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 OTR examination?
My name is Robert Pearce. And the question that’s often asked is, What is an OTR examination? What is an On-The-Record examination? And that’s usually referenced in a letter that’s called the FINRA 8210 letter you may have received. And what happens is that, after the initial letter is sent for documents and information, and FINRA gathers documents, and looks at your answers to the written questions, they may decide that they want to meet with you, they want to interview you, they want to examine you under oath. And they will do that at their offices, or they’ll do it, these days, by remote video conferencing. And they’ll ask you questions in connection with their investigation.
Just like the 8210 letter requests for documents, if you refuse to give testimony, if you refuse to appear, if you ignore the request, you will be suspended. And if you don’t comply after that, you will be permanently barred from the securities industry. Even if you assert your privilege against self-incrimination during the course of the FINRA 8210 OTR examination, and refuse to give testimony, you will be suspended, given an opportunity to testify again, and if you refuse, or assert your privilege against self-incrimination, you will be permanently barred from the securities industry.
Hopefully, at this point in time, you have a securities attorney. Not just a regular securities attorney, but one that’s knowledgeable and experienced in FINRA defense, representing you.
Now, let’s assume you decide to go to the examination and give the testimony. There will be multiple representatives of FINRA. There will be attorneys, there’ll be investigators, and they will each ask you questions. One will follow up on the question of another. It can be intimidating. There could be multiple people trying to ask you questions during this examination at the same time which a reason why you need an attorney to accompany you during the examination.
Your rights during this examination are very limited. If we were in a court case, and this was a formal deposition, I, as your attorney, could make objections. I could instruct you not to answer questions for various reasons. If the questions become harassing, I could stop the deposition and go to court.
Not at FINRA. Not during a FINRA 8210 OTR examination. The people that ask you the questions decide whether the question is a fair one. They decide the scope of the inquiry. They decide whether you have to answer the questions. And, generally, the only time that they will succumb to an objection is on the basis of the attorney-client privilege. In other words, if you speak to me confidentially for advice, and they asked you a question about that, I would assert the attorney-client privilege, and almost always, and if they don’t, I’ll still instruct you not to answer the question, FINRA will back off!
Now, given the fact that these FINRA OTR examinations are essentially one-sided is all the more reason why you need a skilled attorney, skilled in FINRA
Defense, to represent you during the examinations; an attorney who has a relationship with the FINRA investigators and examiners, someone who doesn’t try to antagonize them, who tries to cooperate with them; and in turn, an attorney who gets some concessions from them, a little bit more leniency, a little bit more reasonableness.
Prior to the deposition, or the OTR examination, what we do is we prepare you. We will review the documents that have been supplied, we review the rules that are allegedly being violated, and the type of inquiry that might be made with respect to those rules. We will guide you on how to testify, and how to answer questions.
And, some of the things that we will tell you, I’ll tell you right now, is that you need to listen carefully to each question. You need to take your time. You need to count to three before you give a response. You need to be truthful and accurate. You don’t guess, because guessing will be viewed by them as a fact. And if you guessed wrong, then the fact at the testimony that you gave could be used against you.
If you don’t know the answer to a question, it’s okay to say, “I don’t know.” Or, if you don’t remember something without reviewing a document, you can say, “Do you have any documents that might help me?” or, “I just can’t remember.” Those are acceptable answers to questions. If you don’t know the answer, or if you can’t remember, that’s what you tell the FINRA representative.
Now, once you’ve given a response, and you try to limit your response just to what they asked, if it’s a question that calls for yes or no answer, you give them a yes or no answer. You don’t want to supply them with additional information, because that prompts them to ask additional questions. It can widen the scope of the investigation.
Don’t think that you can talk them out of the investigation by just giving them your version of the story. You’re not there to argue your case. You’re there just simply to answer the questions with the least amount of words possible. Nothing you say will be off the record. If you talk with me, and the court reporter is still there, until the FINRA examiner says, “It’s off the record,” all right, you’re on the record. And they’re recording everything you say.
If you get tired and you need a break, sometimes these OTR examinations last all day, I routinely advise my clients, and instruct them, every hour, we take a break. At least five, ten minutes, so you don’t get all jumbled up and tired. You want to be fresh when you answer the questions. And if you’re sick, we’ll reschedule the OTR examination. You’re too sick to testify, that’s what’s going to happen.
Now, if you realize that you made a mistake, you’ll be given an opportunity at the end of the OTR examination to explain away, or supply additional information, or even change your answer, if you outright made a mistake, and it’s necessary to do so. Again, I remind you, it’s important for you to be truthful. Because, if you’re untruthful, remember you’re on the record, under oath, and this could be viewed as perjury, and perjury is a crime.
Your goal is to get through the OTR as quickly as possible, with the least amount of words possible, and hopefully, they won’t follow up with an enforcement action. And if they do, or threaten you with an enforcement action, hopefully you’ll say enough things that will help us to settle the case for you on your behalf, through an AWC, which I’ll explain in another video.