Pursuant to Rule 8210, the Financial Industry Regulatory Authority (FINRA) has the power to review books, records, and accounts of any member or registered person in connection with investigations, complaints, examinations, or proceedings. As a result, you generally cannot ignore a request from FINRA.
What happens after the request?
The details depend on the circumstances. But in a recent example FINRA sent a request to a broker to testify about the circumstances that led to the termination of his position with Morgan Stanley. Morgan Stanley claimed it terminated the broker due to a long-term dispute over production credits.
In this type of situation, a broker generally has two options: move forward with the investigation or agree to FINRA’s proposed consequences.
Instead of moving forward with the investigation, the broker in this example chose to attend the proceeding, refused to admit nor deny the allegations, and accepted the regulatory authority’s lifetime industry bar. It is important to note that the probe that led to this case resulted in allegations against at least twenty brokers. The allegations mostly involved concerns that brokers failed to share credit with retired brokers. In addition to the frustration that came with dealing with an investigation on its own, many of the brokers in these cases had evidence to support that either the retired broker or the supervisor instructed them to take sole credit for the transfer at issue. This provides an example of how following orders from superiors can result in scrutiny and highlights the need to keep careful records.
The main takeaway from this piece is that it is important to take the matter seriously. It is also good to know that you do not have to deal with it on your own. You can (and should) hire legal counsel to review the matter and discuss your options. Having an advocate on your side can help to better ensure your rights are protected throughout the process.