Broker-dealers and registered investment advisers work in an industry where enforcement objectives change, and regulatory monitoring is ongoing. Working with a FINRA & SEC defense attorney can assist firms in responding strategically to an examination, investigation, Wells notice, or enforcement action while still fulfilling their ongoing compliance duties.
Ryan P. Smith Law, PLC represents broker-dealers and registered investment advisers in regulatory matters with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and state securities regulators. The firm’s focus on both broker-dealers and registered investment advisors enables it to serve a variety of financial professionals on a wide range of issues.
Ryan is a current Chief Compliance Officer and also a former in-house FINRA attorney, which allows him to approach regulatory defense from a unique standpoint. His experience as a FINRA attorney gives him firsthand knowledge of how FINRA analyzes examinations, investigations, and related matters. His experience as a CCO gives him real-life experience on responding to regulatory examinations.
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Ryan P. Smith Law, PLC provides securities compliance and regulatory defense services to broker-dealers, registered investment advisers, and financial professionals across the United States. Ryan has an active Series 24 General Securities Principal license. He advises firms on examinations, investigations, enforcement actions, supervisory best practices, and compliance requirements.
Ryan P. Smith Law, PLC serves broker-dealers, RIAs, and financial professionals all over the country.
FINRA and the SEC examine and investigate firms for a variety of issues, including the following:
Oftentimes, what starts as a standard examination can lead to something broader. A request for information, documents, or interviews with employees can be a red flag that the regulator is taking a closer look at. When you have insight into what a regulator is concerned about, you can properly respond and try to address the issues early on.
There are a number of laws and rules that relate to these issues. The Securities Exchange Act of 1934 is the basis of the broker-dealer regulatory requirements. This also informs the SEC and FINRA rules that are the basis for enforcement actions.
Registered investment advisers are regulated under the Investment Advisers Act of 1940 and related SEC rules. This act sets forth various compliance standards that apply to the investment advisory business. One key to successful regulatory defense is understanding how the regulators may view these authorities.
FINRA examinations are common for broker-dealers. As part of an examination, FINRA will request various types of information. An examination can escalate if potential violations are discovered. Requests may be made for on-the-record interviews, additional information, or explanations of supervisory decisions. You may even receive a notice that enforcement staff has been included in the examination.
Ryan is a former in-house FINRA attorney. He knows how exams are investigated internally and how issues can escalate into enforcement actions. Ryan can assist you in evaluating risk, prioritizing issues, and preparing for the next step in the process.
SEC examinations can focus on a firm’s compliance program, disclosures, conflicts, custody, advertising, and fiduciary responsibilities. Compliance manuals, testing records, correspondence, client files, and operations may all be reviewed during an examination.
If issues are discovered, the SEC may open an investigation. Defense against SEC investigations typically involves a careful review of the facts, related regulatory requirements, potential exposure, and business goals. Responding often requires a delicate balance between cooperating with SEC investigators and protecting the rights of the firm. It is also important to preserve key defenses and address legal issues along the way.
The SEC recovered $8.2 billion in financial remedies in fiscal year 2024, the largest amount in SEC history, after filing 583 enforcement cases. Throughout the year, the agency also received a record 45,130 tips, complaints, and recommendations.
A Wells notice may be issued during the course of a regulatory investigation. While a Wells notice is not a finding of fault, it typically means that the enforcement staff is leaning toward recommending an enforcement action.
Responding to a Wells notice is an important tactical decision.
Strong defense strategies, whether it involves the SEC or FINRA, are often built on explaining the context of events, clarifying business transactions, accounting for mitigating factors, and detailing the compliance efforts of the firm. Every matter is different and should be reviewed on an individual basis.
Responding to a regulator’s requests for documents is one of the most time-consuming parts of defending against a regulatory investigation. Regulators frequently request a lot of documents within a short time period. Not only do you need to locate these documents, but you also need to properly review and produce them.
Incomplete or inconsistent document production can lead to further examination. For this reason, it is important to hire a FINRA & SEC defense attorney to help you with your document processes and develop a response strategy before giving documents to the regulator.
You should consider hiring an attorney when you are faced with issues that could lead to regulatory enforcement. An attorney can help you understand your risk, coordinate your response, identify legal issues and defenses, preserve your rights, and manage communication with the regulators.
A lawyer may also help with document evaluation, factual investigations, regulatory analysis, interview preparation, and remedial planning for organizations with limited internal legal resources.
An attorney who understands the regulatory issues unique to broker-dealers and registered investment advisers may also see conflicts that impact one area of the business but have repercussions for the other. This practice point is especially important for firms operating under a hybrid model or with affiliated firms impacted by varying regulatory standards.
Ryan P. Smith Law, PLC conducts business on a national level and understands the logistical complications that can occur when dealing with federal and self-regulatory bodies. The Firm understands how the regulators operate as well as the inner workings of the industry.
Clients have retained the Firm not only for its knowledge of the law, but also for its firsthand experience with how compliance departments operate on a day-to-day basis. As a former FINRA attorney, Ryan is a current, active Series 24 General Securities Principal and has been involved in compliance matters for broker-dealers and registered investment advisers across the country.
Whether you are a broker-dealer or registered investment adviser, as regulations increase, it is important to have an experienced voice on your side when building your defenses.
Get straightforward guidance from a CCO for CCOs — schedule your free consultation today.
A: One way to prepare for regulatory developments is by frequently assessing your compliance programs against the current regulatory focuses as well as industry developments. Keeping abreast of changes to rules, enforcement activity, and examination findings as they happen will allow you more time to address developing risks.
A: If examiners believe procedures are out of date or are not being followed, they may question whether the compliance program is designed in a manner that is reasonably expected to achieve compliance. Procedures may need to be updated and additional supervisory controls implemented.
A: Yes. During the course of an examination or investigation, regulators may scrutinize the conduct of not only the firm but also its personnel. In some cases, a matter may be attributed to both the firm and individuals based upon the conduct that is at issue.
Ryan P. Smith Law, PLC provides practical guidance informed by experience both inside and outside the regulatory process. Contact the Firm today to discuss your matter and receive the legal help you need.
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