Top Defense Strategies for a FINRA Enforcement Action

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In recent years, the Financial Industry Regulatory Authority (FINRA) has stepped up its enforcement actions against brokers. FINRA is a non-profit organization that regulates more than 70,000 securities firms in the United States and Canada. FINRA’s members believe that brokers who violate the law may lose their licenses, as well as incur significant fines and penalties. Brokers must speak with experienced securities attorneys immediately upon receiving a subpoena or a notice of investigation from FINRA.

If FINRA defense – Financial, or any regulatory authority, conducts an investigation and discovers that you violated the law, the liability you face can be severe. Significant financial penalties and even prison time may be possible, depending on the nature of your offence. To avoid this outcome, it is essential to speak with an experienced securities attorney immediately after receiving a notice of investigation from FINRA.

Do Not Rely on Your Brokerage’s Defense Lawyer: Get Your Own

Many brokers who receive subpoenas or notices of investigation rely on their brokerage’s internal attorneys to defend them. The problem is that most brokerage firms have huge caseloads. Firms typically will not devote much time investigating alleged violations and consulting with you regarding your defense strategy. Moreover, many brokerage industry attorneys limit the scope of representation they will provide. When you do not obtain assistance from your brokerage’s defense lawyers, you must understand that you are solely responsible for providing your own defense. You will also be responsible for the costs associated with obtaining a legal defense. It is important to have an experienced securities attorney who can advise and assist you on key issues surrounding your case.

Read Between the Lines of the 8210 Letter:

When your brokerage firm receives a notice of investigation, usually the first response it will send to you is an 8210 Letter. This letter is what the industry calls a “soft letter” because it alerts you to the fact that FINRA has received some information from one of its members regarding your trading activity. The 8210 Letter typically includes very little detail about the allegations against you and provides no indication about the specific issues of misconduct that have been reported to FINRA. The letter is not a notice of investigation. It is simply an informal notification from your brokerage that FINRA has received information about your trading activity that the firm believes warrants further inquiry. When you receive an 8210 Letter, you should immediately consult with a securities attorney who can discuss the matter with you and provide you with advice regarding how best to proceed.

Do Not Overindulge in response to the 8210 Letter:

After receiving an 8210 Letter, many brokers mistakenly conclude that they have no wrongdoing to be concerned about and that their problems are behind them. This is a disservice to you because the response you provide to the 8210 Letter will very likely be considered by FINRA when it decides whether or not it should open a formal investigation. It is important that you take the time to carefully evaluate all proposed responses and consult with an attorney before submitting your response. During a typical FINRA investigation, every word of your testimony could be used against you. Therefore, it is very important to give careful consideration to your responses.

Remember that FINRA is Asking Other Professionals Similar Questions:

This is not the time to begin by explaining that you have done nothing wrong. You should immediately ask your attorney whether you should mention to FINRA that you have consulted with a securities attorney regarding your case. It is critical to take this step because some brokerage firms will send only a response that does not mention consulting with an attorney. The result is that FINRA will use your statement as evidence that you attempted to hide or misrepresent the fact that you are already represented by an attorney. In most instances, if you have consulted with an attorney, you should mention this to FINRA in your response.

Be Proactive If You Want to Settle the Case:

If you do not want to defend yourself in a FINRA proceeding, it is possible that the firm that has reported the alleged violations to FINRA will settle out of court, and you may be able to avoid any penalties. If this is your objective, you should be proactive in attempting to arrange a settlement rather than hoping and waiting for FINRA’s findings. In some instances, brokerage firms are willing to offer payments without making any charges against your account. However, you should remember that FINRA will determine whether or not to accept such a settlement, and if it does not, it may be difficult for you to avoid any penalties.


To avoid the legal complexities accompanying an investigation by FINRA, it is essential to discuss your case with a securities lawyer immediately after receiving a subpoena or notice of investigation. Your attorney should be able to advise you about how best to proceed, as well as identify potential areas of liability for which you might be at risk. When you retain an experienced securities attorney who can provide solid legal representation and advice, you can better position yourself to not only defend against allegations of misconduct but to resolve your case in the manner that best suits your needs.