Why Compliance Officers Need Independent Counsel for FINRA Investigations

This week's WSJ Risk and Compliance Journal demonstrates why compliance employees need their own retained counsel when it comes to FINRA investigations. When Brown Brother's Harriman was investigated by FINRA enforcement, Brown Brother's money laundering procedures were under scrutiny, specifically with regard to penny stocks and using such stocks for money laundering activity. While both the firm and the compliance officer Hal Crawford were fined and sanctioned for not creating a proper anti-money laundering program in relation to such trading, it is not known if Mr. Crawford was provided with the resources to implement such program or if the firm was willing to accept and implement Mr. Crawford's suggestions. These issues would be obvious issues that Mr. Crawford's attorney would want to raise if they were issues, so as to protect Mr. Crawford's reputation and future in the industry. However, if he was represented by counsel hired by Brown Brothers it would be unlikely that such attorney would focus on such issues as that counsel would clearly be conflicted. 

This highlights once again the need for individual employees to retain their own counsel in any FINRA enforcement investigation and to defer accepting any counsel that the firm provides to such employee. As the old saying goes, there is no such thing as a free lunch and in the case of FINRA investigations it could be a very very expensive lunch in the long run. While we have no idea if Mr. Crawford's situation involved such issues, based on the facts it would appear that these issues potentially could play a role and is instructive for others similarly situated.


Stuart D. Meissner Esq.
212-764-3100





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