Each month, you'll likely find financial advisors who have been disciplined by FINRA for violations of rules relating to the Form U4. In this short blog series on U4 basics, we'll seek to help you understand what a U4 is, what it means to your career as a financial advisor, some common pitfalls to beware of to avoid problems, and also discuss the significant repercussions that can arise when an advisor neglects his or her Form U4.
The U4, also known as the Uniform Application for Securities Industry Registration or Transfer, is the predominant vehicle by which regulatory bodies (FINRA, the states, and exchanges) screen candidates for registration and registered folks for new or continued registration. It is also one of the primary sources of information for an advisor's Central Registration Depository (CRD) or Investment Adviser Registration Depository (IARD) record. It contains personally identifiable information about each applicant such as name, SSN, physical characteristics, address history, work experience, and education. Beyond these basics, applicants are required to self-report information relating to customer complaints, arbitration claims, regulatory proceedings, bankruptcies, certain criminal history, certain civil litigation and liens, and judgments, etc.
On the broker-dealer side, the primary regulations relating to the Form U4 come from FINRA. Article 5, Section 2 of the FINRA Bylaws require that any person applying for registration with FINRA submit an application (the Form U-4) and that the application be kept current, by amendment, at all times. This Bylaws section grants folks up to 30 days to amend their Form U4 after learning of the facts giving cause to make an amendment, but if the amendment involves a statutory disqualification, then it must be filed within 10 days, as opposed to 30 days. FINRA historically enforces this requirement by pursuing violations of FINRA Rule 1122 and 2010 against applicants and brokers who fail to honestly report information on the U4, or fail to timely amend their U4. Unfortunately, in a rather draconian scheme, a “willful” failure to report information on the Form U-4 can have disastrous consequences, including a permanent statutory disqualification.
Remember that the U4 is meaningful to your career. If you have a question about it, seek knowledgeable counsel. If you'd like to discuss your situation with an experienced securities regulation lawyer, please contact us.
You can read more about Form U4 issues in this blog series at the following links:
Update April 2021: The Beck Law Firm, LLC has introduced a new free resource, The Financial Advisor's Guide to Arrests, Criminal Charges, and Related Form U4 Issues. Click here to download your free copy.