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Representing Brokers in FINRA Enforcement Actions

You Got Slapped With a FINRA Enforcement Action? Here’s What to Do

So, you’re a broker who just got hit with a FINRA enforcement action. Take a deep breath – it’s not the end of the world. But, you need to act fast and smart.First thing‘s first, what exactly is a FINRA enforcement action? It’s when the Financial Industry Regulatory Authority (FINRA) alleges you violated securities rules or regulations. FINRA oversees pretty much every broker-dealer firm in the U.S. 12They can bring enforcement actions for all kinds of violations, like:

  • Unsuitable investment recommendations
  • Excessive trading (churning accounts)
  • Misrepresenting investment risks
  • Failing to supervise employees properly

The penalties? Fines, suspensions, bars from the industry – it can get ugly. But, you‘ve got options to fight back. Let’s dive into what you need to know.

First, Don’t Panic – But Don’t Ignore It Either

Getting slapped with a FINRA enforcement action would freak anyone out. It’s normal to feel anxious, angry, or just want to stick your head in the sand.But ignoring it or missing deadlines is the worst thing you can do. FINRA doesn‘t mess around – if you blow off their notices, they can get a default decision against you. Game over.So take a deep breath, and start preparing a strategic response right away. Having an experienced securities defense attorney in your corner makes a huge difference.

Get Familiar With the Allegations

The first step is thoroughly reviewing and understanding the allegations against you. FINRA’s complaint letter will spell out:

  • The specific FINRA/SEC rules you allegedly violated
  • The timeframe of the purported misconduct
  • The sanctions FINRA is seeking (fines, suspensions, etc.)

Read it carefully, because the details matter. For example, if FINRA claims you churned a customer’s account for commissions, the evidence will need to show:

  1. You exercised control over the account
  2. You excessively traded it
  3. Your intent was to generate commissions, not further the client’s interests

If FINRA can’t prove any of those three elements, you may be able to get the churning charge dismissed3

Gather Your Evidence and Witnesses

Once you know the specific charges, start pulling together all relevant evidence, documents, emails, trade records – anything that could support your defense.If there are potential witnesses (colleagues, assistants, clients) who can corroborate your version of events, get their contact info too. Your lawyer will likely want to interview them.This evidence-gathering phase is crucial, so be thorough. The more ammunition you can give your attorney to counter FINRA’s claims, the better.

Christine Twomey
Christine Twomey
Just had my Divorce case settled 2 months ago after having a horrible experience with another firm. I couldn’t be happier with Claire Banks and Elizabeth Garvey with their outstanding professionalism in doing so with Spodek Law Group. Any time I needed questions answered they were always prompt in doing so with all my uncertainties after 30 yrs of marriage.I feel from the bottom of my heart you will NOT be disappointed with either one. Thanks a million.
Brendan huisman
Brendan huisman
Alex Zhik contacted me almost immediately when I reached out to Spodek for a consultation and was able to effectively communicate the path forward/consequences of my legal issue. I immediately agreed to hire Alex for his services and did not regret my choice. He was able to cover my case in court (with 1 day notice) and not only was he able to push my case down, he carefully negotiated a dismissal of the charge altogether. I highly recommend Spodek, and more specifically, Alex Zhik for all of your legal issues. Thanks guys!
Guerline Menard
Guerline Menard
Thanks again Spodek law firm, particularly Esq Claire Banks who stood right there with us up to the finish line. Attached photos taken right outside of the court building and the smile on our faces represented victory, a breath of fresh air and satisfaction. We are very happy that this is over and we can move on with our lives. Thanks Spodek law 🙏🏼🙏🏼🙏🏼🙏🏼🙌🏼❤️
Keisha Parris
Keisha Parris
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
Taïko Beauty
Taïko Beauty
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence. Thank you team!
Anthony Williams
Anthony Williams
Hey, how you guys doing? Good afternoon my name is Anthony Williams I just want to give a great shout out to the team of. Spodek law group. It is such a honor to use them and to use their assistance through this whole case from start to finish. They did everything that they said they was gonna do and if it ever comes down to it, if I ever have to use them again, hands-down they will be the first law office at the top of my list, thank you guys so much. It was a pleasure having you guys by my side so if you guys ever need them, do not hesitate to pick up the phone and give them a call.
Loveth Okpedo
Loveth Okpedo
Very professional, very transparent, over all a great experience
Bee L
Bee L
Amazing experience with Spodek! Very professional lawyers who take your case seriously. They treated me with respect, were always available, and answered any and all questions. They were able to help me very successfully and removed a huge stress. Highly recommend.
divesh patel
divesh patel
I can't recommend Alex Zhik and Spodek Law Firm highly enough for their exceptional legal representation and personal mentorship. From the moment I engaged their services in October 2022, Alex took the time to understand my case thoroughly and provided guidance every step of the way. Alex's dedication to my case went above and beyond my expectations. His expertise, attention to detail, and commitment to achieving the best possible outcome were evident throughout the entire process. He took the time to mentor me, ensuring I understood the legal complexities involved to make informed decisions. Alex is the kind of guy you would want to have a beer with and has made a meaningful impact on me. I also want to acknowledge Todd Spodek, the leader of the firm, who played a crucial role in my case. His leadership and support bolstered the efforts of Alex, and his involvement highlighted the firm's commitment to excellence. Thanks to Alex Zhik and Todd Spodek, I achieved the outcome I desired, and I am incredibly grateful for their professionalism, expertise, and genuine care. If you're in need of legal representation, look no further than this outstanding team.

Consider Your Options: Settle or Fight?

With the evidence compiled, you and your lawyer can start weighing your options for how to proceed. Generally, you‘ve got two main choices:

  1. Try to negotiate a settlement with FINRA
  2. Take it to a full disciplinary hearing and fight the charges

There are pros and cons to each approach. Settling is usually faster and avoids the stress of a hearing. But, you may have to accept harsher sanctions than if you fought it and won.On the other hand, hearings are unpredictable and stressful. But if the evidence is on your side, you could potentially get the charges dismissed entirely.An experienced securities lawyer can analyze your specific situation and make a recommendation on the best path forward. Don‘t try to navigate this alone.

If You Fight, Be Ready for a Lengthy Battle

Decided to take it to a hearing? Strap in, because FINRA disciplinary proceedings are a marathon, not a sprint.The hearing itself is conducted kind of like a trial, with witnesses, evidence submissions, cross-examinations by both sides’ lawyers, and more. Except there’s no jury – just a panel of two FINRA members and one hearing officer calling the shots.But before you even get to the hearing room, there’s the prolonged “discovery” process. This is where both sides request and exchange reams of documents, data, recordings, and other potential evidence.FINRA’s enforcement team will almost certainly hit you with extensive discovery requests. They’ll want every scrap of paper, email, text, phone record – anything even remotely related to the allegations.So be prepared to gather mountains of records from your firm’s databases, servers, phones, you name it. It’s a huge undertaking that can drag on for months.Your lawyer will help manage this laborious process and push back if FINRA’s requests are excessive or irrelevant. But having an attorney who has been through many FINRA proceedings before is invaluable.

The Hearing: Put Your Best Foot Forward

If your case proceeds to a full disciplinary hearing, it’s showtime. This is your chance to present your defense, cross-examine FINRA’s witnesses, and make your case to the panel.FINRA’s enforcement team will go first, calling witnesses and submitting evidence to try proving you violated the rules. Your lawyer will then get to cross-examine FINRA’s witnesses and poke holes in their case.Then it’s your turn. You’ll have the opportunity to testify yourself, and to call your own witnesses who can corroborate your version of events. Your attorney will lead this process, guiding witnesses through their testimony.Throughout, the panel can ask questions of both sides. So be prepared for intense scrutiny and probing from the FINRA representatives.Having a skilled litigator who can forcefully advocate for you, while also maintaining proper courtroom decorum, is critical. This is not the time for an inexperienced lawyer to stumble through their first FINRA hearing.

Potential Outcomes: Dismissal, Sanctions or…Appeals

After both sides have rested their cases, the panel will deliberate and ultimately issue a written decision. There are a few potential outcomes:

Dismissal: If the panel finds FINRA’s enforcement team failed to prove you violated any rules, you walk away scot-free. A complete victory.

Sanctions: More likely, the panel will find some violations occurred. In that case, they can impose sanctions like:

  • Monetary fines (which can reach six or even seven figures)
  • Suspensions from acting as a broker for months or years
  • Permanent bar from the securities industry
  • Orders to take additional compliance training
  • Censures (official reprimands)

The sanctions can range from relatively minor to career-ending, depending on the severity of the violations.

Appeals: If you’re unhappy with the outcome, you do have the option to appeal the decision to FINRA’s National Adjudicatory Council. And if you’re still dissatisfied after that, you can seek review from the SEC itself, and ultimately the federal appeals courts.But appeals can be an uphill battle and are no guarantee of success. Having a seasoned securities lawyer who can identify and capitalize on any errors in FINRA’s ruling is crucial.

Why Hiring an Experienced Securities Lawyer Matters

As you can see, successfully defending against a FINRA enforcement action requires meticulous preparation, mastery of complex securities regulations, and tenacious advocacy skills.That’s why having a law firm that specializes in securities enforcement defense can make all the difference. Some key advantages:

Deep FINRA Experience: Lawyers who have been through this process dozens of times know the ins and outs. They can anticipate FINRA’s tactics and positions, while avoiding rookie mistakes.

Proven Courtroom Skills: You need an attorney who can forcefully cross-examine witnesses and deliver a compelling case to the panel – without going overboard and alienating them.

Robust Resources: Defending against FINRA is an immense undertaking that requires substantial manpower and resources to handle the voluminous document requests, data processing, and more.

Understanding of Nuances: Securities laws and FINRA’s rules have many nuances and gray areas. An experienced lawyer knows how to argue those ambiguities in your favor.

Objectivity: When your career and livelihood are at stake, it‘s easy to make rash decisions out of panic or anger. A good lawyer can provide objective counsel to protect your interests.The right securities defense firm can mean the difference between a dismissal or minor sanctions, versus a career-altering punishment. Don’t leave it to chance – get a tenacious legal team in your corner from day one.

What to Expect From Your Securities Lawyer

Once you‘ve engaged counsel for your FINRA enforcement matter, what can you expect? An attentive, communicative partner who will:

Thoroughly Review the Case: Your lawyer will pore over every detail of the allegations, evidence, and potential defenses. Expect them to ask you lots of questions to gain a comprehensive understanding.

Devise a Strategic Defense: Based on that review, they‘ll formulate a tailored legal strategy and discuss your options – whether to pursue settlement negotiations or take it to a hearing.

Gather Evidence Aggressively: If going to a hearing, your lawyer will spearhead an exhaustive process to obtain all records, data, correspondence, and witnesses that could bolster your case.

Forcefully Advocate at the Hearing: Should it reach that stage, your attorney will vigorously cross-examine FINRA’s witnesses, make objections, and present your defense in a clear, compelling manner.

Explore All Appeal Options: Even if the initial outcome is unfavorable, a skilled securities lawyer will leave no stone unturned in identifying grounds for an appeal.

Keep You Informed: Throughout this entire process, you should expect frequent updates and opportunities to discuss strategy. This is your career at stake – you deserve to be kept in the loop.

Provide Pragmatic Advice: Your lawyer’s role isn’t just to act as a mouthpiece, but to offer candid counsel on the wisest course of action, even if it’s not what you want to hear.

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