How to Fight a FINRA Bar

How to Fight a FINRA Bar

Fighting a FINRA bar is possible but extraordinarily difficult. The system is designed to make it hard. FINRA wants bars to stick – they’ve made that clear through their enforcement patterns and public statements. When you challenge a bar, you’re not just fighting against specific evidence or legal arguments. You’re fighting against an organization that views bars as essential to their investor protection mission and has structured their entire process to produce them. The deck is stacked. That doesn’t mean you shouldn’t fight. It means you need to understand exactly what you’re up against.

The appeal path exists: from the Hearing Panel to the National Adjudicatory Council, from the NAC to the SEC, from the SEC to the federal courts. People have successfully reversed FINRA bars at each of these levels. But “success” in this context often means seven years of litigation, hundreds of thousands of dollars in legal fees, and your career in limbo the entire time. Mr. Tysk fought for seven years before the SEC finally concluded that FINRA had not proven its case and reversed all findings and sanctions. Seven years. Not everyone has the luxury of waging that kind of battle.

This article explains how to fight a FINRA bar – not to discourage you from trying, but to ensure you understand the reality of what fighting entails. The decisions you make about whether to contest, when to contest, and how aggressively to contest depend on understanding the process, the odds, and the costs.

The Hearing Process – Your First Battleground

When FINRA Enforcement decides to pursue formal disciplinary action, they file a Complaint with the Office of Hearing Officers. This triggers a process that looks superficially like a court proceeding but operates under very different rules.

Your case will be heard by a three-person panel:

• One Hearing Officer – an attorney employed by FINRA
• Two industry panelists – drawn from a pool of current and former securities industry members

These arent neutral judges from outside the system. There inside it. The Hearing Officer works for FINRA. The industry panelists have careers that depend on maintaining good relationships with FINRA.

The hearing itself involves testimony, evidence, cross-examination – the mechanics of a trial. But FINRA’s rules are more permissive about evidence then court rules would be. The standard of proof is preponderance of the evidence, not beyond a reasonable doubt. And the hearing panel will consult FINRA’s Sanction Guidelines when determining appropriate penalties if they find violations.

Heres what you need to understand about the hearing stage: this is your best opportunity to fight. The record you create at the hearing – the evidence you introduce, the arguments you make, the witnesses you call – becomes the foundation for everything that follows. If you dont raise an issue at the hearing level, you may not be able to raise it on appeal. Get this stage wrong, and youve limited your options for everything that comes after.

The NAC Appeal – Fighting FINRA Inside FINRA

If you lose at the hearing level, you can appeal to the National Adjudicatory Council – the NAC. You have 25 days from when the hearing panel decision is served to file your notice of appeal. Miss that deadline and your appeal rights are gone.

The NAC reviews wheather the hearing panel’s findings were legally correct, factually supported, and consistant with FINRA’s Sanction Guidelines. This sounds like genuine appellate review. In practice, the NAC is part of FINRA. Your appealing a FINRA decision to FINRA.

While your appeal is pending, the sanctions are stayed. You havnt been barred yet. This gives you breathing room – your career dosent end while the NAC considers your case. But the NAC typically takes months to decide. Your in limbo, unable to fully move forward, waiting for FINRA to rule on wheather FINRA was right.

And heres something critical: the NAC can make things worse. They have the power to affirm, modify, reverse, or increase sanctions. Yes, increase. Your appeal seeking reversal could result in harsher penalties then the original hearing panel imposed. This happens. It deters appeals. It makes fighting risky even when you have meritorious arguments.

The NAC’s decision represents FINRA’s final action unless the Board of Governors decides to review it (rare). After the NAC rules, your next step is outside FINRA entirely.

The SEC Appeal – Finally Outside FINRA

From the NAC, you can appeal to the Securities and Exchange Commission. Now your dealing with an actual goverment agency, not a private self-regulatory organization. The SEC conducts its own review of the record.

This is were some people finaly get relief. The SEC has reversed FINRA sanctions. The SEC has found that FINRA overreached, that evidence was insufficient, that procedures were flawed. The Mr. Tysk case is an example – after multiple rounds of FINRA proceedings, the SEC concluded that FINRA had not proven its case and eliminated all sanctions.

But heres the catch: while your SEC appeal is pending, the bar takes effect. Unlike the stay you get during NAC appeal, there is no automatic stay at the SEC level. Your barred from the industry while waiting months or years for the SEC to decide. You cant work. Your career is functionally over even though the case isnt resolved.

The SEC appeal process can take a year or more. During that time, your paying legal fees, your not earning income in securities, and your reputation suffers from the bar on your record. Even if you eventualy win, you’ve lost years of your career.

Federal Court – The Last Resort

From the SEC, you can appeal to a United States Court of Appeals. This is genuinly independent review by Article III judges outside both FINRA and the SEC. The court examines wheather the SEC’s decision was arbitrary, capricious, or contrary to law.

Federal court appeals take more time and cost more money. Your looking at additional years of litigation. The standard of review is deferential – courts dont easily overturn agency decisions. But courts have reversed SEC decisions upholding FINRA sanctions. It happens.

Alpine Securities spent nine years in litigation across four federal circuits, challenging FINRA’s constitutionality and fighting there expulsion. Nine years. Frank Black is currently in federal court arguing that FINRA’s structure violates constitutional requirements. These fights are possible. But there resource intensive in ways that most individual brokers simply cannot sustain.

The Math of Fighting

Lets be honest about costs. Taking a case to hearing versus settling can be “hugely expensive in terms of attorney’s fees.” Even if you end up with lesser sanctions after fighting, you could spend hundreds of thousands of dollars on legal expenses.

Consider the calculation:

• If FINRA is offering an AWC settlement with a fine and suspension but not a bar, the cost of accepting might be $50,000 in fines plus lost income during suspension
• The cost of fighting might be $200,000 in legal fees over two years, with uncertain outcome and ongoing career limbo

Now consider if FINRA is pursuing a bar:

• The cost of accepting is your entire career – permanant exclusion from the industry
• The cost of fighting is hundreds of thousands of dollars, multiple years of your life, and still uncertain outcome

When the alternative is permanent career death, the math shifts toward fighting even though the costs are enormous.

This is why most cases settle before hearing – approximately 76% of FINRA cases are resolved before award. People calculate the costs, assess there chances, and negotiate outcomes that avoid the uncertainty and expense of full litigation. Fighting is reserved for cases were settlement terms are unacceptable and the stakes justify the investment.

Defense Strategies That Actually Work

If your going to fight, here are the strategies that matter.

First, challenge the sufficiency of evidence. FINRA must prove its case by preponderance of the evidence. If there evidence is circumstantial, incomplete, or relies on inferences that arent justified, attack that. Demonstrate that FINRA hasnt met its burden. The Mr. Tysk case succeeded becuase the SEC ultimately concluded FINRA hadnt proven the allegations.

Second, demonstrate compliance affirmativly. Dont just argue FINRA is wrong – show that you did everything right. Produce documentation of your procedures. Call witnesses who can testify to your practices. Create a record that makes it hard to conclude violations occured.

Third, challenge procedural failures. If FINRA didnt follow its own rules during the investigation, if the hearing process was flawed, if your rights were violated – these become grounds for reversal on appeal. Build the record at the hearing level to preserve these issues.

Fourth, attack the sanctions as disproportionate. Even if FINRA proves some violation, the bar might be excessive given the conduct. FINRA’s own Sanction Guidelines provide frameworks for proportionality. Argue that lesser sanctions – fines, suspensions – are appropriate and that a bar goes to far.

Fifth, consider constitutional challenges. The Alpine Securities litigation and Frank Black case involve arguments that FINRA’s structure violates constitutional requirements. These arguments are pending in federal courts. If there successful, the landscape could shift significanty.

The Timeline Reality

Mr. Tysk’s case illustrates the timeline:

• 2014: FINRA Office of Hearing Officers finds liability
• 2016: NAC upholds findings and increases sanctions
• 2017: SEC remands back to NAC
• 2019: NAC affirms its position again
• 2021: SEC reverses all findings and sanctions

Seven years. From initial hearing decision to final victory. And that was a case that eventualy succeeded – many appeals fail at each stage.

If your going to fight, you need to plan for years, not months. You need financial resources to sustain litigation. You need emotional resiliance to handle the prolonged uncertainty. You need to accept that your career may be in limbo for the duration.

When Fighting Makes Sense

Not every bar should be contested. Sometimes FINRA has you dead to rights. Sometimes the evidence is overwhelming. Sometimes accepting the bar and moving on with your life is the least bad option.

But fighting makes sense when:

• FINRA’s evidence is weak and you have a genuine defense
• The bar is based on procedural violations (like 8210 non-compliance) rather then substantive misconduct
• You have the financial resources to sustain multi-year litigation
• Your career is worth more then the litigation costs
• You beleive you can demonstrate FINRA overreached

Fighting dosent make sense when:

• FINRA has compelling evidence of actual misconduct
• Your exposure includes criminal liability (fighting FINRA could complicate criminal proceedings)
• You lack the resources for prolonged litigation
• Settlement terms would let you remain in the industry with acceptable sanctions

The Uncomfortable Truth

Heres what nobody wants to say: winning against FINRA is rare. Defense victories at hearing are described as “rare wins.” The system is structured to produce convictions and sanctions, not acquittals. FINRA has more resources then you. FINRA has institutional advantages. FINRA has designed the process.

That dosent mean you shouldnt fight if fighting is warranted. It means you should go in with realistic expectations. The goal might not be complete victory – it might be forcing better settlement terms, reducing sanctions on appeal, or simply preserving your record for later rehabilitation.

A FINRA bar dosent have to be permanent. People have come back. People have won appeals. People have proven FINRA wrong. But the path is long, expensive, and uncertain. Know what your getting into before you start.

If you’re facing a potential FINRA bar and considering whether to fight, consult with experienced securities defense counsel immediately. The decision to contest versus settle is one of the most consequential choices you’ll make, and it requires clear-eyed assessment of the costs, odds, and stakes.