We get calls pretty regularly from financial advisors who've been asked to come in for an OTR, or an on-the-record interview with FINRA. And in an earlier video, we explained what an OTR is. In today's short video, we'll talk about how a FINRA OTR works.
If you're going in for an OTR or an on-the-record interview with FINRA staff, you probably have some questions about how is that process going to work. What's the day going to be like? Where am I going to be? What's going to happen? Typically, what you'll find is that you're going to be going to a FINRA office somewhere across the country. You'll meet in a conference room there at their office and you'll sit across the table from FINRA staff members who are involved in the examination, and they'll be asking you questions. Alternatively, perhaps you'll be facing a video camera and a TV screen and you'll be doing the interview by way of video conference, and the folks who are conducing the interview and asking you questions will be at another FINRA office, somewhere in the country, connected to you through a direct video feed. That video interview process works pretty smoothly, in my experience.
In the interview, you'll find is one, two or maybe three people from FINRA in the room with you, and they'll be asking questions of you and taking some notes. In addition, there will be a court reporter seated just to your left or to your right. And that court reporter will be responsible for swearing you in to tell the truth at the start of the interview and then making a transcript of the interview and maintaining the record.
Once you get sworn in, the FINRA staff is going to go through a litany of procedural instructions and directions about how the interview works. They're going to ask you some background questions to make sure that you're there in response to their request under Rule 8210, they will ask you to confirm that you're not suffering from some type of mental impairment or disability that would prevent you from being able to accurately testify. And then they'll generally get into some background questions about your experience, your education, your overall work experience, and your experience in the securities industry. Eventually, they'll turn to the matters at hand, the big reason why they called you in, to get into the meat of what they are investigating.
Generally, you're going to find that the FINRA staff is going to be acting in a very calm and professional and friendly manner. Yes, they're going to ask you some questions and they may ask you some very difficult questions, but they're going to be nice and professional as they do that. They're not going to yell at you. They're not going to curse at you. They're not going to put the light up over your head like you used to see in the Law and Order-type crime TV shows. Instead, they're just going to sit across the table or across the TV screen and ask you some questions.
Having said that, if you're the witness. Yes, you're going to feel uncomfortable. You're going to feel uneasy. You're going to feel nervous. You may feel a little intimidated and your lawyer – and you should have a lawyer through this process – will work with you to help get you prepared for the interview. Being prepared means that you understand about the day, how it's going to go, who's going to be there, what's going to happen, the types of questions that you're going to face generally, and then also sharing with you some strategies for how to listen to questions and then how to answer those questions. Your lawyer will go a long way in getting you ready to go in and testify before FINRA.
During the course of the interview, the FINRA staff will almost certainly show you some exhibits. They'll give you some documents. They'll label them as an exhibit one, two, three, four, etc., and for each exhibit they use they'll ask you to take a look at the document and then answer questions that they have about those. The nature of what's being investigated, that's obviously going to drive the type of documents that you're going to be presented and asked questions about, and of course, as you work to prepare for the OTR, your lawyer will start talking with you about documents and how you deal with those.
At the end of the interview, when FINRA finishes asking their questions, your lawyer will have the opportunity to ask any additional clarifying questions as well, and you will be given the opportunity to make some kind of freeform statement for the record, if you want to do that. Generally, in my experience with my clients, we generally recommend against making a statement for the record for a lot of good reasons, but your lawyer will work with you and get you prepared for that.
When it is over, the FINRA staff will state that they are done and they're going to go off the record and conclude the OTR. You shake everybody's hands and walk on out. From there, FINRA will continue to do their investigation, follow up on any other steps they have to take, and then write up a report and determine what they're going to do – whether they're going to file the matter without action or take some type of disciplinary action.
The bottom line is this: if you get called in for a FINRA on-the-record interview, you need to treat it as serious stuff. You need to work with experienced regulatory counsel, get prepared, and be ready to go in there and handle that interview, if that's the appropriate thing to do. I've seen many instances where financial advisors have gone in unprepared, and come out of the interview in much worse shape then when they went into the interview. Preparing for the interview with experienced counsel can certainly make or break the OTR.
In our earlier interview discussing FINRA OTRs, we talked about how sometimes it might be best to decline to participate in the OTR, even though that has some significant consequences and will likely result in the financial advisor being barred from the industry. When a FA is barred, it means that he or she would not be eligible to be registered or associated with a broker/dealer again. But in some cases, particularly where there may be some exposure to criminal prosecution, not participating in FINRA's exam may be the way to go. That decision should only be made after consulting with experienced counsel.
If you've got questions about a FINRA examination or have been called to an OTR with the regulator, you should be working with experienced legal counsel. If you need help, I invite you to call us at 678-344-5342. We'd be happy to talk with you for a few minutes and see if we might be able to be of assistance to you.
You'll also find much more information about the FINRA exam and enforcement processes on our blog at www.TheBeckFirm.com. Finally, I invite you download a free copy of our book, A Stockbroker's Guide to Regulatory Investigations. You can get that online at www.BrokerDefender.com.
Attorney Joel Beck of The Beck Law Firm, LLC represents firms and individuals involved in FINRA examinations and enforcement actions, and provides advice and counsel regarding compliance with securities industry rules and regulations for broker-dealers and registered representatives or associated persons. Prior to opening his firm, Joel worked for ten years for NASD where he served in a variety of roles, including as an attorney in the Enforcement Department.