When Bad Privilege Advice and One Rule 8210 Violation Is Enough to End a Career: Lessons from FINRA’s Fetherston Case.

The Fetherston disciplinary matter is the kind of case that makes practitioners sit up straight. After an initial Extended Hearing Panel decision, the National Adjudicatory Council (NAC) reversed the decision, sending the case back with unusually specific and pointed instructions to the Panel about how to weigh evidence, how to apply the preponderance standard, and how to treat hearsay from customers who declined to testify. See Dep’t of Enforcement v. Fetherston, No. 2020065396501, 2023 FINRA Discip. LEXIS 14 (OHO Sept. 26, 2023), remanded, 2024 FINRA Discip. LEXIS 27 (NAC Dec. 9, 2024). On remand, and over a dissent by the Hearing Officer, the Panel Majority, disagreeing with the NAC, again dismissed causes one and two involving the conversion and false-information charges, yet unanimously reversed itself on cause three, imposing the industry bar for another Rule 8210 violation, relating to the failure to produce medical-expense records. That rare, open split between the NAC’s roadmap and the Panel Majority’s decision on remand, coupled with the role that flawed legal advice about asserting “privilege” over medical records played in producing a career-ending sanction, is what makes this case so unusual and so instructive.

What is the Fetherston Case About?

Enforcement alleged that a registered representative, Peter J. Fetherston, took three checks from long-standing customers (a married couple referred to in the decisions as “the Gs”) and used the proceeds for himself. That allegation framed a first cause of action for conversion and improper use of customer funds under FINRA Rules 2150 and 2010. A second cause alleged that Fetherston provided false information in response to Rule 8210 requests by fabricating and testifying falsely about a handwritten note purporting to show that the customers gave him the checks to cover his medical expenses. A third cause alleged a separate Rule 8210 violation for refusing to identify, by date, amount, and payment method, the specific medical expenses he claimed the checks were meant to cover. Together, the charges threatened not just suspension but the industry bar.

At the initial hearing, the Panel heard from a firm compliance advisor and a FINRA investigator who recounted multiple interviews with the customers, as well as from Fetherston himself. Fetherston acknowledged that the couple had given him three checks totaling $89,000 to help pay medical expenses and that he did not provide the requested itemized medical-expense information because his counsel advised him that the information was privileged. However, he rejected the accusation that he falsified or testified falsely about the customer’s note. The Panel’s initial decision dismissed the counts of conversion and false information but found him liable on the third cause for failing to supply the medical-expense details, imposing a four-month suspension - an outcome that Enforcement appealed to the NAC.

Why NAC’s Remand Stands Out.

On appeal, the NAC did something unusual: it remanded with very detailed and pointed instructions to apply the correct preponderance standard, to say exactly what weight the Panel gave to the customers’ statements and why, to analyze corroboration, and to consider whether any credibility problems in Fetherston’s testimony supported his liability in combination with the rest of the record. The NAC’s message to the Panel also emphasized in strong terms that “more likely than not” standard governs, not a near-certainty test.

What followed is equally uncommon in FINRA practice: the Panel itself split on remand. And the Panel Majority again dismissed the conversion and false-information counts, while the Hearing Officer issued a written dissent finding liability and favoring a bar. That outcome is in obvious tension with the NAC’s roadmap, which effectively showed how a factfinder could reach liability under the “more-likely-than-not” standard by assigning and explaining the weight of the customer statements, testing them against corroborating evidence, and folding credibility findings into the comparative judgment about what more likely than not took place.

The divergence between the NAC’s pointed instructions and the Panel Majority’s renewed dismissal is unusual, and it is precisely what makes this case so unusual and instructive. The NAC told the Panel to re-anchor its analysis in the preponderance standard, to say exactly how much weight it gave the customers’ statements and why, to walk through corroboration against Fetherston’s own incriminating admissions and documents, and to factor Fetherston’s questionable credibility into the overall judgment. Read as a whole, that guidance functioned less like a generic reminder and more like a map or instruction and directive: if the Panel properly weighed evidence, tested it against the record and Fetherston’s words, and drew reasonable inferences and accorded appropriate credibility weight to witnesses and their testimony, the record could support Fetherston’s liability. The NAC never explicitly directed the Panel to make these findings, but the emphasis and precision of its instructions made the subtext hard to miss.

But as noted above, the Panel Majority saw it differently on remand. Applying the NAC’s framework, it still concluded that the customers’ hearsay statements - absent live testimony - did not carry enough reliable weight. In the Panel Majority’s view, the gaps and inconsistencies in the accounts, coupled with the inability to test the customers on cross-examination, left too much uncertainty to say “more likely than not” on the first two counts of conversion and false information. The Panel Majority credited alternative explanations just enough to keep the scale from tipping, even while unanimously finding a stand-alone Rule 8210 violation on count three, relating to the refusal to produce the medical-expense records, imposing a bar.

The Hearing Officer’s dissent took the opposite path and, in spirit, hewed closer to the NAC’s roadmap. He read the customers’ statements as sufficiently reliable when viewed with the corroboration the record already contained, including Fetherston’s early admissions to firm compliance. He would have drawn adverse inferences from Fetherston’s shifting or implausible testimony, and on that fuller weighing would have found liability on the core counts and imposed a bar. The Panel Majority and the dissent thus parted company on how much weight to give hearsay without live testimony, how to measure corroboration, and how credibility shifts the comparative judgment about what was more likely than not to have happened.

Where they did not part company is just as important. Both the Panel Majority and the dissent agreed to follow the NAC’s instructions on sanctions and to reassess the stand-alone Rule 8210 count, relating to the medical-expense records. That “surviving” charge focused on the refusal to supply itemized, non-medical details and key credit card statements supporting the asserted medical-expense explanation proffered by Fetherston during the investigation. Once the Panel applied the NAC’s guidance, it concluded the production was incomplete in ways that prevented FINRA from verifying the story and that medical-privacy concepts did not shield the requested non-medical identifiers. Under the Sanction Guidelines, that kind of partial, non-curative response warrants a bar absent compelling mitigation. Importantly, too, advice-of-counsel, while potentially relevant to mitigation, is not a defense to 8210 liability and, in any event, did not move the needle on sanctions here.

The result is the headline lesson of this case: even though the Panel Majority dismissed the two other charges, the recalibrated analysis on remand left one violation in cause three - Rule 8210 - powerful enough to carry the ultimate sanction on its own.

Advice of Counsel Defense Under FINRA Rule 8210

The advice-of-counsel defense analysis was central to the remand because it explains why a single “surviving” Rule 8210 count was still grave enough to warrant a bar. The NAC made two points that matter in every investigation. First, reliance on counsel is not a defense to liability for failing to respond “fully and promptly” to a Rule 8210 request. If the information is within scope, and the respondent withholds it, the violation is complete regardless of what a lawyer advised. The NAC affirmed that principle explicitly while also confirming that HIPAA and New York’s physician-patient rule do not create a privilege shielding the non-medical identifiers FINRA sought here.

Second, advice of counsel may mitigate sanctions, but only if the respondent proves it with real evidence and meets a demanding standard. The NAC restated the familiar elements: complete disclosure to the lawyer, a request for legal advice on the precise conduct at issue, actual advice that the conduct was lawful, and good-faith reliance on that advice. Even then, those elements go to mitigation under the Sanction Guidelines rather than liability, and adjudicators expect “sufficient content and sufficient supporting evidence” before giving credit. On remand, the NAC directed the Panel to apply that framework and to reassess the sanction accordingly.

The Panel Majority and the dissent disagreed about the first two counts, but they both followed the NAC’s sanctions instructions on remand and reweighed the 8210 misconduct through the correct lens. The Panel found the production incomplete in ways that prevented FINRA from verifying Fetherston’s medical-expense story, and it concluded that medical-privacy concepts did not protect the non-medical dates, amounts, and payment methods FINRA had asked for. Under the Guidelines, a bar is the standard sanction for a partial but incomplete response unless the respondent shows substantial compliance with the request, something the record did not support here. The Panel, therefore, imposed a bar in all capacities on the 8210 count alone, even while the Panel Majority dismissed the other two charges.

The Panel also explained why the advice-of-counsel claim failed as mitigation on this record. Fetherston offered his testimony and a letter his lawyer sent to FINRA asserting privilege, but he did not produce the actual advice he received, did not call his lawyer to testify, and could not establish that he had made full disclosure or received competent, case-specific advice to withhold the itemized information. The Panel also refused to give any weight to Fetherston’s attorney’s post-hearing brief description of the advice he purportedly gave, noting that “unsworn representations by counsel contained in briefs or memoranda are not evidence of the facts they purport to recount.” Similarly, the Panel found that the letter asserting privilege sent to FINRA staff was not legal advice to a client.

The lesson here is straightforward. If a respondent intends to claim reliance on counsel, the record must actually demonstrate it: full disclosure to the lawyer, advice tied to the precise 8210 request, and proof of what was asked and what was said. Even then, that showing can only reduce the sanction; it cannot erase the violation. In this case, the failure to meet that evidentiary bar meant the “surviving” 8210 count carried the ultimate sanction on its own.

Why Experienced Counsel Early Makes a Decisive Difference

This case underscores why financial professionals should involve experienced FINRA counsel the moment an 8210 letter arrives. Skilled counsel can protect their interests while still satisfying the rule’s “fully and promptly” obligation. What does not work, and what led to the bar here, is a blanket withholding of records based on privileges that do not apply. As the NAC and the Panel made clear, a reliance on an improper assertion of privilege cannot defeat a Rule 8210 charge, and it will mitigate sanctions only when the evidentiary showing of reliance on advice of counsel is robust.

If you are responding to an 8210 request, our firm can design a response strategy that honors legal compliance and protects your interests. We regularly advise clients on how to meet FINRA’s expectations without overproducing protected content. The difference between a calibrated production and an overbroad refusal can be the difference between closure and a career-ending bar.