Advisor Kept in the Dark on Client's 'On the Record' Complaints

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A client filed a complaint against me. The complaint was rather vague on several key facts, and I know he had an on-the-record interview with FINRA. FINRA has called me in for an OTR as well. They have declined my request for a copy of the client's transcribed testimony. I would like to refuse to appear until they give me a copy so I can see what the client says I did wrong. Can I?

The short answer is: No. FINRA Rule 8210 allows you to inspect the transcript of your own testimony. FINRA prohibits you, however, from reading the transcript of others who were called in for an OTR. Although you may well be entitled to those transcripts during a disciplinary hearing, that is not the case during the inspection phase.

Furthermore, FINRA Rule 9552 provides that FINRA can suspend you for failing to provide “any information, report, material, data or testimony requested or required.” FINRA will usually give you a notice that they will suspend you within 21 days for failing to cooperate. You can disagree with FINRA's request for information and challenge their contention that you didn't cooperate by requesting a hearing. Note that you must request the hearing before the 21 days are up. If you wind up losing the hearing (which would probably be likely under your set of facts), and end up suspended, you can petition to have the suspension terminated if you are in "full compliance with the notice or decision" that caused the suspension. Note that, when they say “full compliance” here, they absolutely mean “full compliance.”

I've heard that we no longer have to provide annual privacy notices to clients. Is that true?

Late last year, President Obama signed into law a new statute that primarily authorizes highway funding, but it also includes a number of amendments to securities and other financial-services laws. Of particular note are the amendments to the Gramm-Leach-Bliley Act, which provide an exemption from the annual privacy notice delivery requirement of a financial institution: (1) does not disclose non-public personal information of consumers to third parties, other than disclosures permitted by the Exempt Category of Regulation S-P (e.g., service providers, when required by law, with the client's consent, etc.); and (2) has not changed its policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed in the most recent disclosure sent to consumers.

Regulation S-P has not yet been amended to reflect the change to the GLBA; however, it is my understanding that the legislation was self-executing, which means it would supersede Regulation S-P as to that provision. If you meet the requirements and no longer have to send out the annual privacy notice, make sure the privacy policy in your compliance manual is updated. Do not simply refrain from sending privacy notices without making sure your firm has updated its manual or other relevant documents, because doing so will likely cause a violation of your own disclosures/procedures. Ask your compliance officer if your firm needs to amend any other documents. Also, be aware that your state may have more-restrictive privacy laws; you should check with your compliance officer and/or counsel as to their applicability.

Alan J. Foxman is a contributing writer for On Wall Street, a partner in the law firm of Dew Foxman & Haugh and a senior consultant with National Compliance Services in Delray Beach, Fla.

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