The FINRA MC-400 application is the filing a member firm submits to keep employing — or to newly associate with — someone who has become statutorily disqualified from the securities industry. The sponsoring firm has ten business days from FINRA’s notice of disqualification to file it, and the application must include a proposed plan of heightened supervision, documentation of the disqualifying event, and a $5,000 processing fee. FINRA reviews the filing, the SEC then reviews FINRA’s decision under Rule 19h-1, and the disqualified person can keep working during the process only under an interim supervision plan.
When a Firm Has to File an MC-400
Statutory disqualification is defined in Section 3(a)(39) of the Securities Exchange Act of 1934 and brought into FINRA’s framework through Article III, Section 4 of its By-Laws.1FINRA. General Information on Statutory Disqualification and FINRA’s Eligibility Proceedings The designation attaches automatically once a triggering event becomes final; FINRA staff do not weigh it. The main triggers are:
- Any felony conviction within the ten years preceding an application for membership or association, whether or not the crime involved securities.
- Misdemeanor convictions within the same ten-year window involving the purchase or sale of securities, bribery, perjury, burglary, or false reports. Foreign convictions for substantially equivalent offenses count.
- An SEC, state, or SRO order that bars, suspends, or revokes a person’s registration.
- A court injunction prohibiting the person from acting as a broker-dealer, investment adviser, or in a similar capacity.
- Expulsion, bar, or suspension by a foreign securities regulator or exchange.
Once any of these events becomes final, the firm has to amend the individual’s Form U4 within ten days of learning about it.2Office of the Law Revision Counsel. 15 US Code 78c – Definitions and Application FINRA then issues notice, and the MC-400 clock starts.
Filing is not optional. A firm that fails to file within ten business days of FINRA’s notice has the disqualified person’s registration revoked. If the firm itself is the disqualified party, its FINRA membership is canceled. The Department of Member Regulation can grant an extension for good cause, but a firm should not plan around getting one.3FINRA. FINRA Rule 9522 – Initiation of Eligibility Proceeding
Deadline and Fees
Ten business days from FINRA’s notice. The application carries a $5,000 processing fee, deducted from the firm’s CRD Flex-Funding account on submission; the system will not accept the filing if the account lacks sufficient funds.4FINRA. MC-400 Application If the case proceeds to a hearing, a separate $2,500 hearing fee applies.1FINRA. General Information on Statutory Disqualification and FINRA’s Eligibility Proceedings Neither fee is refundable.
The filing must also include an interim plan of heightened supervision that takes effect immediately and complies with FINRA Rule 3110.3FINRA. FINRA Rule 9522 – Initiation of Eligibility Proceeding The disqualified person can continue working under that interim plan while the application is pending. Any lapse in supervision during the review can sink the case.
What Goes in the Application
The MC-400 is filed through the FINRA Gateway portal. It calls for a narrative account of the disqualifying event, certified copies of the relevant court orders or regulatory decisions, and a full picture of the individual’s professional history, including any prior disclosures on their Form U4.
The centerpiece is the proposed plan of heightened supervision. The plan must name a specific registered principal who will be responsible for day-to-day oversight, and that principal has to sign the plan and acknowledge personal responsibility for carrying it out.3FINRA. FINRA Rule 9522 – Initiation of Eligibility Proceeding It must set out how the supervisor will review the individual’s communications, trades, and client interactions. Generic language about “close monitoring” will not survive review. The plan has to be fitted to the specific conduct that caused the disqualification and to the firm’s actual business. A plan built for a wirehouse trading desk looks nothing like one at a small advisory shop.
Supporting materials — character references, evidence of rehabilitation, proof of completion for any court-ordered programs — can help. Accuracy counts for more than volume. Any inconsistency between the application and the underlying court or regulatory records invites delay or rejection.
How FINRA Reviews the Application
The application goes to FINRA’s Department of Member Supervision, which examines the individual’s background, the nature of the disqualifying event, and the adequacy of the supervision plan. Most of the substantive evaluation happens here. The department is asking whether letting the person stay in the industry is consistent with investor protection.
If Member Supervision recommends approval, the case moves to the SEC filing stage without a hearing. A hearing is triggered only when the department recommends denial. If that happens, the applicant can appear before a subcommittee of the Statutory Disqualification Committee — typically two members drawn from industry or non-industry representatives. FINRA’s Department of Enforcement argues for denial. The firm and the disqualified person can testify, present witnesses, submit evidence, and be represented by counsel.1FINRA. General Information on Statutory Disqualification and FINRA’s Eligibility Proceedings
After the hearing, the Statutory Disqualification Committee prepares a recommended decision for the National Adjudicatory Council. The NAC’s decision is final at FINRA unless the Board of Governors calls the matter for its own review.1FINRA. General Information on Statutory Disqualification and FINRA’s Eligibility Proceedings The whole process from filing to final FINRA decision can run many months, especially when a hearing is involved. The interim supervision plan must remain in effect the entire time.
SEC Review Under Rule 19h-1
FINRA approval is not the finish line. FINRA has to file a notice with the SEC under Exchange Act Rule 19h-1 at least 30 days before the proposed admission or continuance takes effect, including the basis for its determination that the arrangement is consistent with investor protection.5eCFR. 17 CFR 240.19h-1 – Notice by a Self-Regulatory Organization The SEC then has 30 days to act. It can:
- Allow the decision to stand by taking no action within the 30-day window, which lets FINRA’s approval become effective.
- Extend consideration by written notice for up to another 60 days.
- Direct FINRA to deny the admission or continuance.
During an extended review, if FINRA has already permitted the person to continue working on a temporary basis, the SEC will not institute separate proceedings against the individual solely on the disqualification.5eCFR. 17 CFR 240.19h-1 – Notice by a Self-Regulatory Organization Once the SEC’s determination is final, whether by inaction or formal order, the firm must keep that order in its permanent compliance records, and every condition in the approved supervision plan remains binding for as long as the disqualification is in effect.
If the Application Is Denied
An NAC denial can be appealed to the SEC. The applicant files an application for review within 30 days after the NAC’s determination is filed with the Commission and received by the aggrieved party.6eCFR. 17 CFR 201.420 – Appeal of Determinations by Self-Regulatory Organizations The SEC will not extend that window without a showing of extraordinary circumstances.
If the SEC itself issues an adverse final order — either affirming FINRA or independently blocking the continuance — the applicant can seek judicial review in a U.S. Court of Appeals. The petition must be filed within 60 days of entry of the order, in the circuit where the person resides or has their principal place of business, or in the D.C. Circuit.7Office of the Law Revision Counsel. 15 US Code 78y – Court Review of Orders and Rules The court can affirm, modify, or set aside the order in whole or in part. Courts give substantial deference to the SEC’s factual findings, so a reversal is a steep climb.
What Approval Commits the Firm To
An approved MC-400 is not something a firm files and forgets. FINRA charges an annual fee for each statutorily disqualified individual the firm continues to employ: $1,500 for a Tier 1 individual and $1,000 for a Tier 2 individual.8FINRA. Section 12 – Application and Annual Fees for Statutorily Disqualified Member Firms and Individuals Those fees continue as long as the disqualification is in effect and the person remains associated with the firm.
The heightened supervision plan carries permanent weight. The designated supervisor has to actually run it — reviewing trades, monitoring communications, documenting compliance — every day, not just on paper. FINRA can revisit the arrangement at any time, and a firm that lets supervision lapse exposes both itself and the supervisor to disciplinary action. The ongoing supervisory load is the real long-term cost of an MC-400 approval.
There is also a public-record dimension. When the firm amends the Form U4 to report the disqualifying event, the information flows into the Central Registration Depository and feeds BrokerCheck, where investors, prospective employers, and other firms can see it.1FINRA. General Information on Statutory Disqualification and FINRA’s Eligibility Proceedings The disclosure appears whether the MC-400 is approved or denied. An approval permits continued association under supervised conditions; it does not remove the disclosure.