Regulatory Investigations and Enforcement Defense

Lax & Neville LLP represents broker-dealers, financial advisors and registered investment advisors in regulatory investigations and enforcement proceedings brought forth by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Industry Regulatory Authority (FINRA), the National Futures Association (NFA), state securities commissions, including the Office of the Attorney General, as well as other self-regulatory organizations and exchanges. Regulatory investigations and enforcement proceedings are brought by regulators when audits, investigations, Form U4 or U5 filings, or complaints reveal potential issues, including alleged violations of state “Blue Sky” laws, federal securities laws, and regulatory rules. Generally, these investigations are conducted by agencies that lack the power to prosecute criminal charges. However, in some circumstances these agencies may refer their findings to the U.S. Department of Justice or a state criminal prosecutor, who may pursue a parallel criminal investigation. Additionally, many of these regulatory agencies control some aspect of the professional license and may suspend that license, revoke it, or levy monetary fines. Indeed, recent years have seen record breaking fines levied against financial firms to settle allegations of misconduct.

Some examples of the misconduct alleged in the regulatory matters we have defended include fraud, insider trading, books and records violations, unauthorized trading, the sale of complex products, unauthorized outside business activities, deceptive trade practices, expense account issues, and other alleged violations of industry rules and practices. Sometimes a professional may find themselves under investigation by their own firm as part of a larger investigation into potential misconduct. If this happens, the financial advisor should not assume that their firm’s in-house counsel will represent their interests. This scenario presents a very delicate situation where both regulatory and employment consequences pose a risk to the professional. Our attorneys have the knowledge and experience to properly advise clients through these investigations and help them determine when it is in their best interests to litigate or settle such actions.

While serving as zealous advocates, our attorneys are still able to maintain professional and courteous relationships with the regulators and various authorities leading such inquiries and investigations. Our firm has successfully represented clients in all aspects of regulatory defense including in on-the-record interviews (“OTRs”), sit-downs with regulators, responding to requests for information, producing responsive documents, responding to Wells Notices, negotiation of favorable settlements, and civil trials or administrative hearings if the matter is unable to be favorably resolved. For example, a FINRA disciplinary action that goes to hearing is heard by a panel which is chaired by a professional hearing officer and includes two industry representatives. The FINRA panel uses FINRA’s Sanction Guidelines to determine any sanctions it may deem appropriate and issues a written decision explaining the basis for its decision. Examples of potential FINRA sanctions in disciplinary matters brought by FINRA include limitations or modifications of a registered representative’s business activities, functions and operations, fines, censures, suspension for a defined period or contingent on the performance of a particular act, permanent lifetime bar from associating with a firm in any or all capacities, and expulsion of a firm from FINRA membership.

Our firm has the experience to defend clients who are the subject of government or regulatory investigations. Our team at Lax & Neville know when it is in their client’s best interest to negotiate a settlement as opposed to go to a hearing.

If you or your firm has a regulatory matter, please contact Lax & Neville LLP to speak to an attorney experienced in regulatory defense matters.