Here is a really interesting post from Michael regarding those potentially uncomfortable moments when FINRA calls non-complaining customers.  Because FINRA is not the government, it has no subpoena power over these people, and so needs them to cooperate voluntarily.  The problem is that FINRA does an awful job of informing non-complaining customers that they are not obliged to cooperate, and, in fact, often takes full advantage of the misapprehension in customers’ mind that they have no option but to respond to questions.  What to do about that?  While I agree you should never instruct, or even encourage, a customer to blow off a call from FINRA, I do think it’s fair to educate customers about their right to do so, and then let them decide.  – Alan


FINRA has many weapons in its investigative arsenal. It can issue overly broad and unduly burdensome discovery requests that gobble up resources. It can seek to take testimony from so many reps at a firm that it may just be cheaper to pay the piper than your lawyer. It can conduct unannounced visits at an inconvenient time. These armaments – all of which stem from FINRA Rule 8210 – can result in significant expenses. FINRA’s biggest weapon, which, surprisingly, does not stem from Rule 8210, can adversely affect both expenses, through new customer complaints and arbitrations, and revenue, through lost customers and future commissions and fees. I am, of course, talking about calls to non-complaining customers. (Yes, FINRA really makes these calls, and no, you probably do not have a viable tortious interference claim if your customers receive a call.)

FINRA’s Reasons And Method For Calling

Calls to non-complaining customers certainly do not occur in every sales practice exam, but they are not entirely uncommon. FINRA generally reserves these calls: (1) to determine if a possible sales practice or other issue involving one customer is a systemic issue involving multiple customers; (2) to determine if a possible written or other supervisory deficiency resulted in customer harm; or (3) to learn more regarding potentially troubling information about a customer, firm, rep, or security. Before cold calling a customer, a FINRA examiner may send a letter to the customer advising who FINRA is, and asking the customer to call him to discuss her account. The examiner, like a good salesman, then may use the letter to kick-off the call.

The Problems With The Calls

There are multiple problems with FINRA’s calls to non-complaining customers. First, because FINRA is not conducting a customer satisfaction survey, the call, in and of itself, may cause customers to believe there is a problem with their accounts. This is the case even if the examiner appropriately acquits himself by making appropriate disclosures, and by asking only open-ended questions designed to elicit an understanding of a situation, as opposed to asking leading and other questions that imply there is a problem.

Second, examiners are not always entirely candid during calls with customers – most of whom are unfamiliar with FINRA. When a customer receives a call from someone who knows her name and phone number, where she maintains an account, what investments she has made, and who recommended those investments, the customer may reasonably presume the caller works for the government. Many people, of course, believe it to be their patriotic duty to help the government. Examiners may perpetuate this reasonable misunderstanding by not telling customers that:

  • FINRA is not part of the government;
  • FINRA cannot compel a customer to speak with it;
  • It is the customer’s choice to speak or not speak with FINRA; and
  • There are no repercussions if the customer chooses not to speak with FINRA.

Indeed, these omissions are a bit reminiscent of the following phrase from Rule 10b-5(b): “to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.”

Third, there are instances where FINRA examiners have crossed the line during calls with customers. Some examiners become personally invested in exams. They believe that misconduct has occurred, and that they simply need to make enough calls, or push hard enough during calls to elicit the desired statements. Instead of attempting to gather information about what was or was not said, these examiners are aggressively trying to convince a customer that she has been harmed, and she therefore should cooperate with FINRA in an effort to right a supposed wrong, and to ensure the same thing does not happen to others. Examples of this type of inappropriate conduct include: leading questions implying the customer has been wronged, without providing all of the pertinent facts; any question implying FINRA can recover investment losses for the customer; and any question implying the customer should hire an attorney.

How To Handle The Calls

While there are certain things that can be done to attempt to address the impact of calls to non-complaining customers, there is one thing that should never be done: You should not do anything to attempt, or even give the appearance of attempting, to impede FINRA’s inquiry. Such conduct could lead to a new inquiry, and even bigger problems. You should thoroughly document all calls with customers who have spoken with FINRA. These notes can be extremely helpful if the situation escalates. You should be sure to address any questions or concerns that the customers have after speaking with FINRA. You also should consider using your own carefully worded script to advise customers who have been contacted by FINRA about the exam, who FINRA is, their rights, and how you will continue to provide the best possible service. If you have concerns about what an examiner said in a letter or call, or the number of customers being contacted, you should promptly raise your concerns with FINRA management. While FINRA management may not put an immediate end to the letters and calls, they may put in place safeguards to better ensure future communications with customers are more appropriately handled, or they may even limit the number of future letters and calls.

In sum, addressing FINRA’s calls to non-complaining customers is a dicey situation that needs to be handled with care, no matter how angry you may be.