Representatives of broker-dealers and investment advisers use Form U4 to register with the states and with self-regulatory organizations e. Broker-dealer agents and investment adviser representatives have an obligation to update previously filed Forms U4 with any new information required to be disclosed. Firms terminating the registration of an associated person must respond to a series of disclosure questions. Firms also have the obligation to update previously filed Forms U5 if they become aware of new disclosure information. As discussed above, Form U4 and Form U5 filings initial applications.
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To some degree, the debate is a bit silly, if the question is whether there is enough information provided on BrokerCheck. There is a real problem, however, one that is much less academic, and with potentially devastating consequences. By that point, unfortunately, the tools available to me are extremely limited. One of the acts that triggers an SD is a finding that the broker willfully failed to make a required disclosure in an application for registration, i.
That includes a willful failure to update a Form U-4 in a timely manner to disclose something that requires disclosure. A common example of such a failure is a pending tax lien. For some reason, registered representatives cannot seem to remember that Form U-4 requires them to disclose when they become the subject of a tax lien. It hardly matters if the lien is being contested; it still has to be disclosed. FINRA, on the other hand, does remember. It routinely runs the equivalent of a credit check on registered persons, and, if the check turns up a pending tax lien, FINRA will then review CRD to ensure that the U-4 was properly amended to reflect it.
It does not mean that someone intended to violate the rule. It does not mean that someone knowingly failed to file the update. It has no bearing whether or not respondent knew of his obligation to disclose it. The upshot of this is that what FINRA has expressly acknowledged to be a relatively minor rule violation can, when deemed to be willful, become a career ending catastrophe, due to the fact that it will result in a Statutory Disqualification.
There is nothing cheap or easy about dealing with an SD. It could mean an evidentiary hearing in front of a subcommittee of the National Adjudicatory Council, a hearing at which the applicant has the burden of proving his or her right to remain in the industry.
As the reported SD decisions readily reveal, MC applications are routinely denied. The lesson here? Every rep has the duty to ensure that his or her own Form U-4 is accurate, complete and up-to-date.
That cannot be left up to the broker-dealer, even though a rep cannot file his own U-4 amendments. Every rep should take the time to review Form U-4 and study the questions, to serve as a reminder the universe of information must be disclosed.
Then, they should have their broker-dealer provide a copy of the CRD record itself, and confirm that everything requiring disclosure is, in fact, disclosed. It is not enough simply to review BrokerCheck inasmuch as some things in CRD are not published via BrokerCheck, as noted at the outset of this entry.
If there are omissions, or disclosures that need updating, reps should request or, more accurately, demand that the U-4 be corrected immediately. And, of course, that that communication with the BD needs to be documented. One of the few ways that a failure to timely amend a Form U-4 charge can easily be proven not to be willful is by demonstrating that the BD was timely notified of the need for the U-4 update but somehow failed to do it.
Since I published this earlier this week, a good friend of mine, Gregg Breitbart, had an excellent article picked up by Investment News on the same subject, i. In my experience defending these cases, there are really only two ways to establish that the failure was not willful. First, have documentary evidence that establishes the registered representative advised his or her broker-dealer about the tax lien, but, for whatever reason, the BD failed to amend the Form U
FINRA Clarifies Disclosure Rules for PPP Loans
But, did you ever consider how important it is to keep your Form U4 disclosures current to avoid enforcement action for failing to disclose material information? FINRA commonly reviews state filings and the internet in an effort to identify exceptions. These are often overlooked and not updated. For example, if you write-off a portion of your credit card debt with American Express and are able to settle it for a lower amount, you must disclose this on your U4. Address Changes When you move from one home to another, one of the last things that you are considering is whether you have updated your residential address history with FINRA; however, you are required to do so.
U-4 Omissions and Statutory Disqualification: Much Ado About Nothing
Shaktilkree If advisory firms take on that responsibility, however, then they must adopt the policies and procedures for voting and disclose them to clients. Truzzi, Senior Compliance Consultant. The Pennsylvania Department of Banking and Securities issued a position letter on September 25, telling state-registered investment advisers and their investment adviser representatives to stop using client usernames and passwords to access client custody accounts. FINRA inquiries do not necessarily result in the initiation of a formal investigation or enforcement proceeding, but most investigations and enforcement proceedings begin with an inquiry. In the past, enforcement cases involving failures to timely amend U4s were generally brought against individual registered representatives.
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