FINRA’s Rule 8210 is one of its most powerful investigative tools. It permits FINRA, in connection with an examination or investigation, to request documents and information. Sometimes, instead of a letter requesting information, FINRA asks for an appearance before a court reporter. If you have received a notice from FINRA requesting that you appear for on-the-record testimony (or an “OTR”), this is one letter you must take seriously. FINRA uses the OTR to conduct investigative testimony. Rule 8210 gives FINRA the authority to compel persons subject to its jurisdiction (generally persons associated with a FINRA registered broker-dealer) to appear before a court reporter and provide sworn testimony.
Most of the time, these OTRs are conducted at a FINRA district office. However, FINRA sometimes makes exceptions, depending on the circumstances of the proposed witness. One of the common exceptions occurs when a witness who is not near a FINRA district office requests that FINRA travel to his or her location due to a medical or financial hardship. FINRA does not always grant these requests, but if this is your situation, it is worth a try. Remember, FINRA may request evidence of your hardship. FINRA may also be flexible about the specific date of the OTR, depending on the urgency of the investigation. Either way, make sure you act promptly upon receiving a notice. Failure to appear for an OTR, absent exceptional circumstances, will likely result in a bar from the industry.
FINRA usually has several participants in an OTR. Generally, a FINRA attorney is present along with one or more staff members. As a witness you are permitted to bring an attorney as well. However, FINRA does not permit the participation of others (such as a compliance officer, a friend or a coworker). FINRA requires that anyone participating in an OTR with a witness be an attorney representing that witness.
Generally, an OTR lasts one or two days, depending on the complexity and volume of issues being discussed. FINRA may or may not give a witness much detail about what will be discussed, but they will usually give a very general outline.
An OTR starts with a court reporter swearing in the witness. Then FINRA reads a statement of instructions and begins asking a series of questions about whatever issue they are investigating. FINRA’s authority under Rule 8210 grants them the ability to specify the conditions under which the OTR will be taken, and that includes the prohibition of the use of recording devices by the witness. FINRA will generally make the transcript of the OTR available to the witness, either for review at the FINRA district office, or for purchase directly from the court reporting service.
FINRA’s OTRs are often utilized when the nature of the inquiry does not lend itself to a standard inquiry letter. For example, during an OTR, FINRA may present an exhibit to the witness and ask the witness questions about the exhibit. Document intensive questioning generally is not well suited to letter writing.
If you have been notified by FINRA that you are being requested to appear for an OTR, it is important that you take the request seriously and that you act immediately. Your first step should be to consider hiring an attorney who is experienced in representing clients in FINRA OTRs. Further, depending on the issues at hand, you may want to hire an experienced consultant to assist with the issues surrounding the investigation.
Mitch Atkins, FINRA’s former SVP and Regional Director has extensive experience as a consultant working with complex FINRA investigations. Contact him at FirstMark Regulatory Solutions in Boca Raton, Florida at 561-948-6511.
Mr. Atkins is not an attorney and does not provide legal services.