If you've received a letter from FINRA requesting information, don't take it lightly. In this blog, we'll discuss five common questions about the Rule 8210 letter, and what it means for you.
What is Rule 8210?
In a nutshell, Rule 8210 requires firms and registered and associated persons to provide the regulator with records, documents, and testimony pertinent to an investigation. As a self-regulatory organization (SRO), FINRA is not a governmental agency and does not have the power to issue a subpoena and compel information. Therefore, it has rules in place with which its member firms and associated individuals agree to comply. These rules are reviewed and approved by the SEC. Rule 8210 serves as the main mechanism through which FINRA can gather information, documents, and testimony to conduct investigations of member firms and individuals.
What does the Rule 8210 Letter mean?
If you receive a Rule 8210 letter, it simply means that FINRA is requesting documents, information, or testimony from you regarding an investigation of a broker-dealer or a person registered or associated with a broker-dealer. It is important to note that you may or may not be the subject of the examination. However, proceed wisely—as we will discuss below, you are required to respond appropriately whether you are the subject or not.
Do I have to disclose the letter on my Form U4?
Generally speaking, you do not have to disclose an initial Rule 8210 letter on your Form U4. As stated above, you may or may not be the subject of the investigation at hand. Typically, the first few letters from FINRA include language stating that it is a ‘preliminary inquiry,' and does not require disclosure. However, you are required to disclose the matter once FINRA makes a Wells call, or send you a Wells letter, officially notifying you that you are indeed the subject of an examination.
Do I have to respond to the letter?
Yes. No matter the reason behind the Rule 8210 letter, you must respond. You can face serious repercussions for failing to respond to the letter, including potentially being barred from the industry. As mentioned, you may not even be the subject of the investigation, or, if you are, the sanctions you receive could be far less significant than a lifetime bar. The consequences of not responding could far outweigh the results of the examination—don't take that risk. Furthermore, you must respond honestly. If you are dishonest or deceitful in your response, you could face the same consequences. Whether you are the subject of the examination or not, the Rule 8210 letter is a serious matter, and you must treat it as such.
What if I am no longer in the business?
If you are no longer with a broker-dealer or in the securities business, you may still receive a Rule 8210 letter. FINRA retains jurisdiction over formerly associated or registered persons for a period of time, and you can be subject to FINRA sanctions if you do not respond to the letter. Those sanctions include being barred from future association with a broker-dealer. FINRA sanctions can reflect negatively on your reputation and impact your career in other fields. You may face difficulty with licensing agencies and receiving certain professional designations. Typically, our recommendation for clients out of the business is often to respond to the letter even if they are no longer with a broker-dealer, unless we know the outcome of their cooperating with the regulator will lead to a bar. But, since the results of many examinations could be far less damaging to your career than a lifetime bar, we believe it is typically wiser to respond and undergo the examination than to forfeit the chance of working in the industry ever again.
If you've received a Rule 8210 letter, we recommend you seek experienced counsel to guide you through the matter. At The Beck Law Firm, LLC, we have more than two decades of experience dealing with regulatory matters. Give us a call today to schedule a consultation.
You may also find Joel Beck's book The Financial Advisor's Guide to Regulatory Investigations helpful for your situation. Click here to request your copy today.