No financial advisor wants to be under suspicion or investigation by the Financial Industry Regulatory Authority (FINRA). If you receive a Rule 8210 letter, that may be your first assumption. But it’s not necessarily true and a deeper understanding of the rule can help to allay your initial fears.
What is Rule 8210?
Since FINRA is a private and self-regulatory organization, rather than a government entity, it has no subpoena powers nor can it compel information. But its purpose is to provide oversight of the financial industry and its members – how, then, can it conduct necessary investigations when it has reason to believe misconduct has occurred?
Rule 8210 is the means by which it achieves this goal. In the rule, all firms and individuals associated with FINRA are required to provide information when requested. They must also permit inspection of books, records and accounts. And, if necessary, they must testify to matters within their purview.
What does it mean when you receive a letter?
A Rule 8210 letter is sent as the initial means by which FINRA collects information. Although this includes instances when FINRA has opened a formal investigation, letters are also sent when preliminary information is sought. Receiving a letter does not mean, by default, that you are under investigation. It simply means that FINRA believes you have information it needs to acquire. Even if an investigation has begun, you are not necessarily the subject of the investigation.
Regardless of the reason for an 8210 letter, you must respond to it. Refusing to do so can lead to sanctions, including being barred from the industry. However, you should first seek legal counsel from an attorney who is experienced in financial license matters – they can help to ensure that your response to the letter is appropriate for both FINRA and yourself.