Are You Under FINRA Investigation? Here’s What You Need to Know.

This blog post is intended for financial advisors who have received a FINRA Rule 8210 letter. It explains the FINRA investigation process, the importance of seeking legal counsel, and what you can expect at each stage. 

Why You Should Seek Legal Counsel Immediately

An attorney with experience in financial defense can be your strongest ally in FINRA investigations. You can rely on them to:

• Guide You Through the Process: FINRA inquiries have specific procedures and deadlines your lawyer will help you navigate.
• Protect Your Rights: Your attorney will inform you of your rights throughout a FINRA investigation and how best to protect those rights while cooperating with the inquiry.
• Craft a Compliant Response: Your lawyer will help you craft a response that addresses the FINRA request without jeopardizing your position.

Why You Might Get Investigated by FINRA

FINRA, the Financial Industry Regulatory Authority, is responsible for overseeing broker-dealers and financial advisors. They have a wide range of tools at their disposal to investigate potential misconduct. Here are some of the common reasons why a FINRA investigation might be launched:

• Automated Surveillance Reports: FINRA uses sophisticated algorithms to monitor trading activity. If these systems detect unusual patterns, it could trigger an investigation.
• Examination Findings: FINRA routinely conducts examinations of broker-dealer firms. These examinations can uncover potential issues that warrant further investigation.
• Referrals From Other Regulators: FINRA often collaborates with other regulatory bodies, such as the SEC (Securities and Exchange Commission) and state securities commissions. If another regulator identifies a potential violation, they may refer the case to FINRA.
• Whistleblowers: FINRA has a whistleblower program that encourages individuals to report potential misconduct within the securities industry. Information received through this program can lead to investigations.
• Customer Complaints: If a customer files a complaint against you, FINRA will investigate the matter to determine if there’s any validity to the allegations.
• Information on Forms U4 and U5: These forms are used to register and terminate broker-dealer representatives. Inaccuracies or omissions on these forms can trigger an investigation.

What FINRA Rule 8210 Means for You

Rule 8210 letter informs you that you are the subject of an investigation. This rule grants FINRA broad authority to gather information about your activities. They can request documents related to your business practices, personal finances, and even outside business operations.

Responding to a FINRA Inquiry

Receiving a FINRA Rule 8210 letter can be a stressful experience. It’s important to remember that you have rights, but it’s also crucial to navigate this situation carefully. Here are some key points to remember:

• Seek legal counsel from an attorney experienced in FINRA regulations. An attorney can advise you on your rights and responsibilities, and help you develop a strategy for responding to the inquiry.
• Provide only the information that is specifically requested. Don’t volunteer any additional information that is not directly relevant to the investigation.
• Don’t ignore FINRA’s letter. Even if you are not the source of the investigation, you can face serious sanctions from FINRA for a failure to respond, including a bar from the industry.
• Respond honestly. The consequences of a false or inaccurate response can be much greater than the result of the examination.

The FINRA Investigation Process

A FINRA investigation can be a lengthy and complex process. Here’s a general overview of what you can expect at each stage:

• Information Gathering: After you respond to the initial inquiry, FINRA may reach out to other sources for additional information. This could include your past employers, customers, or business associates.
• On-the-Record Interview (OTR): FINRA may request an OTR interview to get your perspective on the matter. This interview is different from a traditional deposition. FINRA has more power during an OTR interview.
• Settlement or Complaint: Once FINRA has gathered all the necessary information, they will decide whether to pursue a formal complaint or offer a settlement agreement. A settlement agreement, also known as an Acceptance, Waiver, and Consent (AWC), is a document that outlines the terms of the resolution.

Why You Need an Attorney

A FINRA investigation can have serious consequences for your career. Depending on the outcome, you could face sanctions, suspension, or even a lifetime bar from the securities industry. An experienced attorney can help you navigate the investigation process, protect your rights, and achieve the best possible outcome. If you have received a FINRA Rule 8210 letter, don’t delay in seeking legal counsel. Alonso & Wirth‘s team of attorneys has extensive experience representing financial advisors nationwide in FINRA investigations. We understand the complexities of the process and are committed to protecting your rights and reputation. Contact us today.

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