11.2 Predispute Agreements, Arbitration Codes, Eligibility, Panels, and Awards

Investment Company and Variable Contracts Products Principal Series 26

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1 Chapter 1: Registration of the Broker-Dealer and Its Associated Persons

1.1 Broker-Dealer Registration, FINRA Membership, and Firm Filings 1.2 Individual Registration: Forms U4 and U5, Registration Categories, and Exempt Persons 1.3 Pre-Hire Screening, Fingerprinting, and Statutory Disqualification 1.4 Heightened Supervision, Interim Plans, and the Taping Rule 1.5 Broker-Dealers, Investment Advisers, Dual Registrants, and Unregistered Entities

2 Chapter 2: Training, Continuing Education, and Product Knowledge

2.1 Continuing Education (Rule 1240), the Maintaining Qualifications Program, and the Annual Compliance Meeting 2.2 The Investment Company Act of 1940: Classifications, Registration, and Fund Governance 2.3 Mutual Fund Pricing, Redemption, Exchanges, Sales Charges, and Share Classes 2.4 Variable Annuities and Variable Life Insurance: Structure, Charges, and Rule 2320 2.5 Closed-End and Interval Funds, UITs, Money Market Funds, 529 Plans, and Investment Risks

3 Chapter 3: Supervisory System, Conduct Standards, Insider Trading, and Discipline

3.1 The Supervisory System, Written Supervisory Procedures, and Standards of Conduct 3.2 Insider Trading, Information Barriers, and Personal Trading Supervision 3.3 FINRA Investigations, Disciplinary Proceedings, Sanctions, and Exemptions

4 Chapter 4: Communications with the Public

4.1 Communications Categories, Principal Approval, Filing, and Recordkeeping (Rule 2210) 4.2 Content Standards, Investment Company Advertising, and Professional Designations 4.3 Variable Contract Communications, Fund Rankings, Bond Fund Volatility Ratings, and Investment Analysis Tools 4.4 Correspondence and Internal Communications, Social Media, Public Appearances, and Telemarketing

5 Chapter 5: Recommendations, Customer Accounts, and Product Sales Supervision

5.1 Regulation Best Interest, Conflicts, and Form CRS 5.2 Know Your Customer, FINRA Suitability, and Institutional Accounts 5.3 New Accounts, Customer Authority, Discretion, and Order Handling 5.4 Mutual Fund Breakpoints, Share Classes, and Switching Supervision 5.5 Deferred Variable Annuities and the Seven-Business-Day Principal Review 5.6 Prospectuses, Summary Prospectuses, SAIs, and Ongoing Disclosures

6 Chapter 6: Compensation, Outside Activities, and Personal Conduct

6.1 Cash Compensation, Distribution Arrangements, and Conflicts 6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220) 6.3 Training Meetings, Sales Contests, and Non-Cash Compensation 6.4 Referral Payments, Bank Networking, and Unregistered Persons 6.5 Outside Business Activities, Private Securities Transactions, and Rule 3290 Transition 6.6 Outside Accounts, Borrowing and Lending, Account Sharing, and Guarantees

7 Chapter 7: Customer Account Operations, Transfers, and Privacy

7.1 Account Records, Trusted Contacts, Confirmations, and Statements 7.2 Cash Accounts, T+1 Settlement, Regulation T, Extensions, and Freeriding 7.3 ACATS Transfers, Transfer-on-Death Accounts, and Account Changes 7.4 Regulation S-P, Incident Response, Service Providers, and Identity Theft

8 Chapter 8: Anti-Money Laundering, Customer Identification, and Sanctions

8.1 AML Program, Independent Testing, Training, and Governance 8.2 Customer Identification, Due Diligence, and Beneficial Ownership 8.3 SARs, CTRs, OFAC, Information Sharing, and AML Red Flags

9 Chapter 9: Supervisory Controls, Business Continuity, and Regulatory Reporting

9.1 Supervisory Controls, Annual Testing, and CEO Certification 9.2 Business Continuity, Systems Resilience, Cybersecurity, and Vendors 9.3 Rule 4530, FOCUS and Annual Reports, and Customer-Asset Events

10 Chapter 10: Office Classifications, Inspections, and Records

10.1 OSJs, Branches, RSLs, and Inspection Cycles 10.2 Inspection Reports, Independent Review, Signage, and Office Files 10.3 Broker-Dealer Books and Records, Electronic Storage, and Correspondence

11 Chapter 11: Complaints, Arbitration, Mediation, and Expungement

11.1 Customer Complaints, Investigation, Retention, and Reporting 11.2 Predispute Agreements, Arbitration Codes, Eligibility, Panels, and Awards 11.3 Mediation and Customer-Dispute Expungement

12 Chapter 12: Financial Responsibility, Membership Changes, and Investor Protection

12.1 Net Capital, Minimum Tiers, Haircuts, and Early Warning 12.2 Customer Protection, Possession or Control, Reserve Formula, and Exemptions 12.3 New-Product Review and Continuing Membership Applications 12.4 SIPC, Fidelity Bonds, Proxy Materials, and Financial Reports

11.2 Predispute Agreements, Arbitration Codes, Eligibility, Panels, and Awards

Key Takeaways Explain This Topic AI

Rule 2268 requires highlighted disclosures and prohibits provisions that limit required arbitration rights, contradict FINRA rules, or mislead customers.

Customer disputes use the Customer Code; employment and other industry disputes generally use the Industry Code.

Rule 12206 generally makes claims ineligible when six years have elapsed from the occurrence or event giving rise to the claim, subject to the rule and court issues.

Customer cases of $50,000 or less generally use simplified arbitration; panel size for larger claims follows the Code and party agreements.

Awards are final and binding, subject to narrow judicial review, and monetary awards generally must be paid within 30 days unless a timely motion to vacate is filed.

Last updated: September 2026

Predispute Arbitration Agreements

FINRA Rule 2268 permits a customer agreement to require arbitration of future disputes only if the agreement includes the prescribed highlighted disclosures and complies with the rule. The customer must receive a copy, and the clause must be presented clearly. The agreement cannot contradict FINRA rules, restrict an eligible customer's right to pursue a claim in the required forum, limit damages or time periods contrary to the Code, or require the customer to waive a right to bring an allowed class action in court.

A principal should review the executed version, delivery evidence and later amendments. Burying the clause, selecting a distant forum unilaterally, shifting all costs regardless of outcome or adding a judicial-review standard beyond governing law can create enforceability and rule issues.

Codes and Eligibility

The Code of Arbitration Procedure for Customer Disputes generally applies to disputes between customers and members or associated persons. The Industry Code generally applies to disputes within the securities industry, including many employment matters. A single controversy can present both customer and industry claims, so forum staff and the Code determine treatment.

Under Customer Code Rule 12206, a claim generally is not eligible for FINRA arbitration when six years have elapsed from the occurrence or event giving rise to it. The eligibility rule is distinct from a state statute of limitations. A court can decide specified questions, and dismissal from FINRA does not necessarily decide whether another forum remains available.

Claim Size and Panels

Customer claim amount General process

$50,000 or less, excluding interest and expenses Simplified arbitration, generally decided on written submissions unless a hearing is requested or required

More than $50,000 through $100,000 Generally one arbitrator unless the parties agree otherwise under the Code

More than $100,000 or unspecified nonmonetary claim Generally three arbitrators unless the parties agree to one

Customer cases use the Code's public-chair and panel-selection process. Parties receive lists, rank and strike as permitted, challenge conflicts, exchange required documents and attend prehearing conferences. Arbitrators must disclose circumstances that could affect impartiality. A principal should preserve relevant records immediately rather than wait for the discovery deadline.

Hearing and Award

Arbitrators decide claims and defenses, hear evidence, rule on discovery and issue a written award. Formal courtroom evidence rules do not control in the same way, but fairness and the Code do. A party's failure to appear does not guarantee victory; the claimant still must support the claim.

Awards are final and binding . Judicial vacatur is available only on narrow statutory grounds, such as corruption, evident partiality, specified misconduct or arbitrators exceeding their powers. A court does not rehear the merits because one party thinks the panel misunderstood a fact.

A monetary award generally must be paid within 30 days after receipt unless a timely motion to vacate has been filed. Unpaid awards can produce expedited suspension proceedings. Interest and other directions in the award also must be followed.

Supervisory Response

Receipt of a statement of claim triggers preservation, insurer notice, conflict review, reporting analysis and assessment of ongoing customer risk. Settlement does not end the firm's duty to investigate the underlying conduct, report when required, remediate customers and correct supervision.

Discovery and Evidence

FINRA's Discovery Guide identifies presumptively discoverable documents in customer cases, but parties can request additional relevant material and arbitrators decide disputes. The firm should collect from approved and unapproved communication channels, product files, account systems, compensation, supervision and complaint records. A narrow collection limited to the representative's email can miss decisive evidence.

Objections must be specific and supported; delay or incomplete production can produce sanctions. Customer privacy is protected through appropriate orders and handling, not by withholding all account records. Witness preparation should focus on accurate recollection and documents, never coordinated false testimony.

Settlement and Reporting

Authority to settle should be documented among the firm, insurers and counsel. Allocation to an associated person can affect Rule 4530 and Form U4 reporting, so parties cannot choose labels solely to avoid disclosure. After payment, the firm confirms dismissal, retains the agreement, updates regulatory records and completes any customer lookback or discipline.

When multiple respondents are named, the firm should preserve each person's separate defenses and conflicts. Joint representation can become inappropriate if accounts, supervision or settlement allocation place the member and associated person in materially different positions.