Blog
Frequently Asked Questions by Brokers Under FINRA Investigation (FAQ Roundup)
FREQUENTLY ASKED QUESTIONS BY BROKERS UNDER FINRA INVESTIGATION (FAQ ROUNDUP)
We are Spodek Law Group, a nationwide federal defense law firm that was created by Todd Spodek. If you’re a broker who was put on notice by FINRA (Financial Industry Regulatory Authority), you might be asking yourself how to handle this legal storm. We get it—you’re worried about losing your license, your clients, and your income. You want answers that are clear and easy to understand, without diving into dense legal talk.
Let’s be brutally honest: you cannot ignore a FINRA investigation. If you do nothing, you are taking the risk of being penalized or even barred from the financial sector. That means you could lose your financial future, which can cause stress that will bleed into every area of your life. Brokers who were disciplined often end up with a shattered professional reputation, which can lead to a permanent stain on your record. That’s why you need a plan, and that’s why we’re here.
Why Should You Take a FINRA Investigation Seriously?
A FINRA inquiry that was left ignored can end your career, and it can do so faster than you might think. FINRA has the power to levy fines that can be extremely big, and it can also suspend or completely bar you from the financial securities industry. That means you could lose your entire professional identity, plus any trust you built with clients over the years. It also means, you have to restart from scratch professionally.If your license is pulled, you can’t simply walk into another brokerage firm and pick up where you left off.
Some brokers try to ignore the early signs of an investigation. That is a mistake that will cost them. If you fail to respond quickly, you might give FINRA the upper hand, which can result in less room for negotiation and harsher sanctions. When you engage proactively, you are showing FINRA—and the SEC (Securities and Exchange Commission) if they get involved—that you’re committed to handling the matter responsibly. Prompt action can help us, Spodek Law Group, mount a strong defense that was designed to protect your interests.
Remember: A FINRA investigation that was resolved favorably can preserve your license, which means you keep your livelihood. Ignoring the inquiry, on the other hand, may lead to severe disciplinary actions that restrict your ability to ever work as a broker again.
FAQ QUICK-REFERENCE TABLE
| Question | Answer |
| What triggers a FINRA investigation? | Complaints that were filed by clients, suspicious activity flagged by your firm, or routine audits that were conducted by FINRA. |
| What penalties can FINRA impose? | Penalties that include fines, suspensions, or permanent bars from the industry. In certain cases, you can also face criminal charges if there is evidence of fraud or other violations. |
| Should I cooperate with FINRA? | Yes, but only after you talk to a qualified defense law firm. Cooperation that was guided by legal counsel can help you avoid making statements that might harm your defense. |
| How long does an investigation take? | It varies. Some cases that are straightforward might wrap up in a few months, while complicated matters can stretch beyond a year. |
| Do I need an attorney? | Absolutely. A broker who was unrepresented can accidentally make incriminating statements, or sign a settlement that comes with harsh terms. |
What Are Common Reasons FINRA Investigates Brokers?
1. Unauthorized Trading
Trading that was done without a client’s permission can trigger an investigation. If FINRA learns that you placed trades or moved funds around without written or verbal consent, you will face disciplinary action. The consequence of such a finding is harsh: you might be forced to pay restitution to the client, which can be expensive, and you could be suspended or banned from the industry.
2. Churning
Churning that was identified by a compliance audit can signal that you tried to inflate commissions by trading excessively. The consequence is that you may owe fines, and FINRA might suspend your license for months or even years. Many times, you will also face civil lawsuits that are brought by angry clients, which increases your total legal costs.
3. Misrepresentation or Omission
When a broker who was trusted by clients makes false statements, it can lead to a FINRA investigation. If FINRA determines that your statements were misleading, you can be held liable for significant fines or restitution. The consequence is that your credibility in the industry might be permanently destroyed.
What Criminal Charges Could Arise?
Some FINRA investigations turn criminal if regulators find potential fraud or theft. If the Department of Justice jumps in, you could face charges that carry possible prison time. If you end up convicted, you might serve years in federal prison, which ends any hope of returning to your career in finance. A criminal record which follows you everywhere can damage your ability to find other employment, which can cause further financial strain for your family.
Evidence that was illegally obtained may be thrown out, and that can lead to a major strategic advantage for your defense. If evidence is removed from the case, FINRA might drop certain claims, which can reduce or eliminate penalties. However, if the prosecution or regulators manage to introduce properly gathered evidence, you can face the full force of FINRA and the criminal justice system. That is why you must act fast, and that is why you shouldn’t attempt to handle this alone.
Defending Against a FINRA Investigation: Our Approach
We investigate thoroughly. We begin by getting records that show all relevant transactions, communications, and agreements. A piece of data that was dismissed by you as trivial might be the key to dismantling the case, and that can help us challenge questionable evidence.
We push back on any weak claims. If FINRA is building its allegations on sketchy evidence or assumptions, we pressure them to prove each element beyond mere suspicion. A claim that is not supported can lead to lower fines or a dismissal of charges. This approach might mean filing motions that force regulators to reveal their full evidence, which can sometimes reveal mistakes in their process.
We create a negotiation strategy. Sometimes, settlement agreements that are created to protect brokers from worst-case outcomes. A settlement that was negotiated by experienced attorneys can help you preserve your ability to practice, or at least reduce the length of a suspension. If your career is on the line, you want the best possible terms, instead of something forced on you by regulators.
We coordinate with experts. There are times when an industry expert who was retained by Spodek Law Group can offer insights into complex financial products. By shedding light on how investments truly work, we can show FINRA that you did not breach any rules. An expert who was credible can also weaken the regulator’s claims that you had malicious intent.
Your Next Step: Stop Making Excuses and Take Action
Far too many brokers underestimate the danger of a FINRA investigation. That is a shortsighted view that costs them their license, their reputation, and their future. If you’re under investigation right now and you haven’t secured legal representation, you’re gambling with your entire career. Trying to handle FINRA inquiries alone might save you attorney fees in the short run, but it can lead to fines or penalties that are financially devastating.
Our team at Spodek Law Group won’t sugarcoat it: you must be ready to fight. That could involve long hours gathering records, giving detailed testimony, and negotiating with regulators. You have to get out of your comfort zone, and you have to stay focused on the end goal—preserving your livelihood. A broker who was found liable for serious violations might never recover from the financial and personal impact.
We are available 24/7, to provide a risk free consultation. That first call can change the entire trajectory of your case, because it sets the stage for a proactive and strategic defense. If you call now, we will give you an honest assessment that reveals your strongest paths forward. If you wait too long, FINRA might finalize its findings, which can force you into a corner.