If you have landed on this article, most likely because you probably just received a letter from FINRA via certified mail that states, “You are notified that the FINRA office is conducting an inquiry to determine whether violations of the federal securities laws or FINRA, NESD, New York stock Exchange, MSRB rules, have occurred.”
In the following paragraph, you’re being urged to submit a number of papers, respond to a number of queries, and/or provide on-the-record testimony to FINRA employees as required by FINRA rule 8210.
The chances are you’ve never received or seen one of these letters before, and it can be very intimidating and cause a lot of anxiety.
Robert W. Pearce, a Florida based securities lawyer with a practice that includes representation of broker-dealers and financial advisors answers one of the more frequently asked questions: What is a FINRA 8210 letter?
My name is Robert Pearce. My guess is, you’re probably viewing this video because you probably just received a letter from FINRA via certified mail that states, “You are notified that the FINRA office is conducting an inquiry to determine whether violations of the federal securities laws or FINRA, NESD, New York stock Exchange, MSRB rules, have occurred.”
In the next paragraph, you’re being requested, pursuant to FINRA rule 8210, to supply a slew of documents, to answer a slew of questions and/or possibly give on-the-record testimony to FINRA employees.
Then you read the warning immediately there under. It says that you are obligated, under FINRA Rule 8210, to respond to the request fully, promptly and without qualification and any failure on your part to satisfy these obligations could expose you to sanctions, including a permanent bar from the securities industry.
Well, to a FINRA representative who’s never seen one of those letters before, it can be very intimidating and cause a lot of anxiety. And so, at this point in time, you need to hire an attorney, an attorney knowledgeable of FINRA Defense, an attorney that has handled these 8210 letters. Because, you are indeed required under 8210 to do all those things that FINRA just warned you about.
Now, the rule, in terms of documents and questions that they can ask you in writing or ask you in an OTR examination, allows them to do almost anything they want. They can make inquiries into your outside business activities. They can make inquiries into private securities transactions with respect to your clients’ accounts. If you’re owned-and-operated broker dealer, they can inspect almost any book and record that you keep and maintain at the organization. The inquiry is very broad, because there is a rule, Rule 2010, that allows them to investigate violations of commercial honor and just and equitable principles of trade, which can include almost any business activity. They can ask you to produce almost any type of document relating to your personal financial condition. If you don’t have these records, like your tax returns, they can compel you to go to your accountant and retrieve them, if you still control that account and have access to him or her and get those records.
You’re probably asking yourself, “Why did I get this letter?” The most common reasons why you receive a FINRA 8210 letter is the information that’s filed on form U4’s and U5’s by your broker-dealer or employer or your former employer, such as customer complaints, arbitration awards, final judgments, more importantly and most commonly, terminations of employment.
If you’re terminated from employment, being discharged with cause or without cause, primarily those that are discharged with cause or you’re permitted to resign while you are under investigation for violation of securities laws or FINRA rules and regulations, these are the types of events that trigger these 8210 letters. Every one that’s filed, every time a U4 is amended or a U5 is filed, it’s screened and it’s reviewed and someone sorts the letters and decides, “Well, we’re going to follow up on this with an 8210 letter.”
The thing that you should do or should not do, and first let me start with what you should not do, you should not, you must not ignore that letter. If you ignore that letter and you don’t respond, first, you will be suspended. You’ll be given a notice that you’re suspended. Then, if you don’t comply with the letter after that, you will be permanently barred, simply for not cooperating. If you decide that you want to assert your privilege against self-incrimination and not respond, you will be barred from the industry. So you need to have an attorney advise you at this point in time. It’s very, very important for you to have a FINRA defense attorney represent you.
So what do we do when a client comes to us with an 8210 letter? First of all, having seen many of these before, we know the offices. We know the attorneys. We know who the investigators are. We determine on our own, what level is this? How serious is this? Is this just an initial inquiry? Is this just, “Well, let’s just see what we can find out inquiry”? Or is this something that’s being initiated by an enforcement attorney? The higher the level of the enforcement attorney who writes this letter, the more serious we know it is. We investigate. We try to determine the trigger. Was it a customer complaint? Was it a FINRA surveillance? Was it a tip? Was it a part of a whistleblower program tip? Was it a referral from an agency? We do this in communicating with the FINRA investigators and attorneys involved in sending you the 8210 letter.
We then try to gather the relevant information and make sure that you respond directly, and not provide more information that’s required so you don’t expand the investigation. Many times, brokers just turn over everything they have without an attorney, and what was a minor investigation turns into a full-blown investigation and disciplinary hearing.
We evaluate what’s necessary to be produced and only produce what’s necessary unless we’re convinced that we can persuade the investigator or the FINRA attorney very early on in the investigation to go away by providing a detailed response. This occurs rarely, but we do do it!
This is the first stage of a FINRA investigation, and hopefully, the last because, you want this to go away! Things only get worse if it continues beyond an 8210 letter. That’s why you need an attorney, a FINRA defense attorney, like the ones at our law firm, to represent you in these investigations.