Rule 8210 Requests
FINRA Rule 8210 Requests Can Present Substantial Risks for Brokers and Brokerage Firms
Brokers and brokerage firms operating in the United States are subject to the oversight of the Financial Industry Regulatory Authority (FINRA). Along with managing the United States’ broker registration system, FINRA also establishes the rules that govern broker-dealers’ operations (alongside federal securities laws), and it enforces these rules through various means.
The Role of Rule 8210 Requests in FINRA Investigations and Enforcement Proceedings
One of FINRA’s primary means of enforcement is conducting investigations pursuant to Rule 8210. This rule gives FINRA broad authority to obtain information from brokers and brokerage firms through various means. Specifically, Rule 8210(a) provides that, “For the purpose of an investigation, complaint, examination, or proceeding authorized by the FINRA By-Laws or rules, . . . FINRA . . . shall have the right to:
- “[R]equire a member, person associated with a member, or any other person subject to FINRA’s jurisdiction to provide information orally, in writing, or electronically . . . and to testify . . . under oath or affirmation administered by a court reporter or a notary public if requested, with respect to any matter involved in the investigation, complaint, examination, or proceeding; and
- “[I]nspect and copy the books, records, and accounts of such member or person with respect to any matter involved in the investigation, complaint, examination, or proceeding that is in such member’s or person’s possession, custody or control.”
For brokers and brokerage firms alike, noncompliance with a Rule 8210 request can have severe consequences—up to and including a bar from the securities industry and referral to the U.S. Securities and Exchange Commission (SEC). But, complying with a Rule 8210 request presents risks as well. If a broker or brokerage firm discloses information that warrants enforcement, this could lead to swift action by FINRA, and the targeted broker or firm could quickly find itself defending against serious allegations in FINRA enforcement proceedings.
Experienced Securities Defense Counsel for FINRA Rule 8210 Requests
At Oberheiden P.C., we provide experienced representation for brokers and brokerage firms facing FINRA investigations. This includes representation for responding to Rule 8210 requests. We help our clients make informed and strategic decisions about how to communicate (and what to disclose) to FINRA, and then we work with FINRA on our clients’ behalf to steer their investigations toward favorable resolutions.
Process for Responding to a Rule 8210 Request
Responding to a Rule 8210 request is a multi-step process that requires an in-depth understanding of the relevant circumstances involved. FINRA’s Rule 8210 requests can take several different forms; and, depending on the nature of a request, a broker’s or firm’s response obligations—and risks—can vary widely.
1. Carefully Review the Request’s Language
With this in mind, the first step in the process of responding to a Rule 8210 request is to carefully review the language of the request itself. If the request specifically states that you or your firm is under investigation, this may trigger an immediate obligation to update your Form U-4. It should also trigger other responsive measures, as defending against a FINRA investigation is itself a complex process that requires an informed and custom-tailored approach. When facing a FINRA investigation, it will be necessary to respond to the Rule 8210 request and build a defense strategy in parallel—and these efforts should be carefully coordinated and closely aligned.
There are other important reasons to carefully review the request’s language as well. Is FINRA requesting oral testimony, written answers, files, or all of the above? How long do you have to respond? What is the appropriate means of response? These are all critical questions that your counsel should be able to answer based on the contents of the Rule 8210 request itself.
2. Engage with FINRA
It will typically make sense for brokers and brokerage firms to engage with FINRA while going through the process of preparing their Rule 8210 responses. This is especially, but not exclusively, true when the response deadline presents a challenge. With the right approach, proactively communicating with FINRA can be a highly-effective strategy, as FINRA staff will often be willing to work with brokers and firms that demonstrate their good-faith intent to reasonably cooperate with their investigative efforts. This includes both granting extensions when warranted and negotiating the scope of voluminous demands.
With that said, any communications with FINRA staff need to be carefully measured and crafted, and any efforts to cooperate with a FINRA investigation should be undertaken with a comprehensive understanding of the risks involved. Being overly cooperative can be dangerous, and brokers and firms that unnecessarily share too much information can put themselves at risk for both FINRA and SEC enforcement.
3. Compile, Review, and Redact Responsive Documents
If your Rule 8210 letter requests the production of documents for FINRA’s review, you will need to work with your counsel to begin assembling your document production promptly. This will involve identifying all relevant storage platforms and media, compiling all responsive documents, reviewing these documents, and then redacting them as necessary to preserve the attorney-client privilege and any other protections negotiated with FINRA staff.
As Rule 8210 letters will often request voluminous documents (often far more voluminous than FINRA staff anticipate), seeking an extension or negotiating modifications will be necessary in many cases. But, brokers and brokerage firms will need to pursue these efforts in parallel with their efforts to assemble their responses. Concessions are not guaranteed, and as submitting a delinquent or deficient response can have significant negative ramifications.
4. Prepare Testimony or Written Answers (or Both)
For Rule 8210 requests that require oral testimony or written answers, response efforts must begin immediately as well. Brokers and brokerage firms must carefully craft their written answers with the assistance of legal counsel, and they must work closely with their lawyers to prepare their testimony. Here, too, brokers and brokerage firms must be extremely cautious about what they disclose. FINRA staff are highly skilled at soliciting information, and inadvertent disclosures cannot be undone.
5. Submit the Response
After completing all necessary preparations and taking all necessary precautions, the final step is to submit your response to FINRA. Depending on the nature of your Rule 8210 request, this may involve providing access to hardcopy or electronic records, submitting written answers, sitting for an on-the-record (OTR) interview, or all of the above. Again, each of these presents its own unique set of risks; and, when responding to Rule 8210 requests, brokers and brokerage firms need to ensure that they are making informed decisions based on the advice of counsel.
What To Expect After Responding to a Rule 8210 Request from FINRA
Once you have submitted your (or your brokerage firm’s) response to a Rule 8210 request, what happens next? The answer to this question depends on the circumstances at hand.
If FINRA was seeking information from you in connection with its investigation into an unrelated entity or individual, this could be the end of the process. But, if FINRA is investigating you or your brokerage firm, you can expect to—and you will need to—continue interacting with FINRA throughout its investigation. While it is possible to avoid FINRA (and SEC) enforcement actions in many cases, doing so requires a strategic and proactive approach undertaken with the advice and representation of a highly-experienced defense team.
FAQs: FINRA Rule 8210 Requests
Why Did FINRA Send Me a Rule 8210 Request?
Several factors can trigger a Rule 8210 request from FINRA. Some of the most common triggers for these requests include:
- Allegations of misconduct disclosed on Form U-4 and U-5
- Customer complaint disclosures on Form U-4 and U-5
- Resignations, non-voluntary terminations, criminal complaints, and other disclosures on Form U-4 and U-5
- Referrals from the SEC and other law enforcement agencies
- Whistleblower complaints from customers or other third parties
When responding to a Rule 8210 request, understanding why FINRA issued the request is critical for making informed decisions. When we represent brokers and brokerage firms in FINRA matters, we prioritize quickly discerning the focus of FINRA’s inquiry so that we can advise our clients accordingly.
What Constitutes “Possession, Custody, or Control” of a Record for Purposes of Responding to a Rule 8210 Request?
Rule 8210 allows FINRA to obtain any records that are in a broker’s or brokerage firm’s “possession, custody, or control.” This includes not only records that are on a brokerage firm’s servers or premises, but also any records that a broker or firm “has the legal right, authority or ability to obtain the document upon demand.”
Do I Have To Respond to a Rule 8210 Request from FINRA?
For brokers and brokerage firms, responding to a Rule 8210 request from FINRA is essentially mandatory. Subpart (c) makes clear that, “[n]o member or person shall fail to provide information or testimony or to permit an inspection and copying of books, records, or accounts pursuant to this Rule,” and violating Rule 8210 can lead to a bar from the securities industry, fines, and other penalties.
Speak with a Lawyer at Oberheiden P.C. About Your Rule 8210 Request in Confidence
Do you need to respond to a Rule 8210 request from FINRA? If so, we encourage you to contact us promptly for more information. To schedule a complimentary initial consultation with a senior lawyer at Oberheiden P.C., please call 888-680-1745 or tell us how we can help online now.