Lately, many hits to BDLawBlog.com have come from searches for information on Forms U-4, statutory disqualifications and disclosable events. Seems like a lot of folks have the Form U-4 on their mind, so I thought I’d do a series on the Form U-4, what you need to know, and what you need to do with respect to it. (We’ve earlier posted about the little known statutory disqualification relating to U-4 violations - see link below) And, for the firm side, we’ll talk about supervisory obligations relating to U-4 matters, too. Here in part one, we’ll discuss its ultimate purpose and the typical rules applicable for this document. In subsequent parts, we’ll discuss disclosable events, and regulatory violations relating to the U-4, and a supervisor/firm’s obligations relating to reporting and supervising.
The U-4, also known as the Uniform Application for Securities Industry Registration or Transfer, is the predominant vehicle by which regulatory bodies (FINA, 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 a broker’s Central Registration Depository (CRD) record. It contains personally identifiable information about each broker or candidate such as name, SSN, physical characteristics, address history, work experience, and education. Beyond these basics, brokers 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.
The primary regulations relating to the Form U-4 come from FINRA. Article 5, Section 2 of the FINRA (formerly NASD) 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 U-4 after learning of the facts giving cause to make an amendment. FINRA historically enforces this requirement by pursuing violations of Rules IM-1000-1 and 2110 against applicants and brokers who fail to honestly report information on the U-4, or fail to timely amend their U-4. 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. Read about that HERE. Stay tuned for Part Two.