The FINRA 8210 Letter: What To Do if You Receive One - Federal Lawyer
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The FINRA 8210 Letter: What To Do if You Receive One

notification letter

When investigating brokerage firms and individual broker-dealers, the Financial Industry Regulatory Authority (FINRA) has several tools at its disposal. One of its most-potent investigative tools is the 8210 letter. If you have received one of these letters—either personally or as a representative of your firm—you need to be very careful, and you will want to work closely with your counsel to ensure that you don’t make mistakes that could lead to unnecessary consequences.

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What is a FINRA 8210 Letter?

Before we get into the steps to take after receiving an 8210 letter, we’ll briefly explain what these letters are. An 8210 letter is a formal communication from FINRA which indicates that FINRA is in the process of conducting a formal investigation.

However, beyond simply serving as a means of notice, an 8210 letter is also a powerful investigative tool. Through the issuance of an 8210 letter, FINRA can compel a brokerage firm or broker-dealer to provide records and/or testimony during an investigation. Under FINRA’s Rules, registered brokerage firms and broker-dealers must comply with the requests in 8210 letters. If they do not, they can face enforcement action regardless of the merits of the allegations underlying FINRA’s initial inquiry.

Responding to a FINRA 8210 Letter

With this in mind, if you have received a FINRA 8210 letter, you need to respond. However, as noted above, you also need to be careful when doing so. Withholding information and unnecessarily disclosing information can both have adverse consequences, and they are both mistakes that brokerage firms and broker-dealers can—and should—avoid.

Here is an overview of some of the preliminary steps to take if you receive a FINRA 8210 letter:

1. Review the 8210 Letter in Detail

The first step to take after receiving a FINRA 8210 letter is to review the letter in detail. This should provide you with several key pieces of information, including:

  • Are you (or is your firm) the target of FINRA’s investigation?
  • Is FINRA requesting documents, testimony, or both?
  • What is the response deadline?

The letter should include other key details as well, such as the format for submitting documents and written answers. Ensuring compliance with the letter’s enforceable provisions—while also taking the necessary steps to protect your firm or yourself—will be key to working toward a favorable resolution.

2. Engage Defense Counsel Promptly

Due to the challenges and risks involved with responding to an 8210 letter, once you receive one of these letters, you should engage defense counsel promptly. When engaging counsel, you should choose a lawyer (or firm) that has specific experience in the area of FINRA investigation defense.

3. Work With Your Counsel to Develop a Response Plan

Once you engage counsel, you will need to quickly begin working with your counsel to develop a response plan. In the preliminary stages, there are several important considerations, including:

  • Can you reasonably comply with the 8210 letter’s response deadline?
  • If not, how and when should you request an extension?
  • Regardless of whether you (or your firm) can comply, do you have grounds to challenge the 8210 letter—whether in whole or in part?

Responding to an 8210 letter can be a time and resource-intensive process. As a result, strategic planning is critical. Too often, brokerage firms and broker-dealers wait to begin the response process, and then they end up dealing with unnecessary challenges and issues as a result of their delays.

4. Preserve the Attorney-Client Privilege

Another important consideration when responding to an 8210 letter is preservation of the attorney-client privilege. When responding to investigative inquiries, individuals and firms have the right to withhold or redact privileged records. Failure to do so, even inadvertently, can result in a privilege waiver, and this can force targeted individuals and firms to disclose information that they would have otherwise been entitled to keep out of FINRA’s view.

5. Engage with FINRA as Warranted

It may make sense to engage with FINRA in various capacities when responding to an 8210 letter. For example, you will typically want to have your counsel engage with investigators to learn more about FINRA’s inquiry, and it may be necessary to try to negotiate the scope of the letter’s demands. Your counsel should be able to explain both what is permissible and what makes sense under the circumstances at hand.

This is one area (among many) where working with experienced counsel is extremely important. Attempting to engage with FINRA on your own can be risky; and, while cooperating with a FINRA investigation can be advantageous in some cases, it can also have unintended (and undesirable) consequences. After evaluating the allegations and facts at hand, your counsel can provide strategic advice, and then you can use this advice to make informed decisions about how to approach both your 8210 letter response and the investigation as a whole.

6. Determine Whether a Form U4 Disclosure is Necessary

Upon receiving a FINRA 8210 letter, it is also important to determine whether a Form U4 disclosure is necessary. If FINRA is targeting you or your firm in its investigation, then a Form U4 disclosure will most likely be required. Failure to disclose a FINRA investigation can have undesirable consequences as well—so this, too, is a matter that you will want to address with your counsel promptly.

7. Work with Your Counsel to Craft a Response and Formulate an Effective FINRA Investigation Defense

After going through all of these preliminary steps (potentially among others), it is time to craft your response. Depending on the requests in the letter, this may involve assembling responsive documents, preparing written or oral answers, or both. If FINRA is targeting you or your brokerage firm in the investigation, you will need to work with your counsel to formulate a defense strategy as well. Both of these require a substantial time commitment and attention to detail; and, while you may want to focus on getting back to business as usual, you must be prepared to give the 8210 letter and FINRA’s investigation the attention they demand.

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