NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 4th October 2023, 06:25 pm
FINRA Defense: Understanding Your Rights and Options
Dealing with a FINRA investigation can be stressful and intimidating. But it’s important to remember that you have rights and options for defending yourself. This article will walk you through the key things to know about FINRA defense so you can make informed decisions.
What is FINRA?
FINRA stands for the Financial Industry Regulatory Authority. It’s a private organization that regulates brokerage firms and exchange markets in the United States. FINRA can investigate brokers, brokerage firms, and other financial professionals for potential violations of FINRA rules or federal securities laws.
Common Reasons for a FINRA Investigation
There are many reasons FINRA may open an investigation, including:
- Customer complaints about unauthorized trading, misrepresentation, or other misconduct
- Allegations of insider trading, market manipulation, or other market abuses
- Failure to disclose outside business activities
- Engaging in private securities transactions without firm approval
- Sharing in customer losses or profits of trades
- Churning or excessive trading in customer accounts
FINRA has broad authority to investigate potential violations of its rules and securities laws. Even minor compliance issues can trigger an investigation.
The Investigation Process
If FINRA opens an investigation into your activities, here’s what you can generally expect:
- You’ll receive a request for information (RFI) asking you to provide documents and written responses about the issues under investigation.
- FINRA may also request on-the-record testimony (OTR) where you answer questions under oath.
- Your firm will be notified of the investigation and required to produce relevant documents.
- FINRA will review all evidence collected to determine if rules were violated.
- If violations are found, FINRA may issue a Cautionary Action Letter, fine, suspension, bar, or refer the case for enforcement action.
This process can take months to conclude. It’s important to take it seriously from the start.
Responding to a FINRA Investigation
If you receive notice of a FINRA investigation, you should immediately contact experienced legal counsel. Here are some tips for responding:
- Do not ignore or delay responding to an RFI. There are strict deadlines for producing documents and information.
- Be truthful in all written responses and OTR testimony. Any false statements can lead to criminal charges.
- Gather and preserve all potentially relevant documents, emails, text messages, and phone records.
- Consult with counsel before submitting any written responses.
- Prepare thoroughly for OTR testimony and conduct mock sessions.
- Do not attempt to coach other witnesses or coordinate stories.
- Assert your Fifth Amendment rights if necessary to avoid self-incrimination.
Responding appropriately requires experience with FINRA’s rules and procedures. Skilled counsel can help protect your rights.
FINRA Defense Strategies
If violations are alleged, possible FINRA defense strategies include:
- Attacking the credibility of customer complaints – Customers may exaggerate or fabricate claims out of anger over investment losses they do not understand.
- Demonstrating compliance with policies – You may be able to show you acted reasonably and followed firm policies based on the information available at the time.
- Arguing mitigating circumstances – There may be explanations for what occurred that mitigate allegations of intentional misconduct.
- Disputing the charges entirely – In some cases, there may be strong evidence to refute the allegations and clear your name.
- Negotiating a settlement – Depending on the circumstances, a settlement may be preferable to litigation. This usually involves accepting some sanctions in exchange for ending the case.
An experienced FINRA defense lawyer can assess which strategies give you the best chance of success. The right approach depends on the unique facts of your case.
FINRA Disciplinary Actions
If FINRA believes violations occurred after an investigation, it can impose sanctions through its disciplinary process. Common FINRA disciplinary actions include:
- Cautionary Action Letter – A letter summarizing misconduct that does not merit formal disciplinary action. This becomes part of your CRD record.
- Censure – A formal reprimand for misconduct that is made public.
- Fine – Monetary penalties ranging from $2,500 up to $1 million or more.
- Suspension – A temporary ban from working in the securities industry for a period of months or years.
- Bar – Permanently prohibiting someone from working in the securities industry.
You have the right to appeal any disciplinary decision through FINRA’s appeals process. An appeals lawyer can advise you on whether to appeal and the likelihood of success.
Avoiding Common Mistakes
Here are some tips to avoid common missteps when dealing with a FINRA investigation:
- Do not speak to FINRA without experienced legal counsel present.
- Be 100% truthful and cooperative with FINRA – any false or misleading statements can be charged as criminal offenses.
- Do not attempt to hide or destroy potential evidence.
- Do not reach out to customers or witnesses without checking with counsel.
- Stay calm and avoid overreacting – your actions can be used against you.
- Do not post about the investigation on social media.
- Comply fully with all information requests by given deadlines.
A skilled FINRA defense attorney can guide you through the process and help avoid missteps that could worsen your situation.
The Benefits of Retaining Counsel
Navigating a FINRA investigation is challenging without experienced legal counsel. Benefits of retaining a FINRA defense lawyer include:
- They understand FINRA’s rules, procedures, and typical penalties.
- They can conduct an independent investigation of the allegations.
- They can negotiate with FINRA on your behalf.
- They can defend you in disciplinary proceedings if charges are filed.
- They can advise you on whether to accept a settlement.
- They can appeal disciplinary decisions to FINRA or the SEC.
Having an expert on your side can help achieve the most favorable outcome possible.
Finding the Right FINRA Defense Attorney
It’s important to choose a FINRA defense lawyer with specific experience handling these cases. Things to look for include:
- Extensive knowledge of FINRA rules, procedures, and precedent
- A proven track record with FINRA investigations and enforcement defense
- Experience as a former regulator
- Strong negotiating skills for settlements
- Excellent litigation skills if your case goes to hearing
- Industry respect and credibility with FINRA
Be sure to ask about the lawyer’s specific FINRA experience, performance history, and strategy for your case.
Don’t Go It Alone
FINRA investigations can quickly spiral out of control without experienced legal guidance. The assistance of a FINRA defense attorney can help protect your reputation, livelihood and avoid the most serious disciplinary outcomes. If you receive notice of a FINRA investigation, consult with qualified counsel right away about your defense strategy and options. With the right legal help, you can achieve the best possible resolution and put the issue behind you.
FINRA Rule 8210
For brokers and investors, getting a notice that you’re being investigated by FINRA (Financial Industry Regulatory Authority) is an almost instant headache and fear-inducing event. In a single year alone, FINRA has investigated over 700 investors and brokers for fraud and other offenses, and while that’s not the only goal of FINRA (prosecution), it’s something that they frequently do when they suspect that an investor or broker is behaving inappropriately within their industry. Spodek Law Group is a law group in Los Angeles that handles all forms of defense cases related to FINRA, and we’ve got a massive amount of experience in this area. If you need someone to help defend you against FINRA Rule 8210 charges, then we’re THE first to call in Los Angeles.
What A Lawyer Does For You
If you received a letter from FINRA, rest assured, it’s bad news at least in the beginning. It means you are being informally invested for violations related to Rule 8210 and you MUST comply and respond to this letter. So many brokers or investors might believe that they can simply ignore a FINRA letter, and this can turn into a career-ending mistake. Not responding is simply not an option. It’s law that you respond!
You must also comply with the investigation. They have the right to request documentation from your industry dealings, and they have every right to ask you for an oral interview. You can respond in a number of ways, such as writing, orally, or electronically, but you simply must respond, and when you do it’s best to have a lawyer on your side who can respond for you. Being represented by a highly esteemed law firm certainly levels the playing field some. FINRA is a powerful organization. They are there to regulate behavior in the financial sector, so make sure that you have a good lawyer on your team when you go up against them.
You might be wondering WHY you received an inquiry
There can be a number of reasons that FINRA begins an investigation, but generally it’s because of complaints from customers, arbitration, problems with creditors, and other things that show FINRA something is not right about the way you are conducting yourself as an investor or a broker. FINRA is the largest independent regulator for the U.S. securities industry, and they are highly respected and there for a reason. There are certain rules that investors and brokers must follow in order to protect their own reputation and the financial assets of their clients. Clients must be able to trust investors and to do so, it’s a good thing that there is a regulatory body such as this to act on behalf of everyone in securities.
Don’t Ignore, Call A Lawyer Today
It’s absolutely normal to be stressed and worried about your notification from FINRA. You SHOULD be. With a good lawyer on your side, though, you’re going to fight through this and come out on the other side vindicated. Give us a call today to set up a free consultation.