I’m FINRA Licensed and Under Internal Investigation: What Should I Do?

“My broker dealer wants me to meet with its lawyers.”  This is the start of a FINRA registered representative’s worst nightmare.

Your heart is pounding and your head starts to race.  “Why me?” “What do they want to know?”  “What could I have done?”  “Are they going to ask me about the XYZ account?”  “I’m sure that I did everything right and by the book, didn’t I?”

If you did do something that may have been a violation of the law, FINRA Rules, or the firm’s manual, you will likely begin to think about the potential punishment (fine, suspension, termination) even before you hang up the phone or close the door to your office.  Once an investigation into your conduct starts, you are not able to leave with a “voluntary” termination, but at best would be “permitted to resign during a firm investigation.”

Ultimately, no matter where your mind goes at first, it will almost certainly arrive at the same question eventually: “Do I need a lawyer?” and “If I get a lawyer, can I bring them with me when I meet with the firm’s lawyers?”

The answer to these questions is almost always a “Yes.”  Retaining counsel is generally a good idea in these situations for a number of reasons.

A broker-dealer’s lawyers getting involved is usually a sign that there is a problem.  You may be a part of the problem, a scapegoat for larger supervisory issues, or you may be an innocent by-stander or witness.  Though it can be difficult to know for certain, retaining an experience securities attorney and having an open and candid conversation with them can go a long way toward helping you determine which position you are most likely in.  Having a good idea of which position you are in (target or witness) will help you determine which approach to take before meeting with the firm’s lawyers.

While honesty is always the best policy, it is critical to know if your firm’s lawyers are “friend or foe.”  The cardinal rule for speaking to your firm’s attorneys is to ALWAYS REMEMBER YOUR FIRM’S LAWYERS REPRESENT THE FIRM, NOT YOU.  Therefore, it is possible that your firm’s interests are not aligned with yours, meaning your firm and/or your supervisors may be looking to throw you under the proverbial bus, thereby avoiding blame themselves.

If you did do something against the rules, you need to remember that there is a very real possibility that your firm may turn over some or all of the findings of their internal investigation to either the SEC, FINRA, or both.  So, if you may have committed a violation, you need to treat your conversation with the firm lawyers much in the same way as if you had received an SEC subpoena or a FINRA 8210 request.   This is going to be the first step in your defense.

Ultimately, you need to look out for yourself.  If you did nothing, you should make sure you are not the scapegoat for something you did not do.   Or, if you did commit a violation, you need to ensure that you are well represented throughout the whole process and present a cogent defense, as well as manage your exit from the firm in the best way possible.


If your firm has requested that you speak to in-house and/or outside counsel, you should contact the securities lawyers at Malecki Law for a free consultation at (212)943-1233.  The attorneys at Malecki Law have extensive experience representing clients in formal regulatory and internal investigations, and are here to help.

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