Executives, Branch Managers and other Supervisors have faced increasing regulatory scrutiny in recent years and are frequently the subject of disciplinary proceedings brought by FINRA. Once a disciplinary charge is filed, FINRA Enforcement or Market Regulation often make onerous settlement proposals, including demands for lengthy suspensions and large fines. Many respondents feel they have no choice but to capitulate to those demands. However, experience has shown that FINRA Enforcement is not invincible, and certain strategies have proven effective in defending disciplinary charges.
Peter Boutin of Keesal, Young & Logan’s San Francisco office recently authored an article published by the National Society of Compliance Professionals in the September 2016 edition of NSCP Currents. The article addresses “lessons learned” from multiple wins on behalf of executives, branch office managers and other supervisors in disciplinary proceedings.
Below is an excerpt of the article. Linked here with permission from the NSCP is a reprint of the entire article.
– Keesal, Young & Logan Securities Group
Ten Tips for Winning a FINRA Disciplinary Case against Executives and Supervisors
FINRA’s Departments of Enforcement and Market Regulation take great pride in their win records trying disciplinary cases before a FINRA Hearing Panel.
That said, our firm’s recent trial win against FINRA’s Department of Market Regulation in a case involving a Managing Director confirms that executives and supervisors should not simply capitulate to FINRA’s proposed –– often excessive –– settlement demands. Set forth below are ten “lessons learned” during the course of that case and other disciplinary cases against executives and supervisors which we have tried.
1. Know FINRAs Rules and Practices
2. Emphasize that FINRA has the Burden of Proof
3. While the Facts are of Paramount Importance, Don’t Forget to Argue the Law
4. Stress that the Applicable Standard is Reasonable Supervision,Not Perfect Supervision
5. Roll up Your Sleeves and Leave No Stone Unturned
6. Credibility is Critically Important
7. Make Sure the Panel Understands and Applies the Appropriate Standard
8. Emphasize the Supervisor’s or Executive’s Efforts to Comply with FINRA Rules and Firm Policies
9. Don’t Forget the Sanction Guidelines
10. Emphasize — if True —the Absence of Client Harm and That the Conduct at Issue Did Not Result in Monetary Gain to the Supervisor or Executive
It is difficult to prevail in a FINRA disciplinary proceeding. However, utilizing these tips may improve the prospects for prevailing on behalf of a conscientious supervisor or executive.
This information has been prepared by Keesal, Young & Logan for informational purposes only and is not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between you and Keesal, Young Logan. You should not act upon this information without seeking professional counsel.