The Trappings of the 8210 Inquiry and Mistakes Advisors Make

From the Desk of Jim Eccleston at Eccleston Law LLC:

FINRA Rule 8210[1], the Provision of Information and Testimony and Inspection and Copying of Books is an investigative tool FINRA uses to investigate potential violations of securities rules and regulations.  When a registered person/financial advisor receives a letter from FINRA referencing Rule 8210, it is not a casual letter to be taken lightly.  If FINRA determines that securities rules and regulations have been broken, they will commence proceedings that can result in fines and/or a suspension or bar from the securities industry.  All too often, when financial advisors draft their own response to FINRA, the result is regulatory hot water.  If you receive an 8210 inquiry, seek legal counsel.  The following are some common mistakes we see all too often:

Problem No. 1.           A financial advisor’s firm (i.e. compliance) will respond on behalf of the financial advisor, or other registered person.

Explanation:    This is never a good idea.  More often than not, the firm’s interests are different from that of the financial advisor.  If there is an opportunity for a firm to throw an advisor under the proverbial bus to detract from their own regulatory failures (e.g. failure to report, failure to supervise to name a few), the firm will do it.  Do not rely on the firm to draft the response on your behalf.  If the inquiry is addressed to the financial advisor, it is for the financial advisor to respond to. 

Problem No. 2.           Not having legal counsel.

Explanation:    Many advisors simply are not aware of the multitude of securities rules and regulations that they may have run afoul of.  A financial advisor may inadvertently admit to wrongdoing if he/she responds to the 8210 inquiry on their own.  A financial advisor may say too much, say too little, or produce documents which could implicate the financial advisor in violations of securities rules or regulations.  Seek legal counsel.

Problem No. 3:          Agreeing with the premise of the inquiry.

Explanation:    Often times, an 8210 inquiry is based on a false or faulty premise provided to FINRA by the financial advisor’s former firm, tainting the entire inquiry.  Experienced securities counsel can draft an appropriate response in such a scenario.

Despite its casual letter form, an 8210 inquiry from FINRA is not to be taken lightly.  Should you receive one, seek competent securities counsel right away.

[1] FINRA Rule 8210 provides, in relevant part:

(a) Authority of Adjudicator and FINRA Staff

For the purpose of an investigation, complaint, examination, or proceeding authorized by the FINRA By-Laws or rules, an Adjudicator or FINRA staff shall have the right to:

(1) require a member, person associated with a member, or any other person subject to FINRA's jurisdiction to provide information orally, in writing, or electronically (if the requested information is, or is required to be, maintained in electronic form) and to testify at a location specified by FINRA staff, under oath or affirmation administered by a court reporter or a notary public if requested, with respect to any matter involved in the investigation, complaint, examination, or proceeding; and

(2) inspect and copy the books, rords, and accounts of such member or person with respect to any matter involved in the investigation, complaint, examination, or proceeding that is in such member's or person's possession, custody or control.

[1] FINRA Rule 8210 provides, in relevant part:

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities Fraud, Compliance Protection, Breach of Fiduciary Duty, FINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston,