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Financial Adviser Alert: Failure to Comply With FINRA 8210 Request Results in Adviser Bar

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Monday, January 14, 2019.

George C. Miller

George C. Miller


Location: San Diego, California
Phone: (619) 696-9500 (Ext. 105)
Direct: (619) 501-8270
Email[email protected]

In late December 2018, FINRA barred former Morgan Stanley financial adviser Daniel T. Levine from associating with any FINRA member firm in any capacity by way of an Acceptance Waiver and Consent (AWC) settlement agreement.   Levine resigned from Morgan Stanley in July 2018, following allegations that he had engaged in an unapproved outside business activity.  With limited exception, financial advisers are required to disclose to their supervising firm, and obtain advance approval for, any outside business activities in which they are engaged. 

According to the AWC, in August 2018, as is virtually automatic following a financial adviser’s separation from a firm under any circumstances other than a clean, voluntary separation, FINRA sent Levine a request for documents and information pursuant to FINRA Rule 8210.  The 8210 process, also known as the FINRA inquiry process, is the initial phase of a FINRA enforcement action. 

An inquiry may end in one of three ways.  First, FINRA may investigate and ultimately close the matter by way of a no action letter which--for any adviser facing an inquiry--is the best case scenario.  Second, FINRA may conclude the inquiry by imposing some low-level discipline, such as a referral to the FINRA staff for additional compliance training or the issuance of a letter of censure, which is non-public but may be considered by the staff in future inquiries.  Third, FINRA may compel on the record or “OTR” testimony from the adviser, which is similar to a deposition, and may refer the matter to its enforcement division for formal discipline before or after the OTR testimony.  Matters referred to enforcement are resolved either through settlement (through an AWC) or through an administrative litigation process before FINRA’s Office of Hearing Officers. 

In its 8210 request to Levine, FINRA sought documents and information concerning his potential solicitation of a loan from a customer to fund an outside business activity.  Serious issues, to be sure, but not necessarily fatal to an adviser’s career.  Instead of complying with FINRA’s request for information, however, Levine refused to provide a complete response to FINRA’s 8210 request, thus sealing his fate and all but guaranteeing he would be barred from the industry.  Failing to cooperate with FINRA in the 8210 process is an independent, and extremely serious, violation of FINRA rules. 

The reputational damage associated with a permanent FINRA bar is significant, and a bar carries additional consequences advisers may not always consider.  For example, when seeking other forms of professional licensure (insurance, real estate etc.), state agencies often inquire as to whether the candidate has been barred from any other regulated industry.  Thus, a FINRA bar often precludes individuals from engaging in many other forms of business.  

It is critically important to consult with experienced counsel when facing a FINRA 8210 inquiry.  Our FINRA 8210 inquiry attorneys and FINRA defense lawyers have a strong track record of success in defending financial advisers in FINRA 8210 inquiries and enforcement actions.  Contact us today for a confidential consultation. 

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