The Blog Of The Securities Industry Professional Association

8210 Legal Defense Team on the horizon

10017299-brass-scales-of-justice-and-law-books--vector-illustrationThe SIPA was recently contacted by a prominent legal firm in New York regarding our willingness to sign a non binding letter of intent regarding services offered by the firm.  Since I have known the lead attorney for years and have actually used him (with success!) in the past I decided to tame my attention disorder and actually listen to him for a few uninterrupted minutes and see if this is something SIPA members would want.  After listening to him for about ten minutes I knew that our members would want the opportunity presented to them.  Without getting into deep details here are the basic talking points of our conversation and we would appreciate your feedback on this always.

RULE 8210

FINRA has utilized rule 8210 to require members to provide documents to them for decades now.  In the beginning, most 8210 requests consisted of New Account Forms, Margin Agreements and trade confirmations.  Occasionally they would ask for things like transaction or Purchase and sales blotters but for the most part a Firm’s chief compliance officer was able to navigate the requests, put it into a nice envelope and send it off to FINRA on his own.  There was always a disclaimer first and foremost that the requested information should not be construed as an indication of a rule violation or a pending investigation.  Somewhere along the way the ambiguous verbiage was replaced with the implied message that if you don’t get us this information as soon as possible you will be barred from the industry. Obviously that is not what they say but there is an implied threat.  In addition, a simple response to an 8210 request carried with it much graver consequences then years ago.  A Compliance officer who omitted some documents would usually receive a nice letter asking them if this was just an oversight.  Today that can be construed as materially misrepresenting or omitting material to avoid a FINRA request.  The last big change we saw under Rule 8210 was the use of sworn testimony under oath in on the record interviews, also known as OTR’s.  For the last ten years or so it appears more and more 8210 requests are sent to firms and then six months later the individuals who provided the information must provide hours of testimony pursuant to rule 8210 .  If they fail to testify or if is deemed they lied under oath they can then begin their new career as a mortgage broker or car salesman.

This is not an indictment of FINRA as much as it is of the changing times due to the likes of ENRON, MADOFF and the Cartel firms of Wall Street like Smith Barney/Citi Group that forced regulators to constantly look for the lies in document production.  The idea of this program is to give relief to firms with these requests and instead of having a Compliance officer tremble as he submits the request, a competent experienced attorney would review and submit the material on your behalf.    In addition, if there is need for an OTR you can utilize there services and have a quality attorney sitting with you as they ask you questions.  The reality is that 8210 requests have become a very burdensome and costly problem for small firms.  Having immediate representation that will not cost you an arm and a leg is also an important part of this program.  Unfortunately, we have seen too many firms go under due to legal costs in the hundreds of thousands.  We know of one firm that had $300,000 in legal cost responding to repeated requests and OTR’s on the request.  Sadly, by the time FINRA decided to bring an action against the firm they decided to just close the firm because they were under net cap from legal fees.  This program might be just the way to lock in your legal costs for 8210 requests at a price that any firm can budget for on a yearly basis.  We will divulge more information as it is given to us and will of course offer an honest assessment of the proposal to our members.  We would like to hear your thoughts so please feel free to comment or contact us directly.




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December 18th, 2013



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