All posts tagged FINRA regulation

A broker-dealer agent, whether dually registered or a straight-up 7, is obviously subject to FINRA’s enforcement apparatus. Sometimes agents/reps make serious mistakes that prompt a FINRA enforcement investigation. Many such investigations or actions are resolved through an agreed upon resolution commonly referred to as an “AWC.” An AWC is a FINRA Rule 9216 letter of Acceptance, Waiver, and Consent.

The pursuit of an AWC may be a reflexive response for many industry members and their attorneys. A couple of critical issues should, however, be considered. For example, if FINRA has not yet, but wishes to take an on-the-record (“OTR”) exam of you, will an AWC still be available at the end of the exam? Or will you be forced to choose between a lack of candor or making matters worse for yourself in the OTR? Some agents—perhaps retired—are in the envious position of just not really needing to be bothered with the cost and stress of an OTR.

A second issue you should consider before hitting the AWC button is publicity. The AWC will include a substantial statement of facts and FINRA will issue a rather thorough non-negotiated public summary of the AWC terms, factual basis, and sanction. If you are dually registered as an IAR, consider whether the AWC route will destroy the fee-based side of your book. Is it worth retaining your association with a FINRA member in light of the nature and composition of your book? Has your attorney communicated with the states and/or SEC regarding their position on your ticket on the 65 side?

If you firmly believe that an OTR would put you in greater jeopardy than you are already in, or would simply be a waste of your time and money, or that an AWC would throw out the baby with the bathwater—consider a fairly quiet FINRA Rule 9552 exit.

Rule 9552 addresses a regulated person’s failure to provide information to FINRA. The Rule provides for expedited automatic procedures that will allow for a gradual letter-notice transition from warning to suspension to revocation. Unless one decides to challenge one of the automatic stages, there are no pleadings or hearings or press releases. Refusing to sit for an OTR is a violation of Rule 9552.

It is possible your current counsel has only laid out two options for you: an expensive prolonged legal battle with FINRA or an AWC suicide pact. At least consider your third option, Rule 9552. But remember—the 9552 disposition is probably not an option once you sit for an OTR.

January 29, 2014 – NASAA has announced that registration for their 2014 Public Policy Conference is now open.  The conference will be held in Washington, DC on April 8, 2014. David Cosgrove has been going to his conference for years, both as a regulator and as a private attorney.  The conference provides IARs with a great opportunity to interface with regulators on critical policy issues such as the prospect of FINRA becoming the regulator of the investment advisory community. Consider attending the conference for an in-depth look at some key public policy issues facing the investment industry and a networking opportunity. For more information, go to: www