What to Do if FINRA is Seeking a Bar
So, what should you do if FINRA is seeking a bar? Here are five tips for fighting a FINRA bar based on my experience:
1. Find Out Why FINRA is Seeking to Bar You
The first thing you need to do is to find out why FINRA is seeking to bar you. Is it because of non-cooperation with a FINRA investigation (or, in FINRA’s language, failing to “provide information or testimony or to produce documents as requested”)? Or, is it because FINRA is accusing you of a serious violation of the federal securities laws?
There are a variety of reasons why FINRA may be seeking to bar you as a condition of settling a securities fraud investigation. However, if FINRA is seeking to bar you, you need to be extremely careful about how you proceed. You must ensure that you clearly understand the circumstances surrounding the bar and the ramifications of accepting a bar as part of a settlement.
2. Determine if a Settlement is Your Best Option
Once you understand why FINRA is seeking to bar you, then you can determine whether accepting the bar as part of a settlement makes sense. If possible, you want to avoid a bar. But, if you are facing a clear risk of a bar in the future, then accepting a bar as part of a settlement could provide important certainty and stability. In either case, after learning why FINRA is seeking a bar, you (and your counsel) should be able to determine the best path forward.
3. Carefully Consider (and Negotiate) the Terms of Proposed Settlements
If you ultimately decide to settle, this does not necessarily mean that you have to accept FINRA’s proposed terms. There may be opportunities to negotiate, and seizing these opportunities could significantly improve the terms of your settlement. With that said, it is important to be realistic as well. Your counsel should be able to advise you on when it will make sense to push back and when it will make sense to move forward with the settlement.
4. If You Don’t Settle, Be Prepared to Face a FINRA Enforcement Action
If you don’t settle, you will need to fight for your ability to continue working in the securities industry. While the focus of this article is on fighting a FINRA bar, this is a high-level overview. If you decide to fight your bar instead of settling, your defense counsel will need to develop a comprehensive defense strategy that is custom-tailored to the specific circumstances at hand.
5. Engage Experienced Defense Counsel to Guide You Forward
This leads to my fifth and final tip: Engage experienced defense counsel to guide you forward. When facing the possibility of a FINRA bar, you do not want to be in a position where you are left guessing about your rights, risks, and options. You need to make fully informed decisions, and you need to be prepared to make these decisions quickly.
What to Know About FINRA Bars: 12 Key Facts
To provide some additional insights, here are some more key facts to know about FINRA bars. This is not a complete list, and you should not rely on this list alone when facing a FINRA bar. But, as an introduction to the process and the risks involved, this list is a good place to start.
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1. FINRA Bars Are Common
FINRA bars are common. In 2022, FINRA barred 513 individuals from participating in the securities industry.
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2. FINRA Bars Are Serious
While FINRA bars are common, they are also extremely serious. As FINRA explains, “FINRA bars individuals from working in the securities industry when we have reason to believe they pose a significant risk to investors.”
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3. FINRA Can Bar Broker-Dealers, Investment Advisers, and Others
FINRA bars are not limited to broker-dealers. FINRA can bar any individual who is subject to its jurisdiction, including investment advisers, investment banks, clearing agencies, and transfer agents.
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4. Bars Are Often Used to Settle FINRA Investigations
As discussed above, bars are often used to settle FINRA investigations. If you are facing a bar, negotiating a settlement could be your best option, but this is a decision that you need to make with the advice of experienced counsel.
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5. Bars Can Also Result from FINRA Enforcement Proceedings
If you do not settle with FINRA, you could face a bar as the result of a FINRA enforcement proceeding. While fighting a FINRA enforcement proceeding is not easy, it is possible—and there have been numerous instances in which securities professionals have been able to avoid bars in FINRA enforcement proceedings.
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6. FINRA’s Enforcement Proceedings Are Formal, but More Limited Than an SEC Enforcement Action
FINRA’s enforcement proceedings are formal, but they are more limited in scope than SEC enforcement actions. As the SEC explains:
“FINRA . . . has jurisdiction over brokerage firms and their employees. . . . FINRA bars generally prohibit investment advisory firms and investment advisors from associating in any capacity with a brokerage firm or working in the brokerage industry. It is important to note that FINRA bars generally do not prohibit you from associating with an investment advisory firm or working as an investment advisor. However, the SEC may provide advance notice to the public of its intention to bar you from associating with an investment advisory firm or working as an investment advisor.”
7. With that Said, FINRA Refers Barred Brokers and Others to the SEC
The caveat above is important. Even though FINRA’s enforcement authority is limited to those who participate in the securities industry, FINRA referrals to the SEC are common. While FINRA referrals to the SEC can result in additional enforcement action, facing a FINRA bar does not necessarily mean that you are at risk for additional enforcement action from the SEC as well.
8. FINRA Bars Are Public
If you are barred by FINRA, the bar will be made public. FINRA has a public database where it publishes information about barred individuals and firms.
9. FINRA Bars Are Permanent
FINRA bars are permanent. There is no automatic reinstatement process, and you will generally need to seek reinstatement through a petition for relief.
10. There Are Different Types of FINRA Bars
There are different types of FINRA bars. These include bars from associating with a broker-dealer, bars from associating with an investment adviser, and bars from associating with a clearing agency or transfer agent.
11. It Is Possible to Petition for Relief from a FINRA Bar
As noted above, it is possible to petition for relief from a FINRA bar. FINRA’s protective orders provide for the possibility of relief from a FINRA bar, and FINRA has published a policy that outlines the process of seeking relief from a FINRA bar.
12. Petitioning for Relief from a FINRA Bar is Not Easy—and Relief Isn’t Guaranteed
While it is possible to petition for relief from a FINRA bar, this is not an easy process. It requires a comprehensive understanding of FINRA’s rules and procedures, and it requires the ability to present a compelling case for relief. Even if you have a strong case for relief, FINRA may still deny your petition. With that said, FINRA relief petitions can be successful, and our legal team can assist you with seeking relief from a FINRA bar if the need arises.
Discuss Your FINRA Bar with an Experienced Securities Enforcement Defense Attorney
If you are facing a FINRA bar, it is imperative that you engage experienced defense counsel immediately. Call 212-300-5196 or request a complimentary consultation online to discuss your situation with a former U.S. Attorney at Spodek Law Group.
Contact Spodek Law Group Today
If you are facing a FINRA bar or enforcement action, our legal team is ready to help. Call 212-300-5196 or contact us online for a confidential consultation.
