Broker Claims FINRA’s Testimony Demands Violate Constitutional RightsBroker Claims FINRA’s Testimony Demands Violate Constitutional Rights

A New York-based broker is suing FINRA over its demand for on-the-record testimony, claiming its calls amount to a subpoena without the benefits of the constitutional protections that come along with it.

According to the complaint filed in federal court in Washington, D.C., last week, Francis Smith runs FGS Financial out of Setauket, N.Y. He provides “financial advisory services” to about 385 households and manages $210 million in assets, taking in more than $100,000 in monthly commissions. According to his BrokerCheck profile, Smith registered with Commonwealth.

Last March, FINRA investigators approached Smith concerning an ongoing investigation, and he eventually retained counsel after learning he would have to give sworn testimony. According to the complaint, FINRA investigators told his counsel they were interested in his dealings with Wesley Triani, who purportedly assisted financial advisors by complying with continuing education requirements. 

According to an affidavit by Smith, he’d known Triani for about 20 years but later became aware that Triani was part of the focus of a FINRA investigatory sweep. 

The agency settled charges with dozens of registrants, accusing them of falsely claiming they’d completed continuing education requirements for their state insurance license when someone else (allegedly Triani) had done so on their behalf. FINRA barred Triani from the industry in 2023 for failing to cooperate with an ongoing investigation. 

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In his affidavit, Smith noted that many of the registrants named in FINRA settlements had been fired from their firms or were otherwise out of the industry.

“In short, should the investigation go wrong, and an adverse finding is made against me, it could have consequences that would be devastating to my career and FGS Financial,” he wrote. “All I have worked so hard for would be destroyed.”

According to Smith, FINRA mandated on-the-record testimony, alerting him he’d be sworn under oath when testifying,” but that “because FINRA is not a governmental agency, however, the Fifth Amendment privilege against self-incrimination does not apply in its investigations and proceedings.” Smith argued that this was “unfair.”

“If I simply appear and cooperate to the extent that FINRA requires, I would be deprived of my ability to assert a constitutionally guaranteed defense,” he argued.

FINRA declined to comment for this story.

Smith’s claims mirror other litigation (including broker Frank Black’s multi-year case against FINRA), citing recent Supreme Court decisions to argue that FINRA is overstepping its authority. 

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Attorneys representing Black in his lawsuit against FINRA expect that a case concerning FINRA’s constitutionality (or a similar case that would have a direct bearing on it) will reach the Supreme Court in the next several years.

Smith is asking for a temporary restraining order and an injunction to stop “FINRA from requiring (Smith) to waive his constitutional rights against self-incrimination during on-the-record, sworn testimony.” FINRA requested extended time to file its response, which Chief Judge James Boasberg granted; the response is due by March 6, and a hearing is scheduled for March 25.