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 an AWC?
My name is Robert Pearce. An AWC is an acronym for a FINRA agreement known as an Acceptance, Waiver, and Consent agreement. It’s FINRA’s version of a settlement agreement. But, it’s unlike settlement agreements in the lawsuits that you may be accustomed to, in four ways.
First and foremost, it’s not confidential. It’s a public document and published on the internet and it will be there forever, so long as FINRA exists and maintains it on its system. It’s also published in FINRA quarterly and monthly reports on disciplinary proceedings. It’s also published on your CRD and BrokerCheck. If you enter in an AWC with FINRA, it remains on your CRD and your BrokerCheck forever. You can’t get that AWC expunged.
WATCH: How to protect your CRD or Brokercheck record
Another way the FINRA AWC is different from a settlement agreement, is that it’s an agreement with a regulator that contains factual findings. Now, you’ll see in that agreement that you accept those findings. You agree to those findings, without admitting or denying the allegations for the purposes of other proceedings, other than with FINRA. According to FINRA, so long as
FINRA has this on your record and if they bring a future action against you, you can’t deny the findings made in the AWC. The findings in this AWC, if you have another action filed against you, can be used against you to impose a greater sanction.
On the other hand, if someone other than FINRA tries to use the AWC as evidence in an arbitration proceeding or court proceeding, some arbitrators or courts will say, “Well, that is a settlement agreement; it’s made without admitting or denying and inadmissible as evidence.” But there are many courts and many arbitrators that will say: “No, maybe certain parts of it are considered to be settlement, relative to the sanctions, for example, but these are regulatory findings. These findings were made after a long investigation and there is a presumption that those findings are correct and they’ll be admitted into evidence.”
Regardless of what can be done legally with that AWC in the future in other cases, there’s a public stigma that’s forever attached to that agreement. The public will always be able to see the AWC, read the findings, and probably think that you did those horrible things that FINRA wrote about. The important thing when you’re negotiating an AWC is to know that the findings are generally the most negotiable term in the agreement. Yes, FINRA has to state enough to make a claim for a violation, but you can generally, with a good FINRA defense lawyer, negotiate the findings in the AWC to soften them. If you can’t and you absolutely think they’re dead wrong, you can refuse to sign the AWC and go to the disciplinary hearing.
The third way in which in an AWC is different from an ordinary settlement agreement is that you waive future rights. You waive all your due process rights in an AWC once you sign it. You can’t contest it in the future. Like I said before, you can’t deny it in FINRA proceedings. You can’t file any appeals to the National Adjudicatory Council, or the Securities and Exchange Commission, or the District Court of Appeal. You waive all those rights.
Last, the C in AWC is you consent to the sanctions. Now the sanctions are the punishment. The sanctions could be anything as innocuous as an undertaking, an agreement that you won’t do something again in the future. FINRA can censure you, say that you violated this rule but not issue any other sanction, just censure you, issue a public admonishment that you violated this rule, in its opinion, and warn you not to do it again. You can be fined and you have to pay that fine before you can begin to work as a broker in the industry, once you’ve been fined. You can be suspended and you have to serve that suspension before you can go back and work. Or you can be permanently barred. Once you’re permanently barred, you’re barred unless you negotiate in that AWC, a right to reapply, and that’s rarely done, but it can be done with the right attorney.
Most investigations conclude with a FINRA AWC. That’s because most attorneys and most litigants recognize that the FINRA disciplinary proceeding is a kangaroo court and the likelihood of success is daunting. So again, when you face a FINRA investigation, receive a FINRA Rule 8210 Letter, give On-The-Record (OTR) testimony, you need to have a FINRA attorney on your side, a FINRA defense attorney. Someone that, the very least, is skilled enough to negotiate an AWC for you as I described and we’re here for you if you need our help.