State Regulatory Investigations

Malecki Law’s State Regulatory Lawyers in New York regularly represents securities and insurance professionals, including registered and unregistered investment advisors and insurance agents in state securities regulators’ subpoenas and requests for information, during testimony, and when state regulators commence investigations and/or bring regulatory actions against such professionals. As with dealing with the Financial Regulatory Authority (“FINRA”) and the United States Securities and Exchange Commission (“SEC”), it is extremely important to properly deal with these regulators skillfully from the very first communication.

One thing to remember is that state investigators are looking for issues, that’s their job. Ordinary words take on new meaning when investigators, and ultimately state lawyers, get involved. Frankly, the state is usually represented by lawyers in its investigations and so should you be represented by State Regulatory Attorneys in New York City, such as those at Malecki Law. You can innocently say something in your lay terminology that fits into a legal framework they are prosecuting, and you could find yourself with a problem.

Pushing back against overbroad document requests and subpoenas, as well as carefully preparing for testimony, can save you anguish in your personal and professional life. There are very structured, tried and true ways to deal with these regulators to avoid and/or minimize any adverse consequences. You could get caught up in an investigation into someone else, then wind up facing an investigation of yourself, even if the regulators did not initially consider you a target.

Parallel proceedings are often either simultaneous (at the same time) or successive (new proceedings happening after the others are well underway or finished). Moreover, civil and criminal agency and regulatory litigation will be public and open you up to civil or administrative proceedings commenced by private litigants affected by a common core of facts. For many licensed professionals, they are also surprised to learn that once they settle or have a judgement by one regulator, it will affect their standing with others – even in different states.

The regulation of insurance professionals is handled by the states. An individual must be licensed to sell insurance and has to follow standards set by the state. Every office used by a licensee has to be supervised by at least one person licensed to do the business conducted. Variable insurance policies also require securities licensure.

Every state has a securities regulator who oversees “Blue Sky Laws.” “Blue Sky Laws” laws are often very similar to the Securities Exchange Act of 1934 and Securities Act of 1933 regulating the sale of investments. The difference is that state securities regulators only have jurisdiction within their own state. Some state statutes only allow for regulator actions, such as in New York, while other states not only empower regulators but create additional causes of action for investors and industry participants.

Alongside the US Securities and Exchange Commission, state securities regulators also regulate investment advisers in their state managing less than $100 million in assets under management. Investment advisers must register with the state in which their principal place of business is located, using a form known as a "Form ADV." These are publicly available documents.

Any regulator who sees a potential violation of a different agency’s rules can also make a referral to that agency – they could be required to do so. For example, if a state regulator sees a federal tax issue in documents you produced or things you told them, they can refer the matter to the IRS. This is true of the Consumer Protection Bureau, the CFTC, the FBI, the DOJ and so on.

Protecting yourself at the outset by hiring attorneys like the experienced Manhattan-based State Regulatory Law Firm, Malecki Law, could help you avoid the parallel regulatory actions. Making mistakes at the outset could open you up to other parallel proceedings by different states, agencies or separate branches of government out of a common core of facts.

Many people feel: “if I just tell them everything, they will know I am innocent,” but in reality, you may be giving them information that could be misunderstood, twisted or used in ways you did not envision. Plus, you may be giving them information you do not need to give, which opens you up to scrutiny.

The securities and insurance laws are a highly regulated, complex and interconnected set of rules and laws that – when any conduct is challenged – require skilled and knowledgeable representation, something with which Malecki Law’s NY-based State Regulatory Attorneys are ready to provide to you.