FINRA Rules 5th Amendmant Does Not Apply in Regulatory Investigation
Late last week, the Financial Industry Regulatory Authority (FINRA) ruled that a securities firm employee can’t shield himself from answering question by claiming Fifth Amendment rights since FINRA is not part of the government. The FINRA panel went on to suspend Lek Securities registered representative Alex Lubetsky and said the suspension will be permanent if three months passes and he still has not agreed to testify. FINRA’s regulatory department was investigating the firm for possible market manipulation.
The rep had argued because the Securities & Exchange Commission (SEC) was involved in the inquiry, it constituted a state action, thereby entitling him to assert the Fifth Amendment as a basis for refusing to answer the regulators’ questions.
However, FINRA said any SEC involvement in the matter did not constitute state action and suspended him for refusing to testify.
According to the FINRA website, “FINRA is not part of the government. We’re an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly. Our independent regulation plays a critical role in America’s financial system—by enforcing high ethical standards, bringing the necessary resources and expertise to regulation and enhancing investor safeguards and market integrity—all at no cost to taxpayers.”
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