Getting Ready for an On-the-Record (OTR) Interview: Important Information for Brokers Regarding FINRA Rule 8210
All registered brokerage firms and broker-dealers must adhere to the regulations set by the Financial Industry Regulatory Authority (FINRA). While these rules primarily govern customer-related activities, they also impose obligations for dealing with FINRA during enforcement investigations. https://goo.gl/maps/rkcLATw2SJVqtY3T9 One crucial rule in this context is FINRA Rule 8210, granting FINRA staff the authority to conduct on-the-record (OTR) interviews. Failing to respond appropriately to an "8210 letter" can result in penalties and suspension. Therefore, it is essential for brokers and firms to thoroughly prepare and understand the OTR interview process.
Responding to an 8210 Letter from FINRA
Preparing for an OTR interview is a meticulous process, but responding to an 8210 letter requires specific actions that can significantly impact subsequent stages of the FINRA investigation. Upon receiving an 8210 letter, a brokerage firm or broker should consider the following steps:
Review the Letter with Counsel:
Brokers and firm representatives should promptly review their 8210 letters with legal counsel. Attempting to handle the situation independently can lead to irreversible mistakes. Seeking legal counsel immediately ensures acting upon sound advice and understanding the necessary actions.
Have Counsel Contact FINRA:
https://docs.google.com/drawings/d/1nTeLQNDGOYlE8HWwVfEhHuqWccXh7cnSlUt7KCy3pSw/view After reviewing the letter, the next step is for legal counsel to establish communication with FINRA. This contact aims to initiate a cooperative relationship, even when taking a defensive stance. Collaborating with FINRA staff can often lead to more favorable outcomes given the circumstances.
Decide Whether to Request an Extension:
Upon reviewing the 8210 letters, recipients should assess whether they need additional time to collect, review, and submit the requested records. If an extension is necessary, promptly submitting a good-faith request offers the best chance for approval. https://www.natlawreview.com/article/preparing-record-otr-interview-what-brokers-need-to-know-about-finra-rule-8210
Decide Whether to Negotiate FINRA's Requests:
Recipients must determine whether negotiating the scope of FINRA's requests or the timing and location of an OTR interview is appropriate. If compliance seems unfeasible, burdensome, or unnecessary, presenting a well-reasoned argument and proposing reasonable alternatives may prove effective.
Prepare and Submit Responsive Documents:
With a clear understanding of the requirements, brokerage firms and brokers can focus on complying with FINRA's record requests. Careful examination of relevant repositories and storage media is crucial while preserving the attorney-client privilege is of utmost importance. Maintaining a strong attorney-client relationship throughout this process is essential.
Preparing for an On-the-Record Interview with FINRA
https://drive.google.com/file/d/1oClkokZovPtKYVhgzqnGv6hlvAc4lDTZ/view?usp=sharing Rule 8210 provides for OTR interviews, which are unrestricted by time limits and often span multiple days. Thorough preparation is crucial to navigating these interviews successfully. Key steps in preparing for an OTR interview include:
Understanding the Scope and Nature of FINRA's Investigation:
Witnesses must have a clear understanding of the specific allegations and the broader scope and nature of FINRA's investigation. This includes potential violations of FINRA Rules and federal securities laws.
Anticipating Potential Questions and Preparing Responses:
Devote significant time to anticipate potential questions and prepare well-thought-out responses. Collaborate with legal counsel to align these responses with the review of responsive documents according to the 8210 letters. https://docs.google.com/document/d/1LIpwwO-M_3FDXJ0o3bbvGvgO-DD6t-wHmSdi1pTlgA0/view
Practicing Prepared Responses Out Loud:
Practice delivering prepared responses out loud, preferably in front of a mirror. This helps ensure clarity, attention to detail, and a confident, non-confrontational tone.
Practicing Responding to Unanticipated Questions:
In addition to prepared responses, witnesses should practice addressing unanticipated questions, both those they know the answers to and those they don't.
Conducting Mock OTR Interview Sessions:
Simulate OTR interviews through mock sessions led by defense firm lawyers posing as FINRA staff. Debrief after each session to address concerns and identify necessary additional preparations. https://sites.google.com/view/thenationallawreview/the-national-law-review
Developing a Strategy for Objections and Attorney-Client Communications:
Create a strategy for counsel to object to questions from FINRA staff and for the witness to seek advice when needed. This ensures that no inadvertent statements are made against the witness's or the firm's interests on the record.
Going Over OTR Interview Day Procedures:
https://docs.google.com/presentation/d/1yqqBUYGq2yPOVJoa7DwkcDYc2Uef8vzghfTCFqB_dVY/view#slide=id.p Script and plan the entire OTR interview day, including meeting locations, pre-interview and post-interview statements to FINRA staff, and details of the interview process. Thorough preparation prevents miscues and demonstrates preparedness to the FINRA staff.
Conclusion
Understanding and adhering to FINRA Rule 8210 is crucial for brokers and brokerage firms. Thoroughly preparing for both the response to an 8210 letter and an OTR interview helps ensure compliance, protect interests, and work towards a favorable outcome. Collaboration with legal counsel throughout the process is vital to navigating the complexities of FINRA investigations effectively.