DEFENDING YOUR PROFESSIONAL INTEGRITY
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FINRA Inquiry or Investigation
When FINRA conducts a “sweep” of your broker-dealer, an email will be sent to your compliance department with a list of reps. The list contains CRD numbers and the findings of the “sweep” which either were not present in the CRD system, or do not align with what was present in the CRD system.
Compliance will then send an email to each rep with the findings of the sweep. The email will innocuously ask that you provide an explanation of the discrepancies between the CRD system and your CRD. Seemingly harmless, most reps will respond with information and explanations of why the CRD and public record do not align. Such responses are the starting point for FINRA Member Regulation or Enforcement Division’s formal inquiry or formal investigation. Due to the potential license revocations, suspensions, fines, and sanctions which ultimately result from FINRA inquiries and investigations, I encourage you to engage counsel prior to responding to the request for clarification from your compliance department.
The next meaningful piece of correspondence is a letter to you with an “Examination No. 201612345678” in the “RE:” line. The letter will ask very specific questions about the items uncovered in the “sweep.” In addition it will likely state that it “should not be construed as an indication that FINRA or its staff has determined that any violations of federal securities laws or FINRA, NASD, NYSE, or MSRB rules have occurred.” Should you or a colleague receive such a letter, it must be taken seriously and speaking with an expert attorney promptly is highly advised.
Frivolous Customer Disputes
There are few mysteries when it comes to customers making baseless allegations for the purpose of obtaining a nuisance settlement from a rep’s broker-dealer. But similar to FINRA regulatory actions stemming from inquiries and investigations, even wholly fabricated customer disputes result in a permanent mark on the rep’s CRD and BrokerCheck profile.
How does E&O help me?
How much will it cost me to engage adequate counsel to save my career? This is the question that quickly surfaces for reps facing an inquiry or investigation. Granted, the cost of counsel pales in comparison to the financial devastation caused by a suspension, revocation, and the permanent mark which will be on your CRD and BrokerCheck profile. Nonetheless, many E&O providers provide partial or full reimbursement to help reps cover the expenses associated with defending against allegations and meeting the overwhelming requirements imposed upon reps by FINRA.
If you happen to find yourself in a situation like those described above, and in need of effective and affordable counsel, contacting AdvisorLaw early on is a good decision. AdvisorLaw has a dedicated team of attorneys and staff that exclusively represent brokers caught in the crosshairs of FINRA or a litigious client, or previously marred by disclosures which are viable for expungement from the CRD system. Contact me today if you or a colleague is facing unwanted attention by regulators or angry clients.
See our commentary in InvestmentNews here.
President, Managing Attorney
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Broomfield, CO 80020
Main Ph: (303) 952-4025
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This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.