What if Compliance Accuses You of a Firm Policy Violation?

On Wednesday, while on vacation, an advisor got a call from his broker-dealer’s compliance department. It was from a young woman who was fairly new to the compliance team. She accused him of altering client-signed documents and cutting and pasting a client signature. In essence, the financial advisor was being accused of fraud.

The advisor got on a plane home Thursday, very concerned for his future and with good reason, as it turns out.

On Friday, after reaching out to contacts in the securities industry and receiving a referral, he engaged Michelle Atlas at AdvisorLaw. Michelle spent 10 years on compliance teams at broker-dealers and now works for individual advisors, helping them protect and defend their livelihood.

Together, over the next week, Michelle and the advisor crafted carefully-worded responses to multiple emails from compliance. Ultimately, the compliance supervisor became involved. Michelle coached the advisor on how to respond to specific questions when he was on the phone with compliance.

In the end, the following Tuesday (13 days later), the advisor was required to affirm in writing his understanding of the firm policies. The event was over—no heightened supervision, no letter of caution, no further actions by the firm.

This could have gone very differently. The compliance supervisor confided that, earlier in the year, the firm had ultimately terminated another advisor for a similar instance. Once a U5 termination is filed, FINRA often opens a regulatory inquiry, which can then lead to a FINRA enforcement action and may ultimately end in sanctions, including a fine and a suspension or even a bar from the securities industry. 

How you respond to what may seem like an innocent compliance question regarding any of your sales practices or document processing can be the difference between a few hours of inconvenience and the destruction of your hard-earned business. It only makes sense to ask a professional for help.

Defense attorneys often lament that they spend most of their time trying to reposition and reframe statements that a client has made in response to an initial question. When a person is taken off guard, because he cannot believe he is being accused of some wrongdoing, he is not at his best.

Thankfully, this financial advisor had the wisdom to reach out to an experienced professional. Now, for him, it is business as usual.  

Doc Kennedy
President and Founder
AdvisorLaw, LLC