FINRA Rule 1013

FINRA Rule 1013 sits within the 1000 Member Application and Associated Person Registration series, immediately following FINRA Rule 1012's general provisions and immediately preceding FINRA Rule 1014's department decision standards.

FINRA Rule 1013(a): Filing the Application — Form NMA and Its Required Contents

FINRA Rule 1013(a)(1) establishes the baseline requirement for how a prospective FINRA member applies — an Applicant for FINRA membership shall file its application with the Department in the manner prescribed by FINRA. This manner-prescribed formulation anchors the application process to FINRA's operational guidance, currently implemented through the online Form NMA filed through FINRA's electronic filing system.

The required contents of the application are extensive. An Applicant shall submit an application that includes: (A) Form NMA — the standardized electronic application form; (B) an original signed and notarized paper Form BD with applicable schedules; (C) an original FINRA-approved fingerprint card for each Associated Person who will be subject to SEA Rule 17f-2; (D) a new member assessment report; (E) a detailed business plan that adequately and comprehensively describes all material aspects of the business that will be or are reasonably anticipated to be performed; and (F) through (J) a series of additional disclosure and supporting documentation items addressing the Applicant's personnel, regulatory history, and compliance infrastructure.

The detailed business plan requirement — adequately and comprehensively describing all material aspects of the business — is the application item that most directly maps to the admission standards FINRA Rule 1014 will apply. Because Rule 1014's twelve standards for admission address the Applicant's business model, capitalization, supervisory systems, personnel, compliance infrastructure, and operational capacity, the business plan is the primary document through which an Applicant demonstrates it can meet those standards before the membership interview even takes place.

The Form NMA's Eight Major Sections and Their Rule 1014 Alignment

Form NMA is organized to align with FINRA Rule 1014(a)'s twelve standards for admission, ensuring that the application provides structured information addressing each standard the Department will evaluate. The form's eight major sections encompass: (I) General Information about the Applicant and its ownership structure; (II) Business Lines describing the specific securities activities the Applicant intends to conduct; (III) Personnel covering Associated Persons and their regulatory histories; (IV) Net Capital and Sources of Funding addressing the Applicant's financial resources and capitalization; (V) Contractual and Business Arrangements covering clearing agreements, introducing arrangements, and similar contracts; (VI) Policies and Procedures addressing the Applicant's written supervisory procedures and compliance systems; (VII) Facilities covering the physical locations from which the Applicant will conduct business; and (VIII) Recordkeeping System addressing the Applicant's books and records infrastructure.

This section organization reflects the evolution of Form NMA over time — the form was introduced in paper format in 2006, migrated to an online electronic system in 2007, and revised in 2008 and subsequently to reorganize its sections to track the Rule 1014(a) standards more directly. The reorganization was designed to reduce common application deficiencies by ensuring Applicants provide responses specifically keyed to each admission standard the Department will apply, rather than providing general information that may leave some standards inadequately addressed.

The "Substantially Complete" Standard and the Department's Right to Reject

FINRA Rule 1013(b) establishes a threshold requirement for the Department to begin processing an application — the Department may deem an application not substantially complete and refuse to process it where the Applicant fails to submit required mandatory items or where the information provided is insufficient to determine whether the Applicant meets the applicable standards.

This substantially complete standard serves an important gating function — it prevents the Department from expending significant review resources on applications that are so deficient in mandatory information that meaningful review is not yet possible, while also protecting Applicants from having an incomplete application deemed denied on the merits. An application that fails the substantially complete threshold is returned to the Applicant with an explanation of what is missing, giving the Applicant the opportunity to supplement and resubmit rather than having the application treated as a denial subject to the appeal process.

Common causes for a not-substantially-complete determination include missing or incomplete financial information (net capital calculations, funding sources), absent or unsigned Form BD, missing fingerprint cards for required personnel, and insufficiently detailed business plans that fail to address all material aspects of the proposed business. FINRA's NMA Guidance for New Member Applications — published by the Department to assist prospective Applicants — identifies these common deficiencies specifically, reflecting the practical experience of the MAP Group in processing NMAs.

FINRA Rule 1013(c): The Membership Interview

FINRA Rule 1013(c) establishes the membership interview as a required component of the NMA process. After the Department determines that an application is substantially complete, it schedules and conducts a membership interview with the Applicant and its representatives. The membership interview serves as the primary forum in which the Department and the Applicant engage directly to discuss the application's contents, clarify any issues or deficiencies the Department has identified, and address questions about the Applicant's capacity to meet Rule 1014's admission standards.

During the membership interview, the Department reviews the application and the Rule 1014(a) standards with the Applicant's representative or representatives. Crucially, the Department is required to provide to the Applicant's representative any information or document that the Department has obtained from the Central Registration Depository or from any other source other than the Applicant itself, and upon which the Department intends to base its decision under Rule 1014. This disclosure obligation — providing the third-party information the Department intends to rely upon during the interview — ensures the Applicant has a full and fair opportunity to address that information before the Department issues its decision.

If the Department receives additional third-party information after the membership interview, or decides to base its decision on such information discovered after the interview, it must promptly serve that information and an explanation on the Applicant — again ensuring the Applicant has the opportunity to respond before the Department's decision is finalized. This procedural protection prevents the Department from issuing an adverse decision based on information the Applicant has never had the opportunity to see and address, consistent with the fundamental due process principle that an Applicant should know the case against it.

FINRA Rule 1013(d): Notification of Pending Arbitration Claims

FINRA Rule 1013(d) establishes a continuing notification obligation that extends throughout the entire pendency of the NMA proceeding — the Applicant shall promptly notify the Department in writing of any arbitration claim involving the Applicant or its Associated Persons that is filed, awarded, or becomes unpaid before a decision constituting final action of FINRA is served on the Applicant.

This notification obligation connects directly to Rule 1014(a)(3)(D)'s admission standard, which requires the Department to consider whether the Applicant or its Associated Persons are subject to unpaid arbitration awards, other adjudicated customer awards, or unpaid arbitration settlements — and to Rule 1011's Covered Pending Arbitration Claim definition, which establishes threshold criteria for when pending arbitration claims require mandatory materiality consultations or CMA filings under Rule 1017(a)(6).

The ongoing character of this obligation — extending through final action of FINRA rather than merely through the initial application filing — reflects the reality that a membership proceeding can take months, during which the Applicant's regulatory and litigation profile may change. A new arbitration claim filed against the Applicant after the initial NMA is submitted but before the Department issues its final decision could materially affect the Department's assessment of whether the Applicant meets the Rule 1014(a) standards. The prompt notification requirement ensures the Department's review reflects the Applicant's current regulatory profile, not merely the snapshot captured at initial filing.

The Withdrawal Provision and Fee Treatment

FINRA Rule 1013 also addresses the consequences of an Applicant's voluntary withdrawal of a new member application. If an Applicant withdraws an application within 30 days after filing, FINRA refunds a portion of the application fee. Withdrawals after that 30-day window result in no refund — paralleling the no-refund consequence for lapsed applications under Rule 1012. This tiered refund structure creates an incentive for prospective Applicants to complete preliminary due diligence before filing a formal NMA, since the filing itself represents a financial commitment that diminishes quickly once the 30-day window closes.

IM-1013-1 and IM-1013-2: NYSE and NYSE American Waive-In Processes

Interpretive Material IM-1013-1 and IM-1013-2 establish expedited membership approval processes for two specific categories of member organizations. IM-1013-1 applies to certain NYSE member organizations that were required to become FINRA members following the consolidation of NASD and NYSE's regulatory functions, providing a streamlined waive-in pathway that avoids the full NMA process for organizations whose fitness and compliance infrastructure had already been reviewed under NYSE's membership standards. IM-1013-2 applies the same waive-in concept to certain NYSE American LLC (formerly NYSE MKT) member organizations.

These waive-in processes reflect a recognition that redundant, full-length membership proceedings for organizations already subject to another exchange's equivalent membership review would impose unnecessary regulatory burden without meaningful additional investor protection benefit. By expediting membership approval for such organizations based on their existing exchange membership status and compliance record, IM-1013-1 and IM-1013-2 enable these firms to become FINRA members efficiently while preserving FINRA's ability to impose appropriate conditions or restrictions where the exchange membership record warrants them.

IM-1013-3: The SEA Rule 15b9-1 Application Process

Interpretive Material IM-1013-3, adopted most recently in connection with the SEC's August 23, 2023 amendments to SEA Rule 15b9-1 — which narrowed the exemption from FINRA membership available to certain exchange-member broker-dealers — establishes a specialized application process for firms that must become FINRA members specifically because of those amendments. Eligible firms under IM-1013-3 are SEC-registered, non-FINRA-member firms that must join FINRA due to the amended SEA Rule 15b9-1 and that, as of August 23, 2023, had been a member of a national securities exchange with which FINRA has had a regulatory service agreement for the prior 12 months.

Eligible firms must submit their applications at least 120 calendar days before the compliance date established by the SEC for the Rule 15b9-1 amendments, unless FINRA determines that a shorter period is appropriate under the circumstances. This advance-application requirement ensures that FINRA has adequate time to process the potentially large volume of membership applications generated by the Rule 15b9-1 amendments before the compliance date arrives, avoiding a situation where firms are required to be FINRA members but have not yet received membership approval.

Connection to FINRA Rules 1011, 1012, 1014, 1015, 1017, and Form NMA

FINRA Rule 1013 connects directly to FINRA Rule 1011 — whose definitions of Applicant, Associated Person, and sales practice event are the foundational terms the Rule 1013 application content requirements employ. It connects to FINRA Rule 1012 — whose filing methods, service completion standards, and substantially complete standard interact with and are referenced throughout Rule 1013's application process. It connects directly and substantively to FINRA Rule 1014 — as the destination toward which Rule 1013's application process leads, with the membership interview specifically designed to address the twelve Rule 1014(a) admission standards and Form NMA organized to align with them. It connects to FINRA Rule 1015 — as the review mechanism available to an Applicant whose Rule 1014 Department decision is adverse, with the ex parte communication prohibitions triggered under Rule 1012 when the Applicant intends to seek that review. And it connects to FINRA Rule 1017 — as the parallel CMA filing requirement that existing members must satisfy when seeking approval of material changes to ownership, control, or business operations, with many of Rule 1013's content requirements having CMA counterparts in Rule 1017's own application provisions.

Examination Relevance and Key Takeaways

FINRA Rule 1013 is tested on the Series 7 and Series 24 examinations as the new member application and interview framework — establishing the Form NMA filing requirement, the substantially complete threshold, the membership interview process, and the ongoing arbitration notification obligation.

The key points to retain are these: FINRA Rule 1013(a) requires new membership applicants to file with the Department via Form NMA and accompanying required materials including original notarized Form BD, fingerprint cards for SEA Rule 17f-2 personnel, a new member assessment report, a detailed business plan comprehensively describing all material aspects of the proposed business, and additional supporting disclosures addressing personnel regulatory history, remedial actions, and compliance infrastructure; Form NMA is organized in eight sections aligned with FINRA Rule 1014(a)'s twelve admission standards; FINRA Rule 1013(b) permits the Department to deem an application not substantially complete and decline to process it where mandatory information is missing or insufficient; FINRA Rule 1013(c) requires a membership interview at which the Department discusses the application and Rule 1014(a) standards with the Applicant, and must provide to the Applicant any third-party information (from CRD or other sources) upon which the Department intends to base its decision, with the same obligation arising for such information received after the interview; FINRA Rule 1013(d) requires the Applicant to promptly notify the Department of any arbitration claim involving the Applicant or its Associated Persons filed, awarded, or becoming unpaid during the pendency of the proceeding through final action; IM-1013-1 and IM-1013-2 establish expedited waive-in processes for certain NYSE and NYSE American member organizations; and IM-1013-3 establishes a specialized 120-day advance application process for firms required to join FINRA due to the amended SEA Rule 15b9-1 requirements effective from the SEC's August 2023 amendments.