From the Blog

Swear to be Smart

So you received a Rule 8210 letter from FINRA requiring you to appear at their New York office to provide testimony under oath (the so called “on the record interview,” or “OTR”).  You had hoped that after you had not heard from FINRA when they sent you that earlier document request months ago, that this thing would just blow over. It didn’t. After a long period of silence, FINRA now wants to speak to you at their office. What should you do?

It used to amaze me when I was on the other side of the table. Frequently, individuals appeared before a regulator without a lawyer. Often these individuals faced serious charges and their careers were at stake.  The reality is seasoned prosecutors and examiners know how to ask questions.  They know how to set up questions.  They lead witnesses down a path where question is built upon question.  Often denials to these key lines of questioning lack credibility and, in some cases, may even destroy your credibility.  Or, just as common, affirmative responses to questions you did not clearly understand or recall (but answered anyway) result in costly admissions that establish a  case against you.

Lay people don’t understand that enforcement cases are constructed during the OTR.  The SEC, FINRA and other regulators spend hours and hours preparing for these verbal and logic battles.  OTRs are physically and mentally draining.  Witnesses get fatigued, confused, yet continue answering questions for hours and hours.  Many witnesses are called back for follow up sessions.  At the end of the day, witnesses’ stories are locked in for good.  Many with harmful admissions, or worse, denials that are so obviously false that not only is it clear that the witness violated the law or rule, but may leave an impression with the regulator that the witness lied.  And if the SEC or FINRA try to prove a witness lied, the stakes become even greater.

Lawyers understand what it as stake.  Seasoned securities counsel can prepare you adequately for the tough questions and the brow beating you likely will face.  Counsel will adequately review with you documents and written communications to refresh your memory of key events. They will question you in mock practices and in the same manner you can anticipate being questioned on OTR day.  And seasoned counsel will interrupt when regulator questions are unclear, accusatory or are otherwise unfair or objectionable.  In short, during this most unpleasant of experiences, you will be accompanied by an advocate looking out for your interests, and who will fight for fairness of process and your rights.

Take it from me, as someone who has taken hundreds of OTRs during a 20-year career as a regulator – and barred many people from the securities industry after taking their testimony – when you are summoned before FINRA to appear for testimony, swear to be smart and hire a seasoned securities lawyer, and then tell the truth.

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