Representing Brokers in FINRA Investigations into Insider Trading
Contents
- 1 Facing a FINRA Insider Trading Investigation? Here’s What You Need to Know
- 2 What is Insider Trading?
- 3 The FINRA Insider Trading Investigation Process
- 4 1. The Inquiry Letter (FINRA Rule 8210)
- 5 2. The On-the-Record (OTR) Interview
- 6 3. The Wells Notice
- 7 4. Potential Charges and Sanctions
- 8 Why You Need a Dedicated FINRA Defense Lawyer
- 9 Potential Defenses Against Insider Trading Charges
- 10 Insider Trading Investigations Are Time-Sensitive – Act Fast
- 11 Anatomy of an Insider Trading Case: A Hypothetical Scenario
- 12 The Allegations
- 13 Michael’s Response
- 14 Why Spodek Law Group? Unmatched FINRA Defense Experience
Facing a FINRA Insider Trading Investigation? Here’s What You Need to Know
You’re a broker, working hard to build your career and reputation. But, one day, you get a letter from FINRA. It says they’re investigating you for potential insider trading violations. Your heart sinks. This is the stuff nightmares are made of for anyone in the financial industry.But, take a deep breath. We’re here to guide you through this process and protect your rights and career. At Spodek Law Group, we’ve handled countless FINRA insider trading investigations for brokers nationwide. We know exactly what to do to put you in the best possible position.
What is Insider Trading?
Before we dive into the FINRA investigation process, let‘s quickly define insider trading. It’s the illegal practice of trading securities based on material, non-public information about a company. Here’s a detailed overview from the SEC.For example, if you learned from an executive friend that their company was about to be acquired, and you traded the company’s stock before the news went public, that would be insider trading. It gives you an unfair advantage over other investors who don’t have access to that inside information.Insider trading is a serious offense that can lead to heavy fines and even jail time. That‘s why FINRA takes any allegations of it extremely seriously when it comes to brokers and other financial professionals they regulate.
The FINRA Insider Trading Investigation Process
So what exactly happens when FINRA launches an insider trading investigation against you as a broker? Here‘s a step-by-step look at their process:
1. The Inquiry Letter (FINRA Rule 8210)
It all starts with an ominous letter citing FINRA Rule 8210. This is essentially a demand for information and documents related to the potential insider trading allegations.FINRA has broad authority here. They can request any records, emails, texts, trade confirmations – anything they deem relevant to their investigation. And as a FINRA member, you‘re required to fully cooperate and produce what they ask for.This is a critical first step, so don‘t try to handle it alone. Having an experienced FINRA defense attorney to guide your response can make or break your case right from the start.
2. The On-the-Record (OTR) Interview
After reviewing the documents you produce, FINRA will likely request an on-the-record (OTR) interview with you. This is an interview conducted under oath, where you‘ll be grilled about the trading activities and any potential insider information.The OTR is a minefield. Everything you say can be used against you, not just in the FINRA proceedings, but potentially in criminal cases by the DOJ or SEC as well. That‘s why it’s absolutely vital to have legal representation to prepare you and be by your side during questioning.Your attorney can object to inappropriate questions, advise you on what to say or not say, and ensure your rights are protected throughout. Don’t ever go into an OTR alone.
3. The Wells Notice
If FINRA’s investigation convinces them that you likely engaged in insider trading, they‘ll issue you a “Wells Notice.” This outlines the specific charges and violations they intend to bring against you.Receiving a Wells Notice is a pivotal moment. You’ll have the chance to submit a “Wells Submission” explaining why the charges are unfounded or mitigated. This is your opportunity to present a vigorous defense before any formal disciplinary action.Having a skilled FINRA litigator craft your Wells Submission is crucial. They know exactly what evidence and arguments to present to give you the best shot at avoiding charges or minimizing potential sanctions.
4. Potential Charges and Sanctions
If your Wells Submission fails to dissuade FINRA, they can then formally charge you with insider trading and related violations. From there, the case proceeds to a disciplinary hearing before a FINRA panel.The sanctions for insider trading can be devastating for a broker‘s career. You could face a permanent bar from the securities industry, in addition to potential criminal charges, fines, and more.That’s why mounting an aggressive defense at this stage is absolutely paramount. Your attorney will fight tooth and nail, presenting evidence, examining witnesses, and doing everything possible to get the charges dismissed or reduced.
Why You Need a Dedicated FINRA Defense Lawyer
It’s simple. Every single client deserves honesty and white glove service. Every single client should know what he, or she, potentially faces and what the outcome of their case could be – before hiring an attorney.Our lawyers have experience handling FINRA insider trading cases nationwide. We understand the severe consequences you’re facing, and we take that responsibility incredibly seriously. We’ll leverage our expertise to explore every possible defense strategy and protect your career and future.Most law firms implement a cookie cutter strategy in order to fight your case, and save their own time. They don‘t look carefully at your situation – they simply want to move on to the next case. At Spodek Law Group, we leave no stone unturned. We do everything possible to win. Everything we do is focused on getting you results.We understand the difficult and challenges of going through a FINRA insider trading case. If you’re accused, schedule a consultation with our attorneys today. The sooner we get involved, the better we can safeguard your rights and start building your defense.
Potential Defenses Against Insider Trading Charges
While insider trading cases are undoubtedly serious, it’s important to understand that you do have potential defenses available. An experienced FINRA defense attorney will explore all possible avenues, including:
Lack of Material Information
For insider trading to occur, the information you allegedly traded on must have been truly “material” – meaning it would impact a reasonable investor’s decision to buy or sell the securities. If the information was vague or speculative, you may have a defense.
Public Information
If the details you traded on were already publicly available, even if obscurely, that could defeat the insider trading claim. Your lawyer will scour disclosure filings and media reports to establish this.
No Breach of Duty
Insider trading requires a breach of fiduciary duty or other duty of trust and confidence. If you didn’t actually owe such a duty regarding the information, you may have grounds to dismiss the charges.
Lack of Evidence
FINRA has the burden of proving insider trading with substantive evidence beyond just the trades themselves. If they lack sufficient proof you had or acted on inside information, you could prevail.These are just some of the potential defenses. Every case is unique, which is why you need a FINRA litigator who will dive deep into the specifics of your situation to find the best path forward.
Insider Trading Investigations Are Time-Sensitive – Act Fast
One of the biggest mistakes brokers make when facing a FINRA insider trading investigation is waiting too long to get legal help. Every single day and interaction matters from the very first 8210 request letter.The sooner you have a veteran FINRA defense attorney actively protecting your interests, the better your chances of avoiding or minimizing potential discipline. Don‘t go it alone and risk making a mistake that could jeopardize your entire career.At Spodek Law Group, we’re proud to put our nationwide experience and relentless advocacy to work for brokers and financial professionals across the country. Our reputation speaks for itself, with testimonials from clients whose lives and careers we’ve helped save.If you‘re facing the unthinkable – a FINRA insider trading investigation – take the first step today. Reach out for a confidential consultation so we can start forging your defense immediately. Your future depends on it.
Anatomy of an Insider Trading Case: A Hypothetical Scenario
To better illustrate what a FINRA insider trading investigation looks like in practice, let‘s walk through a hypothetical scenario:
The Allegations
Michael is a successful broker at a major Wall Street firm. One day, he receives an 8210 request letter from FINRA. It alleges that six months ago, Michael purchased 25,000 shares of ABC Corp stock. Two weeks later, ABC announced they were being acquired at a 40% premium, causing the stock to skyrocket.FINRA’s letter claims Michael had inside information about the acquisition from a close friend who is an executive at ABC. It accuses him of illegal insider trading based on material, non-public information in violation of FINRA rules and federal securities laws.
Michael’s Response
Understandably shaken, Michael immediately consults the Spodek Law Group. We assure him this is far from an open-and-shut case against him. We get to work immediately, taking these steps:
- Respond to the 8210 Letter
We carefully review Michael’s communications, trading records, and any other potentially relevant documents. After determining what to provide FINRA, we draft a thorough response and produce the requested materials – taking care to include appropriate objections and protect privilege. - Prepare for the OTR Interview
Sure enough, FINRA requests to interview Michael on-the-record shortly after. We spend weeks rigorously preparing him – reviewing his testimony, practicing questioning, and ensuring he understands what he absolutely cannot say that could incriminate himself. - Investigate the Evidence
In parallel, our team launches our own comprehensive investigation. We interview Michael’s friend at ABC Corp and review their communications to establish exactly what the friend knew and told Michael. We also analyze ABC’s own disclosures and media reports to determine how “non-public” the acquisition details truly were. - Craft the Wells Submission
As expected, FINRA eventually issues Michael a Wells Notice indicating their intent to charge him with insider trading. But we’re ready with a forceful Wells Submission poking holes in FINRA’s case theory:
- The information Michael received was vague and speculative – not the clear, “material” details FINRA alleges
- Certain details about the acquisition had already been reported in industry publications, so Michael did not trade solely on non-public information
- Michael’s friend had no knowledge of the actual acquisition plans and thus did not breach any duties by sharing general industry “chatter”
- FINRA has no direct evidence Michael traded because of any inside information – just the circumstantial fact that he made a profitable trade
- Prepare for a Hearing (If Needed)
FINRA decides to proceed with charges despite our Wells Submission. But we’ve laid the groundwork to take this case to a full disciplinary hearing if needed. We’ll rigorously cross-examine FINRA’s witnesses, present our evidence, and fight tooth and nail to get the charges dismissed.
This hypothetical shows the amount of work and preparation that goes into properly defending a FINRA insider trading case. It’s not something to take lightly or attempt on your own as a broker. Having an experienced legal team like Spodek Law Group in your corner can make all the difference.
Why Spodek Law Group? Unmatched FINRA Defense Experience
When it comes to defending against FINRA insider trading investigations, you need a firm with nationwide experience and a track record of success. That‘s exactly what you get at Spodek Law Group.Our founding partner Todd Spodek is a second-generation trial attorney who has handled hundreds of high-stakes cases over his decades of practice. He and our team of veteran FINRA defense lawyers have represented brokers, investment advisors, public companies and others in insider trading matters across the country.We understand the severe implications of these allegations on your career and future. That‘s why we take an aggressive, detail-oriented approach from day one. We’ll explore every possible defense strategy and leverage our deep familiarity with FINRA’s processes and the latest case law.But our representation goes beyond just legal expertise. We prioritize open communication and treating each client like part of our family. You’ll always know exactly where your case stands and what‘s being done to protect you.It’s this white-glove level of service, combined with our nationwide capabilities and insider trading knowledge, that sets Spodek Law Group apart. When your career and freedom are on the line, you need the best defense possible. We deliver it without fail.