I have watched enough medical shows over the years, from the awesome St. Elsewhere to the never-ending Grey’s Anatomy, to have heard umpteen times that the Hippocratic Oath includes the admonition that doctors “do no harm.” While, apparently (according to Google, anyway), Hippocrates may or may not have ever actually said that, everyone gets the
Examination
Barclays AWC Teaches Important Lessons About The Price To Pay For Not Heeding Exam Findings
There is no question in my mind that the quality of FINRA examiners is a bit uneven. Some are smart and insightful and helpful; others are, well, not. Most of the time, they do know what they’re talking about. That means the opportunity to make legitimate arguments against exam findings can, at least sometimes, be…
Securities Regulators In The Age Of Covid-19
Thanks to Blaine not only for attending this conference, but for actually listening, so he could share with you the insights he gleaned from the local securities regulators here in Chicago. – Alan
While much of the broker-dealer world has been trying to figure out how to protect the financial welfare of their customers, in…
Two (More) Scary Tales Of FINRA’s Abuse Of Rule 8210
Once again – twice again, actually – FINRA has used Rule 8210 as a cudgel, beating the poor unfortunate recipients of the “request” for documents and information into submission, or worse. This has got to stop.
The first case is a repeat of one I blogged about earlier this year, and it involves the use of 8210 to demand that a computer be produced to FINRA so it can make a complete copy of the hard-drive. Here’s what happened. At 8:45 am on Wednesday, I received by email an 8210 letter, telling me that my client had to provide “immediate access to FINRA staff to inspect and copy” “[h]ard drive(s), Google drive(s), and USB thumb drive(s).” The letter also included this threat/promise; note that the use of bold and underlining appears in the original, just to ensure these words are not skipped:
If your client fails to provide immediate access to FINRA staff of the requested information, they may be subject to the institution of an expedited or formal disciplinary proceeding leading to sanctions, including a bar from the securities industry.
At 9:00 – 15 minutes later – the examiners showed up at my client’s office and demanded that they be provided the computers so the hard drives could be copied, in their entirety. Now remember from my previous blog post that I have been down this very road before with FINRA. The last time this happened, in the face of essentially the same 8210 letter, my other client elected to produce the computer rather than face an Enforcement action. Despite that, sadly, the matter still eventually ended up as an Enforcement case. At the hearing in that case, I objected to the 8210 request as being unlawful, as it exceeded the scope of the rule (which does not permit computers to be seized and imaged). The Hearing Officer asked me if an objection had been lodged at the time the initial 8210 request was served, and I had to say no. Well, then, ruled the Hearing Officer, you waived your right to object here by not objecting sooner.
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A Glaring Example Of FINRA Dragging Its Feet, Culminating In A Pointless Default Decision
FINRA loves to tout its supposed intent to bring meaningful cases, cases that matter to the investing public, rather than enforcing “foot faults,” as it has been accused of doing over the years. My own experience with FINRA suggests that while it talks a big game, in reality, we all still live in foot-fault city.
I stumbled across this decision recently, and it serves as a good example of two problems that FINRA has. First, FINRA is, at times, maybe most times, hardly the model of efficiency when it comes to promptly bringing cases against perceived bad guys. Second, it reflects how FINRA is still willing to spend its finite resources, in terms of time, manpower, and money, on an utterly fruitless pursuit, resources that anyone would agree – including the FINRA lawyers who brought the case and the Hearing Officer who had to consider the evidence – would have been better spent on something else.
The case started out normally, with FINRA filing an Enforcement action against the broker-dealer in 2017, alleging a number of nasty sounding historical sales practice violations. According to the decision, however, and for reasons that went unexplained, the complaint was filed five years after the exam of the matter was started, and fully four years after the matter was referred to Enforcement. From the defense perspective, that is a long time. A long time for documents to be preserved, for witnesses’ memories to remain intact. Remember: FINRA is not restricted by statutes of limitations (like the SEC, or like civil litigants), but it is still supposed to be procedurally fair to respondents, and one aspect of that fairness is not waiting too long to file a complaint.
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FINRA Touts The Fact That Its Examinations Need Not Be “Fair”
While I feel I have enjoyed as much success defending respondents in FINRA Enforcement matters as anyone, I am still careful to caution clients who are unwilling to consider any settlement that going toe-to-toe with FINRA at a hearing is always a difficult proposition, even though they are presumed innocent and FINRA bears the burden…
The SEC Released A Risk Alert On Reg S-P, a/k/a How To Avoid A $1 Million Penalty
I am hardly saying that SEC Regulation S-P is the sexiest of regulations. I mean, has any customer is history actually read one of those exciting statement stuffers that discloses in some dense font a BD’s privacy policy? Likely not, but, nevertheless, it remains that in this day and age, with hacking and phishing and…
FINRA’s 2019 Examination Priorities Letter: Beware, More Of The Same Is Coming
In what has become an annual, but hardly exciting – I mean, it’s not like anxiously awaiting the day that pitchers and catchers report to Spring Training – tradition, with the turning of the calendar to the new year, FINRA has once again released a letter announcing what it deems to be its priorities for…
The Real Lesson From FINRA’s 2018 Exam Findings Report
On Friday last week, FINRA released a report discussing the findings from its 2018 exams, providing what it described as “selected observations” that were deemed to have “potential significance.” Even with that tepid introduction, in theory, this is still a great idea, since anyone in the industry, even so-called “good” or “clean” firms, should welcome…
FINRA Announces Changes To Its Exam Program. Or Does It?
As I am (probably too) fond of reminding people, I was an English major, and pride myself, at least to some degree, on my ability to use words effectively to communicate clearly. I get easily frustrated, therefore, when I read or hear something that was purportedly designed to relate a specific message, but the message…