What Types of Evidence Are Typically Collected During a FINRA or SEC Investigation? - Transcript

Facing a FINRA or SEC investigation can be an intimidating experience. These regulatory bodies have broad authority to collect evidence as part of their efforts to uncover potential wrongdoing. Understanding the types of evidence typically sought during these investigations can help you prepare and protect your interests. At Malecki Law, we have extensive experience guiding clients through these challenging situations and minimizing the risks involved.

One of the first things FINRA and the SEC often request is a detailed examination of your financial records. This process is sometimes referred to as a "financial colonoscopy" because of its invasive nature. Investigators scrutinize bank statements, investment accounts, credit card records, and any other financial documents to identify potential misconduct or ill-gotten gains. If the regulators suspect funds were transferred to a spouse or another family member, these transfers may also come under scrutiny.

For individuals in the securities industry, the failure to provide these records can lead to severe consequences. With FINRA, refusing to cooperate can result in the loss of your license. Similarly, the SEC can enforce subpoenas through court orders, and non-compliance can have both civil and criminal repercussions.

Email correspondence, text messages, and other forms of communication are frequently collected as evidence. Investigators look for discussions that might reveal intent or knowledge of misconduct. This includes internal communications within a firm as well as correspondence with clients, third parties, or external partners. Social media posts and private messages are not exempt from scrutiny if they are relevant to the investigation.

Regulators use these communications to build a narrative around the alleged misconduct. Even casual conversations can become significant pieces of evidence if they suggest wrongdoing or a failure to uphold regulatory standards.

For professionals in the securities industry, employment records are another critical category of evidence. Investigators may examine Form U4 or U5 filings, compliance training documents, and performance reviews. These records can help regulators determine whether an individual’s actions deviated from firm policies or regulatory standards.

Compliance records, in particular, play a significant role in investigations. If a firm failed to supervise its representatives adequately, both the individual and the firm could face penalties. Regulators often examine supervisory systems and procedures to evaluate whether adequate safeguards were in place.

As part of an investigation, FINRA and the SEC often require individuals to provide testimony under oath. Witness statements can come from employees, clients, or third parties who interacted with the person or firm under investigation. These statements are used to corroborate documentary evidence and clarify ambiguous details.

Providing testimony is a critical moment in any investigation. It’s important to have experienced legal counsel present to ensure your rights are protected and that you avoid unintentional self-incrimination. Declining to testify or invoking the Fifth Amendment can have serious professional consequences, including damage to your reputation and the potential loss of your securities license.

Regulators also collect publicly available records, such as securities filings, advertisements, and promotional materials. These materials are compared against internal records to identify inconsistencies or misrepresentations. For example, marketing materials that overstate the performance of an investment product could be evidence of fraud or negligence.

Internal records, such as account statements and trade confirmations, are equally significant. These documents help regulators trace the flow of funds and determine whether improper transactions occurred. Firms are required to maintain accurate and complete records, and any discrepancies can become evidence of misconduct.

Navigating a FINRA or SEC investigation requires a strategic and informed approach. Regulators have extensive powers to gather evidence, and failing to comply with their requests can lead to severe consequences. At Malecki Law, we work closely with clients to ensure that their rights are protected and that they respond appropriately to investigative demands.

Our experienced securities lawyers understand the tactics regulators use and how to counter them effectively. Whether you’re facing a FINRA 8210 request, an SEC subpoena, or the prospect of providing testimony, we can help you navigate these challenges and achieve the best possible outcome.

Call Malecki Law today at (212) 943-1233 or contact us online to schedule a consultation. Protecting your future starts with the right legal guidance.

Transcript:

The SEC have broad powers to get almost anything that they want from you in an investigation barring use of your use of the Fifth Amendment privilege which is the end of your career the minute you plead the fifth you your license is not going to be active uh for much longer they can famously they do what’s called a financial colonoscopy because they want to see whether you got any ill-gotten gains from the conduct that you engaged in and they’re going to request extremely personal information if there are transfers to a spouse or a loved one with what appear to be ill-gotten gains they’re going to investigate them the failure to cooperate with FINRA could be the loss of your license and the failure to cooperate with the SEC could result in court orders and you know the enforcement of a subpoena that could have civil or Criminal results.