Question 14A(1)(b) asks if you've ever been charged with a felony. Many years ago I had an issue, which I was able to get expunged later by a judge. I recently changed employers and FINRA claims that the arrest showed up on my record and they claim that I therefore lied when I answered "no" to 14A(1)(b). What can I do?

-R.S, via e-mail

In this day and age, with multiple law enforcement databases, just because a record is supposed to be expunged doesn't mean that every one of those databases with a copy of the record will actually expunge (or delete) it. With all the other issues that staff must handle in law enforcement agencies, sometimes something like this is not considered a high priority and takes a back seat. Consequently, when the regulatory authorities do a background check, it's still possible that it might pop up somewhere and you wind up with a nasty letter from the regulator alleging that you "lied" on your application.

In order to resolve this, you will have to provide all the paperwork showing that the matter was formally expunged by a court. It's therefore imperative that you keep copies of everything, especially the final Order of Expungement, so you can provide a copy to a regulatory agency in the future.

Also, keep in mind that just because an item doesn't show up one time, that doesn't mean it might not pop up in the future when you file a new application for registration (i.e., if you change jobs or seek to get licensed in another state). It depends on how thorough the particular regulatory agency is.

I'm planning to purchase a small broker-dealer. I would like to do a private placement to raise capital in order to expand the operations of the firm. Are there any issues that are unique to brokerage firms doing private placements for themselves?

-W.R., Florida

Private placements can be complicated matters and, consequently, you must speak with a qualified attorney to guide you through the process. I could not even begin to try and address all of the myriad issues involved in this process within the brief space of this column.

However, one issue you should be aware of is a recent FINRA Regulatory Notice (09-27). It announced the SEC had approved a new FINRARule (number 5122) relating to private placements of securities issued by a member firm or a control entity.

FINRARule5122"requires a member firm or associated person that engages in a private placement of unregistered securities issued by the firm or a control entity of such firm to: 1) disclose to investors in a private placement memorandum, term sheet or other offering document the intended use of offering proceeds and the offering expenses; 2) file such offering document with FINRA's Corporate Financing Department at, or prior to, the time it is provided to any investor; and 3) commit that at least 85% of the offering proceeds will be used for business purposes, which shall not include offering costs, discounts, commissions and any other cash or non-cash sales incentives."

There are various exemptions to this rule. For example, one is for member private offerings that are sold solely to qualified purchasers, as defined in Section 2(a)(51)(A) of the Investment Company Act. Therefore, you and your attorney should review both the actual rule and the Regulatory Notice itself.

A former client of mine has filed an arbitration action against me and my firm. The claim contains numerous inaccuracies and falsehoods. Can I countersue the customer for slander for ruining my reputation?

-H.R., via e-mail

Just to clarify, libel is a written defamatory statement. Slander is a spoken defamatory statement. Both fall under the general category of defamation. To prove defamation you need to show that the defendant made a false and defamatory statement; published (written or orally) the statement to a third party; made the defamatory statement with the requisite intent, negligence or malice; and that you actually suffered damages.

The last element might be difficult to prove since you would have to show that you actually lost business (or were fired), because of the arbitration claim.

Regardless of that, however, there are numerous defenses to a claim for defamation, not the least of which is the fact that an absolute privilege extends to statements made during a judicial proceeding, provided that such statements are related to the proceeding's subject matter.