The financial industry is highly regulated to ensure that the investors are sufficiently protected from cybersecurity risks, fraudulent activity, or other threats. The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regularly revise their rules and regulations so that financial advisors and member firms continue to act in good faith and protect the interests of their clients. Both of these regulatory bodies have enforcement divisions that aim to identify, investigate, and respond to investment-related misconduct, fraud, or other violations of the industry’s rules and regulations. According to FINRA, “We dedicate our resources to bringing meaningful enforcement actions to correct wrongdoing and deter future misconduct and to rooting out the bad actors that pose the greatest risk of harm to investors and the markets.” As a financial firm, it’s essential that you familiarize yourself with your reporting obligations to prevent accusations of FINRA disclosure noncompliance or misconduct.
As soon as you hear that the SEC or FINRA is investigating allegations of noncompliance, it’s worth enlisting the services of a highly experienced and trusted FINRA disclosure lawyer who can help you understand your rights and responsibilities. Together, you can identify the most appropriate path forward that protects your best interests at every opportunity. Let’s take a closer look at how the SEC and FINRA typically approach noncompliance issues and how partnering with a caring and highly qualified securities law attorney can help with FINRA disclosure noncompliance matters.
Understanding the Key SEC and FINRA Compliance Requirements
As a member firm or financial advisor, you are likely aware of the compliance rules and reporting requirements that the SEC and FINRA expect you to follow. While there are numerous rules put forth by these two regulatory authorities, the most notable obligations include filing ongoing quarterly and ongoing reports, filing current reports for certain events (i.e., changes in control of the company, amendments to charter and bylaws, the election or departure of directors, etc.), filing customer complaints on a quarterly basis, developing and implementing strong cybersecurity protocols, and adhering to standards when communicating with members of the public. If you are named in a FINRA investigation because your firm has been accused of noncompliance, reach out to a knowledgeable and dedicated FINRA disclosure attorney right away for the customized and effective legal support you need during this stressful time.
Consequences of SEC or FINRA Noncompliance
Those found to have engaged in SEC or FINRA noncompliance or misconduct can face a number of consequences. Potential penalties include suspensions, costly fines, or (for egregious cases of misconduct) bars from the financial and brokerage industry. In some cases, FINRA may compel individuals or member firms to compensate the customers who were harmed by their actions or negligence. It’s worth noting that SEC investigations are civil and not criminal. The SEC may investigate and penalize firms or individuals for violating federal securities laws, imposing penalties such as fines, mandatory repayment of ill-gotten gains, or barring the individual from working in the securities industry or from serving as a public company director. Since the potential consequences are so serious in nature, it’s worth enlisting the services of a highly qualified and experienced securities law attorney who can work hard to keep your future as bright as possible.
Common Examples of SEC or FINRA Noncompliance
There are many reasons that can prompt a noncompliance investigation from FINRA or the SEC. Below are just a few of the circumstances or factors that may increase your risk of noncompliance accusations or enforcement actions against your firm.
Disorganized or Missing Records
Neglecting to implement or follow an organized system of keeping records can leave your firm especially vulnerable to accusations of noncompliance. These regulatory authorities require a substantial amount of records and information, particularly when it comes to submitting quarterly or annual reports. Keeping detailed records of electronic communications is essential, as FINRA or the SEC may ask for these records at any time.
Lack of Written Supervisory Policies
Member firms are required to create clear written supervisory procedures and to consistently follow them in their daily operations. Without these drafted documents that clearly address supervisory procedures pertaining to internal communications, customer communications and complaints, as well as transaction supervision policies, a financial firm may face an SEC or FINRA examination.
Cybersecurity Lapses
In today’s highly online world, the SEC and FINRA value cybersecurity more than ever. They require firms to develop and implement clear and effective cybersecurity protocols, as well as to demonstrate evidence of living out these efforts to protect their investors as much as possible. Failing to produce clearly written cybersecurity policies can trigger an investigation or enforcement action.
Steps to Take in Response to a Disclosure Noncompliance Accusation
Being named as the subject of an SEC or FINRA investigation can be a stressful and intimidating experience. Suddenly, you face an uncertain future, and it’s natural to wonder how this process will affect your career and livelihood. Here are some of the most important steps you can take in response to a FINRA or SEC disclosure noncompliance allegation in order to minimize potential issues or adverse outcomes as much as possible.
Contact an Experienced Securities Law Attorney
Hiring a skilled and knowledgeable securities law attorney is the best way to receive the personalized legal guidance you need during this challenging and often confusing time. Your attorney can help you understand the upcoming steps of the process so that you can move through each phase with greater clarity and confidence.
Respond Calmly and Cooperatively
While it’s natural to be defensive in the face of these accusations, it’s best to remain calm and cooperative as the process moves forward. Your attorney can help you conduct an immediate review, determine responsibility, and respond to inquiries while protecting your best interests at every turn.
Adopt a Proactive Approach
SEC and FINRA investigations adhere to fairly strict timelines, so it’s important to meet all deadlines and to respond promptly to requests for information. Your dedicated securities law attorney will help you take proactive steps to identify the underlying issues and respond appropriately as needed.
Get Started With a Top Securities Law Attorney Today
If you or your firm has been accused of FINRA disclosure noncompliance, you need reliable and effective legal advocacy right away to help you identify the most strategic course of action. At Judex Law, LLC, protecting your best interests is always our top priority. As a smaller law firm, we are able to deliver personalized and comprehensive legal representation to every client we serve. Please reach out to our Broomfield, Colorado office today at (303) 523-4022 to get started with a highly experienced and friendly securities law attorney.