A Financial Industry Regulatory Authority (FINRA) hearing panel issued a decision today against a broker formerly employed at Lek Securities Corporation. Alex Lubetsky, respondent in a complaint brought by FINRA's Department of Market Regulation, was suspended for refusing to provide testimony at an on-the-record (OTR) interview regarding possible market manipulation in an account at the New York City-based firm.
FINRA Rule 8210 "requires FINRA members and persons associated with a member to provide information orally or in writing with respect to any matter involved in a FINRA investigation. Because FINRA is a self-regulating, non-governmental agency, it does "not recognize the Fifth Amendment privilege against self-incrimination in any of its proceedings, including an OTR."
Lubetsky was informed that his failure to answer any questions based on his assertion of the Fifth Amendment privilege, he would "may be subject to a FINRA disciplinary action and the imposition of sanctions, including a bar from the securities industry, suspension, censure, and/or fine." At the OTR, when he was asked if he was known by any other names, Lubetsky invoked the Fifth Amendment and refused to answer any further questions.
At the time FINRA was investigating Lek Securities, the Securities Exchange Commission (SEC) was also independently investigating the firm for possible market manipulation. Lubetsky argued that the two entities were coordinating their investigations, therefore FINRA was engaging in a state action which made it subject to the Fifth Amendment. While it was true that both the SEC and FINRA were interviewing the same people and making similar requests of him, Lubetsky was unable to demonstrate a "nexus between the SEC and FINRA's requests," and therefore the panel found there was an "investigative overlap and nothing more."
In addition to the suspension, Lubetsky was also ordered to pay $1,796.68 for the hearing costs. Lubetsky's suspension will automatically convert to a bar within three months if he fails to fully comply with the department's request for testimony.