We are experienced in representing securities professionals when they become involved in an investigation or enforcement proceeding.  These investigations and enforcement proceedings may be initiated by the United States Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) or state regulators, such as the Pennsylvania Department of Banking and Securities.

Among the services we provide is the representation of advisors and brokers when the SEC or FINRA commences an investigation and requests, through the issuance of a subpoena, that the professional produce documents and/or submit to an on-the-record (OTR).  During an OTR, the professional is required to appear at the offices of FINRA or some other location and provide testify under oath concerning the matters being investigated.  If confronted by such a proceeding, it is critical for the securities professional to engage experienced counsel to navigate the process and ensure that the professional’s rights are fully protected.  If the case proceeds without a negotiated settlement, a regulatory hearing may occur before an administrative law judge and may have serious, potentially criminal, implications for the professional.

When FINRA commences an investigation, it does so under FINRA Rule 8210.  Under that rule, the targeted firm or broker is subject to significant legal obligations and penalties for failure to comply can be severe.   Most investigations begin with a records request under Rule 8210(a)(2), with the rule broadly authorizing FINRA to inspect and copy the books, records and accounts of a broker or firm “with respect to any matter involved in [an] investigation, complaint, examination or proceeding that is in such member’s or person’s possession, custody or control.”  Brokers and firms must take all appropriate steps to ensure compliance with such a request, including the preservation of all potentially relevant documents, including electronically stored information.

The next step in a FINRA investigation is often an OTR under FINRA Rule 8210(a)(1).  The importance of properly preparing for the OTR cannot be understated, as the broker will be required to testify under oath, with the attendant consequences of allegedly inaccurate testimony, and FINRA may share the testimony with federal authorities if it chooses to make a criminal referral.

Following an OTR, the investigation can proceed in various directions.  It is critical for a securities professional who is subject to a FINRA investigation to retain experienced counsel who understands the process and can take the necessary steps to bring the proceeding to a successful conclusion.