules 9135, 9136, and 9137. After the start of a hearing but before the NAC issues a decision, withdrawal requires filing with both CRED and OGC. This two-destination filing for post-hearing withdrawals ensures that both the administrative record-keeper and the advisory body are notified of the withdrawal contemporaneously.

Withdrawal before a final decision is an important flexibility mechanism — circumstances change during the often lengthy eligibility proceeding process, and a member that determines it no longer wishes to employ or sponsor a disqualified person should have a clear pathway to terminate the proceeding without prejudice. FINRA Rule 9522(c)'s withdrawal mechanism provides that pathway.

FINRA Rule 9522(d): The Ex Parte Communication Prohibition Trigger

FINRA Rule 9522(d) establishes a specific trigger for FINRA Rule 9143's ex parte communication prohibition in the eligibility proceeding context. The prohibition becomes effective when FINRA staff has initiated the eligibility proceeding and staff has knowledge that a member intends to file an application. This trigger — rather than the formal application filing date — protects against informal communications that could influence FINRA's assessment of the application before the formal proceeding commences. Once FINRA staff knows a member intends to apply, all subsequent communications about the merits of the eligibility determination must follow the formal Code of Procedure framework.

FINRA Rule 9522(e): The Two-Tier DMR Approval Authority

FINRA Rule 9522(e) establishes the two-tier early resolution framework through which the Department of Member Regulation may approve eligibility matters without requiring the full formal hearing process of FINRA Rule 9524 — a critically important efficiency mechanism that resolves many eligibility matters at the administrative level.

The first tier — matters approvable without any formal application — applies to three specific categories: disqualifications based on an injunction entered ten or more years prior to the proposed admission; requests to change the supervisor of an already-approved disqualified person; and dual-member situations where another SRO intends to file an SEA Rule 19h-1 notice approving the same association and DMR concurs. For these categories, the member files only a written request for relief rather than a full MC-400 application, and DMR may approve the relief directly without the filing fee, the supervisory plan formalities, or the formal hearing process.

The second tier — matters approvable on application without escalation to a formal hearing — applies to six specified categories where the disqualification's circumstances are sufficiently routine or where prior regulatory approvals provide adequate precedent for administrative approval. These include: prior approval by another SRO on the same terms; prior approval in the same matter on the same terms; prior consideration by the SEC in an enforcement proceeding; court orders or judgments that specifically contemplate SEC non-action; disqualified persons in purely clerical or ministerial functions; and disqualifications from Exchange Act Section 15(b)(4)(D), (E), or (H) or Section 3(a)(39)(E) findings. For these categories DMR may approve the application directly after its own administrative review without convening a formal Statutory Disqualification Committee hearing.

The rights preservation provisions in FINRA Rule 9522(e)(3) ensure that DMR's administrative approval authority is not used to deny members their right to a formal proceeding — if DMR does not approve a request under either tier, the member retains the right to proceed under FINRA Rule 9523 or FINRA Rule 9524 as applicable. DMR may also require a formal application even when a written request for relief would otherwise suffice.

FINRA Rule 9522(f): The Interim Plan of Heightened Supervision

FINRA Rule 9522(f) is the provision most directly relevant to the Series 24 principal's day-to-day compliance obligations in the eligibility proceeding context. Every application that seeks the continued association of a disqualified person — filed pursuant to FINRA Rule 9522(a)(3) or (b)(1)(B) — must include two components: an interim plan of heightened supervision, and a written representation from the sponsoring member that the disqualified person is currently subject to that plan.

The interim plan of heightened supervision must satisfy specific substantive standards. It must identify an appropriately registered principal who is personally responsible for implementing and maintaining the plan and who has signed it acknowledging that responsibility. The plan must be in effect throughout the entire application review process — from filing through final resolution of the eligibility proceeding, which may take many months or even years. The plan must comply with FINRA Rule 3110's supervisory requirements and must be reasonably designed and tailored to include specific supervisory policies and procedures that address the regulatory concerns related to the nature of the disqualification, the nature of the sponsoring member's business, and the disqualified person's current and proposed activities.

The tailoring requirement is the most demanding aspect of the interim plan standard. A generic heightened supervision plan that does not specifically address the nature of the disqualifying event — for example, a plan that provides generic increased supervision without addressing the specific customer harm risks associated with the type of misconduct that resulted in the disqualification — does not satisfy FINRA Rule 9522(f). The plan must demonstrate that the sponsoring member has analyzed the specific risks the disqualification presents and designed specific procedures to address those risks.

The personally signing responsible principal requirement creates direct individual accountability — the principal whose signature appears on the plan cannot later claim that implementation was someone else's responsibility. This individual accountability is particularly important given that the interim plan must remain in effect throughout the entire multi-year review process.

FINRA Rule 9522(g) and (h): Substantially Incomplete Application Consequences

FINRA Rules 9522(g) and (h) establish the quality control mechanism for applications seeking continued association. If DMR determines that a continued-association application is substantially incomplete — defined as either lacking the written representation that an interim plan exists or lacking a reasonably designed interim plan that meets FINRA Rule 9522(f)'s standards — it may reject the application and deem it not filed, rather than processing a deficient application through the full review process.

The rejection notice triggers a ten-business-day cure period — the sponsoring member has ten business days after service of the delinquency notice to remedy the application. If the cure is completed within this period, the application proceeds as if properly filed from the original submission date. If the sponsoring member fails to cure within the ten-business-day window, DMR shall serve a written notice of rejection. FINRA refunds the application fee less a $1,000 processing fee. Upon rejection the sponsoring member must promptly terminate association with the disqualified person — a mandatory consequence that creates a powerful incentive for the initial application to be complete and the interim plan to be substantive.

The SD Regulatory Notice and Recent Amendments

The SD Regulatory Notice referenced throughout FINRA Rule 9522 is Regulatory Notice 14-55, which announced the comprehensive 2014 restructuring of the Rule 9520 series through SR-FINRA-2014-038. That restructuring created the current tiered framework distinguishing between disqualifications that require formal applications and those that may be addressed through written requests for relief or that are exempt from the formal process altogether. SR-FINRA-2020-039 effective October 29, 2020 and SR-FINRA-2020-011 effective June 1, 2021 made additional amendments to the rule in connection with the FINRA Rule 9285 conditions and restrictions framework and related eligibility proceeding updates.

Examination Relevance and Key Takeaways

FINRA Rule 9522 is tested on the Series 24 General Securities Principal examination as the eligibility proceeding initiation rule — one of the most practically important rules for principals given their direct supervisory responsibility for ensuring that eligibility proceedings are initiated promptly and that interim supervision plans are adequate.

The key points to retain are these: FINRA Rule 9522(a) requires FINRA staff to issue a written notice of disqualification specifying the grounds when staff has reason to believe a disqualification or ineligibility exists; notices to disqualified members require application or request for relief within ten business days or membership is canceled; notices regarding disqualified persons require application or request for relief within ten business days or the person's registration is revoked; good cause extensions are available; FINRA Rule 9522(b) imposes an independent self-initiation obligation on members who discover disqualifications without waiting for FINRA notice — failure to self-initiate is itself a compliance violation; FINRA Rule 9522(d) triggers FINRA Rule 9143's ex parte prohibition when FINRA staff initiates a proceeding and has knowledge a member intends to apply; FINRA Rule 9522(e) establishes two tiers of DMR administrative approval — a written request for relief pathway for specified routine categories without a formal application, and an application approval pathway for specified categories without escalation to a formal hearing; FINRA Rule 9522(f) requires every continued-association application to include an interim plan of heightened supervision signed by an identified responsible principal, in effect throughout the entire review process, compliant with FINRA Rule 3110, and tailored to the specific nature of the disqualification; substantially incomplete applications lacking the interim plan or the written representation may be rejected by DMR with a ten-business-day cure period; failure to cure results in rejection with a $1,000 processing fee retained and mandatory termination of the disqualified person's association; and the rule was last amended August 22, 2022 through SR-FINRA-2022-009 adding email service authority.