Handling Regulatory Agency Communications During an Inquiry, Examination, or Investigation
If you have been notified of an inquiry or investigation by a regulatory agency like the SEC or FINRA, it is vital to communicate effectively as this can significantly impact the outcome.
Here are some key steps to consider:
– Stay Professional & Cooperative – Maintain a respectful and responsive tone while protecting your firm’s interests.
– Engage Legal Counsel Immediately – Regulatory matters can have serious consequences. An experienced securities attorney can guide responses, ensure compliance, and manage risks.
– Understand the Scope of the Inquiry – Gain a thorough understanding of the inquiry or the alleged issues to determine the best approach.
– Respond Accurately & Timely – Failing to respond accurately or by the deadline can escalate the matter.
– Preserve & Review Documents – Secure all relevant records, emails, and communications while ensuring compliance with document retention policies.
– Avoid Unilateral Communications – All interactions with regulators should be coordinated through legal and compliance teams to ensure consistency and protect privilege.
If you have been contacted by a regulatory agency regarding an inquiry or more, please contact us at 619.298.2880 or email info@jackolg.com.
Litigation Strategies to defend against an alleged FCPA violation
FCPA securities litigation can involve investigations, prosecutions, and lawsuits. The Foreign Corrupt Practices Act (FCPA) prohibits bribery and corruption. If facing allegations, focus on:
A strong compliance framework and proactive defense can help mitigate FCPA liability.
For assistance with allegations of FCPA violations, contact us at 619.298.2880 or email info@jackolg.com.
What to Expect During an SEC Investigation: Insights from a Litigation Attorney
It is essential to understand the SEC’s process for investigating securities law violations. Before filing any formal enforcement action, the SEC typically conducts a private investigation, which may involve informal inquiries, witness interviews, and reviewing financial records and trade data.
If warranted, the SEC will issue an Order of Investigation, granting them broad powers to subpoena witnesses, compel testimony, administer oaths, and demand documents. Investigations are generally nonpublic unless ordered otherwise.
Once the investigation is complete, the SEC will present the findings to the Commissioners. If substantial evidence of wrongdoing is found, the SEC may authorize a formal enforcement action, issuing a Notice of Charges or Complaint. This begins the litigation process, which can include penalties, disgorgement, and injunctions, along with significant reputational risks. Timely responses and clear communication are critical to minimizing risks and protecting your interests.
A skilled securities litigation attorney is vital to guide you through the formal proceedings, help negotiate settlements and mount a strong defense.
If you are at risk of an investigation or enforcement action, please call 619.298.2880 or email info@jackolg.com.
Mitigation Strategies for Brokers and IAs Planning to Transition
When a broker or IA decides to leave a firm, it is important that they take proactive steps to protect their reputation from any defamatory statements on their Form U5 that may affect future endeavors.
Here are key protective measures to take from a litigation perspective:
To discuss how to safeguard your transition to avoid litigation or reputational damage, please call 619.298.2880 or email info@jackolg.com.
The Clock is Ticking on Expunging Your Form U5
Often times, a broker planning to leave a firm has already found a new firm to transition to. With the promise of a better tomorrow, the broker and the new firm may not consider what the prior firm discloses on the departing broker’s U5. However, there is a clock ticking, and any defamatory statements made by the prior firm about the broker should be challenged within a year. This is because anything reported on your U5 can potentially affect your reputation and future professional endeavors.
What a firm puts on your U5 can be defamatory per se and you will likely need to seek FINRA arbitration to have it expunged and to collect damages. The longer you wait, the more your claims could suffer, i.e., barred by the statute of limitations or challenged that there were no reputational harm/damages.
If you have been defamed and need help expunging your U5, or if you plan to transition and would like to discuss how to safeguard your reputation and to avoid litigation, please call 619.298.2880 or email info@jackolg.com.
Efficient Business Dispute Resolution through ADR
In business disputes, it’s important to explore options to avoid costly and time-consuming litigation. Alternative dispute resolution (ADR) methods like arbitration or mediation can be effective ways to resolve conflicts more efficiently and preserve business relationships.
To avoid litigation and pursue ADR, consider the following steps:
By proactively considering ADR, businesses can resolve disputes quickly, save resources, and avoid the adversarial nature of litigation.
For help with evaluating a business dispute to determine the best legal approach, please call 619.298.2880 or email info@jackolg.com.
Key steps to take when dealing with a FINRA customer complaint.
If you receive a customer complaint, it is pertinent to immediately notify your compliance department. The compliance group should take steps to contact the customer to understand the nature of the complaint and attempt to resolve any potential issues. If unsuccessful at reaching a resolution, you will have an obligation to submit the customer complaint to FINRA within 30 days of receipt of the complaint.
There are key steps you should take from the time you receive a complaint and inform FINRA, such as:
For help with a FINRA customer complaint, please contact us at 619.298.2880 or email info@jackolg.com.
Tips for Preparing Against Potential Litigation
Most lawsuits are expected, and a warning sign is generally in the form of a contentious letter, comment, or message. If you have received such a warning sign, it is time to act. Here are the key steps to take in preparing for potential litigation:
For assistance with preparing for potential litigation or to speak with a litigation attorney, please call 619.298.2880 or email info@jackolg.com.
Defending against investor suitability disputes
A broker, brokerage firm, financial advisor, or financial consultant is required under FINRA’s (Financial Industry Regulatory Authority) suitability rule to properly assess a potential investor and only recommend investments that are appropriate for them. One of the most common claims by investors is that a financial professional failed to fulfill their suitability obligation, meaning they did not ensure that the product being sold was appropriate for the client’s needs and risk profile.
To help demonstrate compliance and defend against potential claims, financial professionals should:
For help in protecting yourself against “Suitability Claims,” please call us at 619.298.2880 or email info@jackolg.com.
How to Prevent Shareholder Litigation
Business disputes are a regular occurrence and it is best to be prepared for them. One common dispute is between shareholders, or shareholders and company management. As in all types of disputes, it is best to avoid litigation and opt for amicable resolution. Here are three key steps to prevent shareholder litigation.
Promoting transparency and amicable resolutions can go a long way in preventing damaging and costly Shareholder litigation. It is in the best interest of all parties to strive for peaceful resolution.
For help during a shareholder dispute or potential litigation, please call us at 619.298.2880 or email info@jackolg.com.
Protecting Privacy Privileges if Litigation is Imminent
When everything points to litigation, a business can take the right steps to strengthen its position in trial. This includes managing the human factor and any internal and external communications related to the case.
Here are some key steps to take in managing the human factor:
• Immediately work with executives and anyone involved to understand their feelings about the case.
• Provide extensive coaching on maintaining control over their emotions regarding the case.
• Emphasize the importance of limiting non-privileged communications about the case.
• Remind them to avoid any written communication about the case unless necessary.
• Hire an experienced litigation attorney at the outset.
During litigation, the business will be placed under the microscope. It is in its best interest to position itself positively and contain any factors that may reflect negatively on it during trial.
If you believe your business may be sued and need legal assistance in preparing for litigation, please call us at 619.298.2880 or email info@jackolg.com.
Business Litigation
Business litigation is a constant threat to an Investment Adviser. Litigation encompasses a wide range of legal disputes that can arise in the course of operating a company and can drain resources, damage reputations, and derail business objectives.
Understanding the different types of business disputes that may arise on a day-to-day basis is key to navigating challenges. Business disputes can consist of:
Being cognizant of potential disputes enables advisers to take proactive steps to mitigate, mediate, and safeguard the business.
If you are at risk of or facing litigation, call us at 619.298.2880 or email info@jackolg.com.
Partnership Disputes
Strong partnerships are highly beneficial to the growth of a business. However, when there is conflict between partners, it could negatively affect the business in many ways. Differences will come up, but partners should strive to resolve disputes amicably. Here are five ways to do so:
– Honest and Open Communication: address the issue promptly, and honestly
– Mediation: Consider involving an objective third-party
– Legal counsel: If the dispute is yet to be resolved, retain legal counsel
– Create or Modify Partnership Agreement: If a partnership agreement is in place, explore reestablishing roles and obligations to accommodate all parties
– Dissolution: If resolution is impossible, consider parting ways as business partners
Breach of Fiduciary Duty
RIAs are held to their fiduciary duty and can be sued if they fail to uphold that duty. If a lawsuit has been filed against an RIA for breach of fiduciary duty, the next steps are crucial. Here are the key things to remember if you have been sued by a client.
1. Speak to an experienced Securities litigation attorney immediately
2. Inform your insurance provider that you have been sued.
3. Prepare evidence to demonstrate that you acted in the best interests of your client, and that all potential conflicts of interest were properly disclosed to the client
4. Perform a comprehensive review of your compliance program
5. Understand and prepare for possible outcomes
6. Explore settlement options
Form U5 Expungement
A negative mark on your Central Depository Registry (“CRD”) record can hinder efforts to find another job in the Securities industry. If a past employer has submitted negative comments on the advisor’s Form U5, does the advisor have any recourse?
Yes. The advisor can request a Form U5 expungement where the mark is untruthful or defamatory.
Here are some key steps to take towards expungement.
– Retain legal counsel that is experienced in Form U5 expungement.
– Carefully review the Form U5
– Gather evidence to prove the negative mark is false
– Attempt to resolve the matter with the past employer amicably
– File a U5 dispute with FINRA if resolution with the past employer fails.
– File an expungement request with FINRA
How to Prepare for an SEC Enforcement Action
Firms going through an SEC enforcement action may have one of two extreme reactions: Agree to everything proposed by the SEC, or fight against everything proposed by the SEC. Neither of these are recommended. Firms preparing for an SEC enforcement action should be strategic in their approach and open to negotiating while protecting their interests. A crucial step towards preparation is to retain legal counsel experienced in dealing with the SEC. In addition, firms should:
– Launch an internal investigation into the violations raised, to assess the extent of the violation.
– Review the compliance program including policies and procedures, and implementation, to determine and address any gaps in compliance.
– Cooperate with the SEC, maintain transparency and professional conduct.
– Aim to come to a settlement.
Requesting a No-Action Letter from the SEC
If faced with a potential enforcement action, you may have the option to request a no-action letter for a specific activity. A no-action letter asks that the SEC does not take enforcement actions against the adviser for a specific activity/violation. Below are the steps to request a no-action letter from the SEC.
– Determine if you are eligible to request a no-action letter.
– A no-action letter must pertain to a specific activity or possible violation.
– Provide a clear and detailed description of the activity in question and provide documentation to support remedial actions taken.
– Provide a legal argument as to why the SEC should not take enforcement actions for that activity.
– Include a cover letter with a summary of the request.
– Mail it to the SEC.
– It is advisable to seek legal counsel.
What Not to Do in Court
Most parties aim to settle lawsuits through mediation, however, when all other options have been exhausted, cases end up in court. Appearing in court is a stressful situation. Even the most stoic clients struggle to present themselves and their case to the best of their abilities. Here are a few tips on what NOT to do in court.
– DO NOT provide false or misleading information as it may damage your credibility.
– DO NOT disrespect the court by interrupting opposing counsel, witnesses and especially the judge.
– DO NOT ignore court rules and processes such as deadlines or court orders.
– DO NOT be lax in preparations. Ensure evidence, documentation and anything supporting your case is organized and easily accessible.
– DO NOT give into emotion or unprofessional outbursts. Remain calm, professional and composed.
Defense Against Non-Disclosure to Investors on Company Updates
If you have been sued for failing to disclose company-related information to investors, it is paramount to mount a strong defense strategy. Litigation for non-disclosure is challenging, however, there are several key strategies at your disposal.
Managing risk – how to preserve confidentiality and privilege
In litigation, it is crucial to work with an attorney that understands the importance of preserving confidentiality and privilege as part of their risk management. The attorney-client privilege preserves communications made in confidence between lawyers and their clients for purposes of seeking legal advice or services. Virtually all types of communications or exchanges between attorneys and their clients may be covered by the privilege. The privilege protects individuals and institutions. There are certain exceptions or waivers that may cause the privilege or confidential nature of communications to be lost.
Attorney-client privilege and who holds the privilege.
During litigation, a critical safeguard for clients is attorney-client privilege. Clients should understand that they possess this privilege and can choose to assert or waive it as they see fit. It’s equally vital to discern what constitutes privileged information or communication. A skilled litigation attorney advocates for their clients by ensuring the preservation of this privilege to effectively safeguard their clients’ interests.
5 Tips to Prepare for Litigation
If you are in a dispute that may lead to litigation, it is important to start taking key steps to prepare. Here are five tips that will help.
Understanding Your Technologies in Case of Enforcement Action
If your business has optimized its processes through use of technology advancements, and Artificial Intelligence, it is vital to fully understand the technology and maintain detailed documentation on the implementation, use, risks, and response to risks associated with that technology.
This practice provides many advantages in the event of an enforcement action as understanding the underlying use of the adopted technologies can help with defense against regulatory enforcement.
Importance of Trust in the Adviser-Client Relationship
The adviser-client relationship should be built on trust to avoid litigation. Here are tips to foster trust:
Consider Mediation
Using mediation as an alternative dispute resolution method can save time and expenses compared to lengthy litigation. Mediation can preserve professional relationships and confidentiality while allowing parties to control the outcome of their dispute.
Prepare thoroughly for mediation by gathering all relevant documentation and developing a clear strategy. Maintain an open mind and be ready to compromise. Effective communication and cooperation can lead to a mutually agreeable settlement. For more information, please contact Dharmi Mehta, Esq. at 619.298.2880 or email info@jackolg.com
Investment Advisers facing SEC Enforcement
Advisers facing SEC enforcement actions should prioritize compliance and cooperation. Engage the services of experienced legal counsel who can guide you through the process and respond effectively to SEC inquiries. Preserve all relevant records and documentation and conduct a thorough internal review to identify potential compliance issues. Develop a strong defense strategy and consider settlement options if appropriate. Maintaining proactive and honest communication can lead to a more favorable outcome and potentially minimize penalties. For more information, please contact Dharmi Mehta, Esq. at 619.298.2880 or email info@jackolg.com
Dharmi Cookie Mehta is a senior attorney at Jacko Law Group, P.C. She focuses her practice on representing the firm’s clients in complex business disputes, securities and real estate litigation, and ...
