LexInter | August 3, 2022 | 0 Comments

6 Possible Defense Strategies for a FINRA Enforcement Action

FINRA is the Financial Industry Regulatory Authority, a self-regulatory organization established by Congress to protect investors in the equity and debt securities markets. FINRA’s enforcement program handles disciplinary, regulatory, and examination matters. FINRA’s enforcement department routinely handles a very high volume of cases. The average length of time from filing to conclusion is approximately ten months. The number of cases brought by FINRA has been steadily increasing. Investment advisors and brokers must register with the Securities Exchange Commission and the Financial Industry Regulatory Authority (FINRA). To be registered, an applicant must fulfill certain requirements established by law. These requirements are intended to ensure that investment advisors act in their client’s best interests. If an advisor fails to act in their client’s best interest, their registration in the Investment Adviser Public Disclosure (IAPD) database can be suspended or revoked.

Investment advisors face a variety of challenges when it comes to FINRA. These challenges include but are not limited to an increasingly complex regulatory environment and the emergence of new technologies. It is imperative for investment advisors to make themselves familiar with the rules and regulations in order for them to make well-informed business decisions. Business decisions that ultimately impact the advisor’s clients, their business, and their future. It is important for investment advisors and brokers to consult FINRA defense lawyers prior to entering into any relationship involving new or potential clients.

1. Do Not Rely On Your Brokerage’s Defense Lawyer: Get Your Own:

Defense Lawyer

The first step in defending against a FINRA action is to hire an attorney. An attorney can be of great help when it comes to understanding the complexities of a FINRA case. All too often, an advisor will rely on their brokerage’s defense lawyer to explain the potential penalties and time frames associated with a FINRA case. However, this is not always the case. A law firm’s defense attorney is typically paid by the brokerage. Often, a brokerage will pressure its registered representatives to accept the brokerage’s defense lawyer.

2. Read Between The Lines Of The 8210 Letter:

FINRA becomes the custodian of your brokerage’s business records. This includes sales or trades involving securities with previous clients, accounts in which you have knowledge of a violation, books, and records related to various sales, trading, and disciplinary matters, as well as other documents that are relevant to your case. At the same time, you will receive a “letter” from FINRA explaining the nature of the case. This letter is often referred to as an 8210 letter or “Notice of Disciplinary Action.”

3. Do Not Overindulge In Response To The 8210 Letter:

Expert Witness

Often, additional information is needed in order to defend a complaint. A response to FINRA must be specific and detailed in nature. The response must include all requested supporting documentation and additional explanations for each factual allegation made. However, due to the high volume of cases FINRA receives on a monthly basis, it is not uncommon for an advisor to receive an 8210 letter without the benefit of a response from the 8210 letter.

4. Remember That FINRA Is Asking Other Professionals Similar Questions:

FINRA makes decisions to bring cases on a regular basis. These cases are investigated and documented by industry professionals, including but not limited to the National Admissions and Compliance Department (NACS) and the Market Regulation Department (MAR). As such, FINRA will often have all of the answers before an advisor is made aware of an investigation. To defend a FINRA case, it is important for an advisor to remember that FINRA has been asking similar questions from other professionals.

5. Be Proactive If You Want To Settle The Case:

In order to settle a FINRA case, it is important for an advisor to be proactive. However, many advisors are unaware that they even have the option of resolving their case prior to the conclusion of FINRA’s investigation. Once an advisor has been served and a response is due, they are given sixty days to respond and execute an agreement with FINRA.

6. Consider Using An Expert Witness:

Expert Witness

When defending a FINRA case, it is important to consider the many options available to assist in the settlement of a case. Many advisors will contact their broker’s defense lawyer. However, this approach rarely yields positive results and is often perceived as an admission of guilt. Therefore, an advisor should seek other professional help, such as an expert witness or an accountant. An expert witness can be extremely helpful in understanding technical and complex issues that may not be readily apparent to the advisor.


Investment advisors and brokers who wish to continue to provide quality service to their clients must be aware of the challenges they face in the securities markets and the regulatory environment. Advisors are recommended to contact legal counsel for further questions regarding their case or for advice regarding potential defenses. A knowledgeable attorney can review your case and explain the legal system and your rights to you. They can also advise you on how your defense will be conducted.

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