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Case Study: Cleaning Up a Form U4 – August 2018

Posted by Joel Beck | Aug 09, 2018 | 0 Comments

If you're a financial adviser with negative disclosures on your Form U4 and in your CRD record, it really does make sense to see what you can do to clean that up. Those negative disclosures not only sit there and may cause problems when your prospects or clients review it, but it can also hinder your employability and your marketability as you look at potentially changing firms.

We recently completed a project for a client of ours, a financial adviser who had several disclosures on his record.Our client, who we'll call Broker X, had a couple of criminal history disclosures appearing on his Form U4 and in his CRD record. He didn't like those lingering there and came to us to see if we could fix it. He also had a history of several tax liens against him.Several had been resolved, but one remained on his Form U4.

With respect to his criminal history, he had two reported events. One was a felony charge of obstruction of a law enforcement officer. The case was ultimately dismissed and the records were restricted, but it was still appearing on his U4.Neither Broker X, nor his firm, had ever reported that the records had been essentially sealed under the applicable state law and sought to therefore remove them from Broker X's Form U4 and CRD record.To fix this, we were able to go in and file a petition for expungement providing the documentary evidence laying out the argument under the law why this should no longer appear on his record. We were able to get it removed entirely from his CRD record. So, it doesn't show up on his U4. It's not archived in the CRD system anymore and importantly, it doesn't appear on the BrokerCheck ® report for his clients, prospects, other firms – as well as the competition – to see. That was a great win for him.

Broker X also had another case stemming back from the 1990s or so when he'd been in college and he got arrested by the police in his dorm room on a couple of charges. The police charged him with a couple of felonies, and when the prosecutors got the case, they dismissed it without pursuing any type of charge.

When Broker X first got into the brokerage industry, he, of course, did what he needed to do and shared all of these information with his employer firm and his firm advised him to report the police charges on his U4.The firm didn't understand that he had never been formally charged in a court of law with any of these offenses. He had just been arrested but those charges were dropped. This appeared on his U4 from day one in the industry and followed him around for over 20 years. When our firm got involved, we were able to obtain the records from the police department and from the court and then got the entire record relating to the arrest restricted under that state's law, so that they're not available to the public.Then, we petitioned FINRA and were able to successfully remove that from his U4 and from this CRD record. Now, it's not there. It's not archived anymore. And so, it's not going to show up and be a hindrance to Broker X and his business when clients or prospects take a look at his record, or if down the road he needed to change firms. This was a great win for our client and Broker X was very happy with this.

Broker X also had a history of some tax liens, and all of these except for one had been knocked out by the time that he came to us. His one remaining IRS tax lien is being worked on with his tax advisor, and they are speaking with the IRS about steps to resolve that lien . Hopefully, that's going to be resolved soon.When it is, that will no longer appear on his Form U4 and BrokerCheck ® report to the public.

The bottom line is this: if you're a financial adviser and if you have disclosures on your U4, you need to do what you can to clean those up, so that those negative disclosures don't cost you business, or career mobility.If a blemish from your record can be cleaned up, it makes sense to do that.Understand, though, that not all negative marks on your U4 can be removed.

If we can be of help with respect to your Form U4 and CRD record, contact us to schedule a consultation. 

Update April 2021: If you're concerned about your Form U4, click here to request the new Financial Advisor's Guide to Arrests, Criminal Charges, and Related Form U4 Issues from The Beck Law Firm, LLC.

About the Author

Joel Beck

Joel Beck founded The Beck Law Firm, LLC in 2007. His firm focused on business law and estate planning needs of clients, two areas that he was drawn to based upon personal and business experiences in his life, including a ten-year career at NASD (now known as FINRA).


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