If you spend the entirety of your career as a financial advisor, chances are you’re going to be hit with the dreaded FINRA inquiry, in the form of an Rule 8210 request, at one point or another. No one likes receiving these letters; they’re confusing and have incredibly short deadlines to respond.
Sometimes, a broker-dealer will tell advisors that its own compliance department will craft a response for them. I can’t advise against that more. Your firm’s priority is not to shield you from liability; it’s looking to shield itself. At the end of the day, if your firm is also being investigated, and it has to choose between assigning the blame to you or taking responsibility itself, it will shift blame to the financial advisor, every time.
The typical approach to an 8210 response is to be concise and succinct and avoid giving the investigator too much information. Sometimes, the best move for an advisor is to provide a long narrative of information painting oneself in the best light. It takes experience and discretion to gauge which tactic to use, and it depends upon the situation.
The best result is a no-action letter, wherein FINRA clears you of any wrongdoing. A close second is a cautionary action letter that serves as a warning without any reportable sanctions. The more serious outcome is the scheduling of an OTR — on the record testimony — which is FINRA’s version of a deposition and can result in fines and sanctions.
FINRA investigations are high-stakes, thorny situations. Don’t face them on your own or with an institution that doesn’t actually represent your interests. Instead, have an expert advocate in your corner. Seeking outside counsel from an attorney proficient in enforcement actions and regulatory inquiries from FINRA, the CFP Board, and the SEC is your strongest defense.
Learn more about AdvisorLaw’s Enforcement Defense Services.
AdvisorLaw provides representation against all threats, including FINRA Enforcement, state regulators, the CFP Board, firm compliance, and retail investors. Contact us to discuss AdvisorLaw’s Enforcement Defense services. Our services were created exclusively for financial advisors, and the consultation is complimentary.
Ben Winograd, J.D.
Director of Enforcement