Regulatory Defense

The Linehan Law Firm is ready to defend businesses and investors who might face fines or investigations by financial regulatory authorities. From small town/city violations, such as unlicensed sale of products, to allegations by federal agencies of widespread investor fraud, Mr. Linehan can help if your business is in jeopardy.

An active, risk-taking business can create dissatisfied clients or partners that might lodge complaints with regulators. If you broker trades of securities or commodities on behalf of clients, provide financial advice on the trading of stocks, or solicit investments in a business, you’ll be subject to restrictive fraud protections and due diligence requirements by regulatory authorities like the U.S. Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), and the Commodity Futures Trading Commission (“CFTC”). Additionally, in New York, the General Business Law’s “Martin Act” carries civil and criminal penalties for fraud related to the offering and sale of securities. If one of these bodies accuses you or your business of misconduct, the penalties can be severe and long-lasting.

So how would you know if you fall under the scope of these regulations? A security is defined as any investment of money in a common enterprise with a reasonable expectation of profits based upon the entrepreneurial/managerial efforts of others. That could include debt securities (such as a bond, with a set interest rate and payback terms), equity (such as shareholder stock in a company), or derivatives (for example, options contracts, involving the sale of an asset in the future). Even a small transaction involving these forms of securities requires strict adherence to the rules set forth in New York. When regulators investigate a company for shareholder stock fraud, for example, bad faith actions with even a minor investor can lead to serious consequences from the SEC, the NY AG’s office, or even a local prosecutor’s office.

Commodities are defined in New York as any fungible (not unique) good subject to a forward-looking or “future delivery” promise to buy or sell at a set price. Examples include food items such as grains or beef, petroleum products like oil and natural gas, or even cryptocurrency, which has been designated a commodity under the CFTC’s regulations.

If you deal in these sorts of transactions, it’s best to keep in mind the common triggers for enforcement actions. These could include:

• 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.

Both the SEC and FINRA will provide a subject of an investigation with “Wells Notices” or “8210 letters,” and that’s when you need to enlist an attorney to negotiate on your behalf. Failure to respond or cooperate with these investigations can lead to heavy fines or a bar from the securities industry entirely. Regulators can seek injunctions, which may prohibit certain practices, require audits of accounting, or set up supervision of your business. Financial fines or orders to return profits (disgorgement) are also common. Regulators can even suspend you from serving as a corporate officer for a set number of years.

The Linehan Law Firm is ready to defend your practices should you receive such notices. It could make the difference between a successful livelihood or a shuttered business.