ENFORCEMENT DEFENSE

JLG BLOG - JUNE

When you receive an “8210 letter” from FINRA, your whole world can change.  FINRA does not have subpoena power; rather, their investigative power comes from FINRA Rule 8210.  But, that rule is very powerful when it comes to member firm broker-dealers.  Often, an 8210 letter can be the first step in a long drawn out investigation that will take time and money to respond to and possibly fight.

At that point, you need an experienced attorney who knows the ins and outs of FINRA as well as the enforcement process. It is important to select counsel who understands your business and its operations – from client intake, through execution and clearing, and all steps in between.

In 2015, there were 1,512 new enforcement cases brought by FINRA; 35 firms expelled and 25 suspended; 496 individuals barred from the industry and 736 suspended.  These numbers are not insignificant, especially if one of them is you.

It is likely the first time you will hear about a regulatory inquiry is through receipt of an 8210 letter.  You must respond to their requests for documents and provide explanations by a specified date.  You should not do this alone, even when you know that you have not done anything wrong.  It is prudent to receive guidance from an experienced legal counsel.

Document requests often are followed by additional requests, and possibly an On-The-Record (“OTR”) interview, conducted by FINRA attorneys.  This process can be nerve wrecking.  Similar to a deposition, an OTR is testimony that can be used against you, so you should prepare and not be represented by counsel.

Taking the attitude, “I did anything wrong so I don’t need a lawyer,” could lead to difficulties down the road.  Make the call, listen to advice and make your decision.

Author: David Sobel.  David Sobel serves as JLG’s FINRA specialist.  He has been in the industry for 35 years.  He has been a floor broker on the NYSE floor; a third market trader; and in NY, represented many of the independent brokers on the NYSE and AMEX for compliance and enforcement matters.  Since 1998, David has been a FINRA arbitrator and is a past Chair of FINRA’s Small Firm Advisory Board.  For more information, please visit http://www.jackolg.com/Professionals/.

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