FINRA Investigations

FINRA 8210 Investigations, Inquiries, & Exams

Bartell Law defends financial advisors in FINRA 8210 Investigations and Inquiries (FINRA Rule 8210 letters), FINRA Exams, FINRA Disciplinary Actions, and FINRA Form U4 and Form U5 disclosure matters. The firm has extensive experience defending FINRA investigations into FINRA Form U4 disclosure violations, employment terminations (FINRA Form U5), customer complaints, criminal charges, sales practice violations, and violations of internal firm policy.

If you received a letter from FINRA, an experienced FINRA defense lawyer can provide valuable advice and assistance in responding to FINRA and navigating the process. There is no need to go it alone. An experienced FINRA lawyer can help you with all aspects of the process: (1) helping you provide the requested signed, written statement in response to the allegations; (2) researching the FINRA sanctions guidelines and published FINRA and SEC decisions to develop legal defenses; (3) preparing you for a FINRA On-the-Record interview and attending as your counsel; (4) negotiating a settlement through Letter of Acceptance, Waiver and Consent; and (5) answering a disciplinary complaint and litigating a FINRA disciplinary hearing. 

An inquiry letter informs the advisor that FINRA is "conducting an inquiry" into some matter. The inquiry letter typically asks the advisor to provide a signed, written statement concerning possible violations of the securities laws and rules. It often asks the advisor to answer a list of specific questions and to provide copies of any correspondence or memoranda relating to the matter. The request is made under FINRA Rule 8210, which requires advisors to provide information and documents, and also authorizes FINRA to take the advisor's testimony under oath in an "on-the-record" interview. Failing to comply with an inquiry letter under Rule 8210 can lead to sanctions, including hefty fines, suspensions, or a bar from the industry. 

FINRA sends out inquiry letters in a variety of circumstances. Three common examples are:

• Terminations, FINRA Form U5. When an advisor voluntarily resigns, was discharged, or was permitted to resign after being accused of (1) violating investment-related statutes, regulations, rules or industry standards of conduct; (2) fraud or the wrongful taking of property; or (3) failure to supervise the broker-dealer will report the specific allegations on Form U5 (in the disclosure reporting pages). FINRA will send an inquiry letter to the advisor requesting a signed, written statement responding to the allegations reported by the broker-dealer. FINRA will typically also ask specific written questions about the circumstances of the termination and request related documents. For an advisor who was recently terminated, such a letter can be an unwelcome surprise. It can also be a significant burden and distraction for an advisor scrambling to secure new employment. By managing the process, an experienced attorney can reduce the stress on the advisor, help the advisor avoid common pitfalls, and help prevent the situation from escalating unnecessarily.

• Arbitrations and Regulatory Actions. This includes customer arbitrations with allegations of conversion, unsuitable investment recommendations, fraud and misrepresentation, unauthorized trading, breach of fiduciary duty and other substantial investors claims. It also includes actions by government authorities such as the Securities and Exchange Commission, the Commodity Futures Trading Comission, state securities regulators, state attorneys general, and foreign securities regulators.   

• Disclosure Failures, FINRA Form U4. This includes failing to make required disclosures to FINRA through a Form U4 amendment. Common examples include failures to disclose:

  • Criminal Charges and Convictions;

  • Liens, Bankruptcies, and Compromises with Creditors;

  • Customer Complaints;

  • Outside Business Activities; and

  • Regulatory Actions.  

You are entitled to legal representation in responding to an inquiry letter. A trained attorney can guide you through the process, assist you in drafting responses and ensure the process proceeds as smoothly and quickly as possible. A trained attorney can also help you avoid some of the common pitfalls that advisors frequently encounter when attempting to represent themselves, and where appropriate, can help prevent the inquiry from evolving into a formal investigation and a disciplinary action. 

Bartell Law has experience with a wide variety of different securities regulatory matters, including, for example:

• unauthorized trading;

• selling away;

• failure to supervise unsuitable transactions;

• unauthorized outside business activities;

• discretionary trading without written authorization;

• deceptive conduct in an internal investigation;

• receipt of undisclosed gifts from clients;

• books and records falsification;

• signature cut-and-paste and alteration allegations;

• improper document notarization;

• complex retail structured products issued by broker-dealers;

• the sale and structuring of collateralized debt obligations;

• state false claims act violations;

• the sale and marketing of auction rate securities and the operation of the auction markets;

• the 50-state settlement of auction rate investigations sponsored by the North American Securities Administrators Association;

• broker departures, client information privacy and Regulation S-P;

• broker-dealer sales incentives and contests;

• unfair customer account fee structures;

• brokerage cold-calling practices;

• state and federal do-not-call violations;

• investor privacy policies and procedures.

• Exam cheating; C.E. Credit matters

FINRA Disciplniary Hearings

When the investigator has completed reviewing the advisor's response to the inquiry letter (and the response of any third-parties), the investigator may decide to refer the matter to "Enforcement." The Enforcement Division at FINRA is staffed with attorneys and investigators with authority to investigate the matter further and bring a disciplinary action. Enforcement may send out additional requests for information and documents and may require that the advisor appear and provide testimony under oath in an on-the-record interview.

FINRA has broad authority to investigate member firms and their associated persons. FINRA investigations can be triggered by a variety of sources including customer complaints, lawsuits and arbitrations, surveillance reports, examination findings, anonymous tips, criminal matters and terminations. FINRA will analyze the evidence and law and determine whether a violation appears to have occurred. If the violation is minor, and there is no customer harm or detrimental market impact, the matter may be resolved with an informal disciplinary action, a so-called "cautionary action." Cautionary actions are not considered formal discipline and are not publicly reported.

With more serious matters, FINRA staff may recommend formal disciplinary action. In such cases, FINRA will call the advisor to describe the proposed charges and the primary evidence supporting the charges. This is called a "Wells Call." The advisor is usually given an opportunity to submit a writing (called a "Wells Submission") arguing why formal discipline is not appropriate. The Wells Call is followed by a letter from FINRA confirming that the call was made; this is called a "Wells Notice." Receipt of a Wells Notice is a reportable event on Form U4. The respondent may also elect to enter into settlement discussions with FINRA to resolve the matter. This involves negotiating a settlement agreement, which may include agreeing to a fine, a period of suspension or both. The settlement is formalized in a "Letter of Acceptance, Waiver and Consent," which is a publicly-available document describing FINRA's factual findings and any sanctions imposed. Matters that are not settled go to hearing before the Office of Hearing Officers, where the matter is tried before a FINRA hearing officer and two industry panelists. The advisor has certain appellate rights from any adverse decision.

FINRA investigations and disciplinary actions also raise issues of "statutory disqualification." More specifically, certain types of events can cause an associated person to lose their ability to associate with a member. This list of triggering events is long, but they include, for example, making false statements to FINRA during a FINRA investigation and willful violations of securities laws and rules.

If you are involved in a FINRA inquiry, FINRA investigation or a disciplinary hearing, you may benefit from having experience counsel assist you. Experienced counsel can help examine evidence, draft legal arguments, accompany you at regulatory interviews, negotiate with the regulators, draft settlement agreements, and conduct disciplinary hearings on your behalf. Counsel can also help you understand the process, make it more manageable, and maximize your ability to resolve the matter as quickly and beneficially as possible.