Audits & Regulatory Investigations
Our New York audits and investigations attorneys offer strategic legal defense to individuals and entities who are being investigated and charged by FINRA, the SEC, the U.S. Attorney’s office, state securities regulators, and other exchanges.
Being the subject of a regulatory investigation can be a life-altering experience. The magnitude of potential penalties may include substantial fines, losing your license, or even criminal charges. It can even have an effect on your future employment in other industries. Having experienced audits and investigations counsel representing you and protecting your rights may be the key to an outcome in your favor.
It is important to be properly prepared for responses to inquiries and subpoenas. Early intervention by an attorney can avoid unnecessary issues and prolonged proceedings.
Malecki Law represents clients at each stage of the regulatory and self-regulatory process — from an informal inquiry, through contested hearings (including on-the-record testimony and the “Wells” process), as well as on appeal. We assist clients through:
- Obtaining "No-Action Letters" i.e., a complete defense with no reporting on your license
- Negotiation of favorable regulatory settlements to minimize sanctions, generally known as AWCs (Acceptance, Waiver and Consent)
- Fully litigated hearings before regulators, self-regulatory organizations, government agencies, and criminal proceedings
- Formally responding to Regulatory Inquiries, Investigations, Exams & Audits, including On-the-Record Interviews, Document and Information Requests, and Subpoenas
- Review and Creation of Compliance / Supervision Directives and Procedure
- Membership & Registration Continuation Proceedings
Malecki Law has represented brokers, investment advisors, supervisors, compliance professionals, structured finance professionals, analysts, CFOs, CEOs, COOs, and others who fall under the watch of the Financial Industry Regulatory Authority (FINRA), the United States Securities and Exchange Commission (SEC), the U.S. Attorney’s office, state securities regulators, and other exchanges.
For over 20 years, New York securities audit and investigation lawyer Jenice Malecki and her team at Malecki Law has assisted various types of industry professionals and firms in formal and informal civil, criminal, regulatory and enforcement actions, investigations, audits, and proceedings initiated by the SEC, FINRA, NASD, NYSE, AMEX, federal prosecutors, state attorneys general, and other regulatory and self-regulatory agencies.FINRA Investigations
One of FINRA’s top priorities is to advance investor confidence in the securities markets through vigorous enforcement of federal securities laws. FINRA has the authority to fine, suspend or bar brokers and firms from the industry. FINRA may initiate investigations from many varied sources, including examination findings, filings made with FINRA, customer complaints, anonymous tips, automated surveillance reports, and referrals from other regulators or other FINRA departments, among others.
In 2015, FINRA instituted more disciplinary cases in 2015 as compared to the prior year, but the total fines levied were significantly lower, whereas the amount of restitution FINRA ordered in 2015 nearly tripled. Last year FINRA brought 1,512 new disciplinary actions, an increase from the 1,397 cases initiated in 2014; barred 492 people (versus 481 in 2014) and suspended 737 (versus 705 in 2014). FINRA also referred more than 800 fraud and insider trading cases to the SEC and other agencies for litigation and/or prosecution. FINRA levied $95 million in fines (versus $134 million in 2014) and ordered $96.6 million (versus $32.3 million in 2014 and $9.5 million in 2013) to be paid in restitution to harmed investors.
In 2016, the Department of Labor has introduced new tougher regulations holding brokers and insurance agents to strict “fiduciary” standards. As the regulations of the securities industry become more demanding, so has the scrutiny of securities professionals and the need for regulatory defense and other proceedings.SEC Investigations
In 2015, the SEC brought a record 807 cases, which were composed of 507 independent actions and 300 actions against issuers that were delinquent in making required filings or “follow on” administrative proceedings (as reported by the SEC). These SEC actions resulted in a record total of monetary sanctions being imposed against defendants and respondents. In fiscal year 2015, the SEC obtained orders requiring the payment of $4.19 billion in penalties and disgorgement, which is a record for the Commission. However, the SEC brought 3% fewer cases against investment advisers and investment companies (126 cases in 2015 compared to 130 actions in 2014). And actions against broker-dealers were down to 124 from the prior year’s 166.
Common violations that may lead to investigations include:
- FINRA or SEC rule violations
- Misrepresentation or omission of important information about securities
- Manipulating the market prices of securities
- Stealing customers' funds or securities
- Violating broker-dealers' responsibility to treat customers fairly
- Insider trading (violating a trust relationship by trading on material, non-public information about a security)
- Selling unregistered securities
Significant Engagements in Regulatory Investigations, Disciplinary Hearings & Subpoenas for our Audits and Investigations Team:
No Action taken in FINRA investigation into alleged fundraising outside business activity and working on a transaction after their license being terminated in violation of FINRA Rules
No Action by SEC for 2 individuals after full investigation and OTR regarding alleged spoofing and layering transactions by trader and assistant
Obtained No Action Letter from FINRA Regulation Enforcement Department for Series 24 Supervisor under investigation for allegedly accepting client funds from an insurance annuity policy
Obtained No Action letter from FINRA for investment professional alleged to have altered Bloomberg screens sent to clients
Obtained No Action letter for financial professionals in matters involving allegations of embezzlement of client funds with sales assistant
Obtained No Action in case involving alleged private securities transaction and outside business activity for a securities broker involving Countrywide and life bonded settlements
Obtained No Action letter for investment professional for allegations relating to outside business activities
Successfully obtained No Action after Wells submission to FINRA regarding allegedly mismarking order tickets
Successfully represented NYSE floor broker in fully contested enforcement hearing on front running
Successfully negotiated favorable AWC settlement with the SEC regarding alleged violations related to intentional altering of an analytical model through sets of assumptions reflected in the Offering Memorandum of the Regional Aircraft Securitization Program Offerings (“RASPRO”) transaction
Settlement of Favorable AWC with FINRA relating to cherry picking and front running by a fund manager
Negotiated favorable AWC settlement with SEC for group of traders for allegedly operating an unregistered broker dealer
Obtained No Prosecution agreement from SEC for professional trader of US Inflation Trading desk related to alleged misreporting of losses on complex derivatives desk
Obtained No Prosecution for two brothers in an SEC insider trading case
Represented subpoenaed party in a SEC investing into EB-5 funding
Represented subpoenaed individuals in SEC investigations involving Variable Annuity Sales Practices at a major brokerage firm
Numerous ongoing representations of financial practitioners in negotiation disputes relating to Form U4 and U5
Numerous ongoing representations of financial professionals in OTRs before SEC and FINRA for alleged rule violations
Successfully represented Series 7 licensed broker in FINRA investigation relating to failure to report tax liens
Successfully represented Series 7 investment professionals in issues of FINRA investigation relating to issues of failure to report regulatory settlement with CFP Board and several states