Statutory Disqualification under Exchange Act Section 3(a)(39)
Under the Securities Exchange Act of 1934 and FINRA bylaws, which event causes an individual to be subject to an automatic STATUTORY DISQUALIFICATION (SD) from the securities industry?
Under Section 3(a)(39) of the 1934 Act, a person is subject to Statutory Disqualification (SD) if they have been convicted of ANY FELONY (securities or non-securities related) within the past 10 years, or any securities/misappropriation misdemeanor within 10 years. An SD prevents an individual from associating with any FINRA member firm.
Complete Analysis & Legal Rationale
Bankruptcies must be disclosed on Form U4, but do NOT cause a statutory disqualification.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Any felony conviction in past 10 years triggers statutory disqualification.
Bankruptcy requires Form U4 disclosure, but is NOT a statutory disqualification.
Customer complaints are reportable, but do not disqualify an individual.
Exam failures require a 180-day waiting period, not a statutory disqualification.
Official Standard: Defines criteria barring association with FINRA member firms.