Advisor at Risk

Ellen Bessner

Ellen Bessner is a well known, leading litigator with commercial litigation firm Babin Bessner Spry LLP. Her more than 20 years of experience includes defending investment and insurance industry participants, including dealers and individuals at all levels of courts.

Preparing for an interview with compliance, a regulator or client’s counsel is key because your licence, reputation and livelihood are all at stake

By Ellen Bessner |

This is the second in a three-part series on being prepared and cautious when faced with a potential compliance breach. This column is about how to prepare for an interview with your own compliance department, the regulator or counsel for a complaining client. The first column explained how it's crucial to never go into a meeting cold when being interviewed for any compliance infraction. The third column, to be published on June 5, will be about the importance of thoughtful email exchanges and the preparation of other written documents pursuant to an investigation into a potential compliance breach.

All registrants, including advisors, their supervisors, compliance officers and registered assistants are under the microscope more than ever before, resulting in a correlating increase in investigations. Most investigations include an interview. As a result, it's critically important to prepare for an interview properly and to know when to hire a lawyer for such a process.

Specifically, advisors could be interviewed by any number of investigators, including:

  • Their dealers' compliance staff or legal representatives.
  • Provincial securities commissions. (There could be more than one provincial regulator if registered, or seeking registration, in more than one province.)
  • Self-regulatory organizations.
  • Insurance regulators. (There could be more than one if registered, or seeking registration, in more than one province.)
  • The Ombudsman for Banking Services and Investments.
  • Certain financial planners' associations. (This depends on which one an advisor is registered with.)
     

Those advisors who are to be interviewed may assume, mistakenly, that they will just attend the interview, answer honestly and everything will be fine. But you need to realize that your licence, reputation and livelihood are all at stake. Therefore, the importance of preparing for such an interview is key, especially as interviews are recorded on tape and the tapes and other materials may be shared with other bodies investigating the matter.

Thus, getting every answer right, on every interview, means ensuring consistency with what's told to each regulator, what's in the documents, and to reflect what actually happened. Here are four steps you should take to prepare for an interview properly:

1. It's key to know the infractions being alleged against you — and by whom. Sometimes, investigators need to be pushed to be transparent with you so that you can prepare properly.

2. Reading all the relevant materials concerning the allegations, such as your agenda and meeting notes, is crucial to refresh your memory.

Some investigators want to blind-side you by putting a single document in front of you and asking questions in a vacuum. This is not supposed to be a memory test, but rather, an exercise to get to the truth. You, or your lawyer, should insist — politely — that other relevant documents be provided so you are not forced to guess.

3. After reviewing all materials, you may want to prepare a chronology to help piece facts together.

4. Reflect and think. Ask yourself the questions you expect in the interview and prepare the most accurate answer based on the materials you've studied. If your memory is foggy, think harder and really challenge yourself. The most accurate answers are those you've had a chance to think about.

Lawyers who practice in this area are usually able to anticipate most of the questions you will be asked in an interview. However, registrants are often concerned that if they hire a lawyer to help them through this preparation process, they will be seen to be unco-operative or it will be interpreted as if they have something to hide. They are also concerned about the cost — even though their licence may be at stake.

However, many experienced lawyers have junior associates who charge a lower rate and can be supervised by the more senior lawyer. Furthermore, check your insurance coverage as your errors and omissions insurance may cover the cost of a lawyer in certain circumstances.

Here are some things to think about on whether, and when, you need to hire a lawyer:

> If your dealer's compliance or legal department is handling the matter, you may not want a lawyer interfering with the dealer's process — and the dealer may not appreciate the interference when it's just trying to collect the facts. However, you can quietly retain and consult with a lawyer to prepare you, without having the lawyer interfere. In fact, the dealer doesn't even have to know you retained counsel. You would just work with the lawyer in the background and all interfaces with compliance are directly with you.

> Sometimes, it's your dealer that suggests you retain a lawyer to assist with preparation. This is both fair and smart because a well-prepared advisor will also protect the dealer. In these cases, the dealer works with the lawyer, supplying documents and other materials to assist with the process.

> If the interview is with a regulator, you need a lawyer. This is your right and regulators expect you to attend with counsel. In all regulatory interviews, you are not thought to be guilty or have something to hide if you attend with a lawyer.

I asked one of my clients to prepare a statement about the preparation for his examination and this is what he said:

"The preparation and time that went into my examinations proved to be invaluable. It provided me with the confidence to focus and answer questions specifically while controlling my emotions and body language. I was successful in my examinations as a result of my legal team's commitment and efforts to ensure I was ready."

I hope that you're never on the hot seat, but if you are, take the time to be prepared.

 

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