As we continue to review basic information regarding the Form U4, in this post, we'll address some disclosable events regarding criminal history disclosure. Generally speaking, the Form U4 is a very straightforward document, when taken together with the official instructions for completion of the U4. Based upon my own observations, I believe that many financial advisors and supervisors rush through completing the form and don't pay attention to the instructions. Many times, those people get busted for making a misrepresentation or omission on the U4, and, in the case of a new broker, ruin the prospects of their career before it even gets going. So, what should you do? First, read the instructions, which can be found on FINRA's website and on CRD. Second, pay close attention when completing the form – anytime you see an italicized word that means it has a special definition for this form – check that out in the instructions. And finally, if you have questions, seek help – especially when it comes to criminal history disclosures. Don't complete the U4 and file it when you are guessing how you should complete it. The consequences can simply be too great to take a haphazard approach to completing the U4. And, if you disclose something that you were not required to, it may prove very difficult to have removed, leaving a potentially negative disclosure out there for clients, prospects and your competition to see.
Form U4 Items 14A and 14B – Criminal Disclosure. In Items 14A and 14B of the U4, applicants must disclose information about certain criminal charges and convictions, including disclosure of all felony convictions and certain misdemeanor convictions. Notice that question 1(b) of each section does not ask if you have been convicted of certain offenses; it asks whether you have been charged. And notice that “charged” is italicized, and the definitions explain that this means being formally accused or a crime in a formal complaint or indictment or other similar fashion in a court of law or a court martial. An arrest may or may not be a charge for purposes of the Form U4. Even if you were not convicted, you are instructed to disclose the charge for the identified offenses. As you answer the questions, be careful to understand that there is not a time limit for these questions – the criminal history questions use the word, “ever.” I've often heard financial advisors tell me that these questions only seek information going back 10 years. The reality is that only one U4 question (Item 14K with three subparts) seeks information limited to the most recent ten years. The criminal history questions seek information about the events whenever it was that they occurred.
If you've had criminal history records sealed or expunged, or think you have, be sure to have a clear understanding of what has actually been sealed or expunged, and what that actually means. Sometimes, under certain state laws, the expungement may only relate to a conviction, leaving the charge on your record. If that is the case, you may then still have to disclose the charge on your U4. Also, know that laws on expungement and sealing of records vary from state to state. If you have a concern about whether you need to disclose a charge or conviction that you've had sealed or expunged, consult with legal counsel before completing the Form U4.
Finally, before answering the questions, read the U4 and its instructions carefully. If you have a question or concern about how to respond, seek knowledgeable legal counsel. If you'd like to discuss your situation with an experienced securities regulation lawyer, please contact us.
You can learn more about Form U4 Issues by visiting these other blog posts in this U4 Basics series:
Form U4 Basics: Part 1 – An Overview of the Form U4
Form U4 Basics: Part 2 – The Little Known Lifetime Bar
Form U4 Basics: Part 4 – Disclosure of Customer Complaints, Arbitrations and Litigation
Form U4 Basics: Part 5 – OBAs, Regulatory Events and Terminations
Form U4 Basics: Part 6 – Disclosure Issues Beyond the Form U4
UPDATE – AUGUST 2018
If you have criminal history or other disclosures on your U4, be sure to check these posts out, including two case studies of our work for some of our clients.
Case Study: Cleaning up a Form U4 – August 2018
Case Study: Expungement of an Advisor's Criminal Record from CRD (July 2015)
Update February 2019: Joel recently blogged about Georgia's record restriction statute. If you have a criminal charge in Georgia that did not result in a conviction, this post is for you:
Georgia Records Restriction: Sealing Non-Conviction Records
Update April 2021: For more information on criminal disclosures and what to do about them, view our new free resource, The Financial Advisor's Guide to Arrests, Criminal Charges, and Related Form U4 Issues. Click here to request your copy.
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