FINRA & Regulatory Investigations

 

Investigations from financial industry regulators demand responses that are precise.
Every word is evidence.

Regulatory Investigations

All financial industry regulatory investigations start with a simple inquiry and can end in disclosures, suspensions, fines, and possible barring from the financial services industry.

​Due to the stakes involved at this level, it is vitally important to respond promptly, consistently, and with a high degree of precision. An advisor should always have counsel representing them at every point in this process.

There is no point in your financial advice career that AdvisorLaw will work harder at protecting your livelihood than when you are subject to a FINRA, state, or licensing board investigation (such as the CFP Board).


Formal FINRA Rule 8210 Letter Inquiry

FINRA inquiry letters (routinely called "8210 letters") are the first stage of a regulatory investigation by FINRA. These inquiry letters may reference a Matter No. or a Star No. (Star#XXXXXXXXXXX). These are intended to gather preliminary information that can and will be used against an advisor later in the process if the regulatory body decides that further action is warranted. Rule 8210 is the your first notice that FINRA is building a case.

Formal FINRA Regulatory Investigation

Formal regulatory investigations from FINRA are the second stage, in which regulators decide that the response to the FINRA inquiry letter merits uncovering more detail. Investigations may be opened from various agencies:

  • Financial Industry Regulatory Authority (FINRA)
  • State attorneys general and securities regulators​ ​
  • CFP Board

On The Record Interviews (OTR)

"On The Record" interviews are the FINRA equivalent of a deposition. FINRA requests them so as to put the financial professional under oath and make a transcript of official answers to direct questioning. These interviews are typically employed when the regulatory authority suspects or has evidence to eventually bring a ​formal complaint against the financial advisor.

Acceptance, Waiver and Consent (AWC)

The AWC is the regulatory equivalent of an advisor's plea bargain with the regulators. These are final dispositions of a FINRA action that typically result in a fine and suspension, statutory disqualification (SD), and, in extreme cases, an advisor being barred from the industry entirely. Often times, signing an AWC is not in the best interest of the financial professional.

Statutory Disqualification (SD)

FINRA's Statutory Disqualification may be a component of the AWC and, if so, will have lasting implications. Even when a financial advisor agrees to the underlying accusations of FINRA, SD is always a point which needs to be negotiated. Arguing statutory disqualification is typically founded on the concept of “willfulness.” As such, it can be difficult for the regulator to prove. If one accepts SD, it will be burdensome for that financial advisor to remain employed in the financial industry. If that advisor does plan to remain in the brokerage industry, an MC-400 will be required to be in place to keep tabs on every action taken by the financial advisor moving forward.

Heightened Supervision MC-400

The Heightened Supervision MC-400 is the regulatory equivalent of having a parole officer. The advisor and the advisor's new broker-dealer (now their sponsor) must submit an application detailing all of the ways that the new “heightened supervision” will keep the advisor from breaking any rules moving forward. This plan must be approved and monitored first by FINRA and is not a “guaranteed” option.

Wells Notices

If an advisor does not agree to sign an AWC, yet the regulator continues to believe that rules were broken, the regulator may issue to the advisor a Wells Notice. The Wells Notice advises the individual that the regulator intends to bring a formal claim enumerating the specific rules believed to have been violated. This Wells Notice is the formal starting point for regulatory litigation. Ultimately, the regulator will need to prove their case against the advisor. ​

It is absolutely imperative to realize that, no matter which way these events unfold, each step of the process is set up for the regulator to build a case against you. Admissions at any point on this timeline can possibly upend a future settlement or negotiation and cost a financial advisor their entire career.

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Contact us to discuss AdvisorLaw's Regulatory Defense services.

The consultation is free, and our services were created exclusively for financial advisors
(303) 952-4025