Last time, we discussed the general purposes and overall regulatory scheme for the U-4. Now, let’s talk about some disclosable events and what has to be disclosed. Generally speaking, the Form U-4 is a very straightforward document, when taken together with the official instructions for completion of the document. Based upon my own observations, I believe that many folks 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 U-4, and, in the case of a new broker, ruin the prospects of their career before it ever 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.
Here are a few disclosable events where folks commonly get trapped:
Item 13 – Other Business. An often-overlooked area. In addition to disclosing outside business activities to your firm pursuant to Rule 3030 – the Form U-4 requires those disclosures as well. But note that the disclosure here is rather exhaustive, including the nature of the business, your title, start date, approximate number of hours your work per week or month for that business, how many hours during trading hours, and a brief description of your duties.
Item 14A&B – Criminal Disclosure. Here, question 1(b) of each section does not ask if you have been convicted of certain offenses, only whether you have been charged. Charged is italicized, and the definitions explain that this means being formally accused of a crime in a formal complaint or indictment. Even if you were not convicted, you are instructed to disclose the charge for the identified offenses. Note that there is not a time-limit for these questions, such as within the last ten years; rather, the question uses the word, “Ever.”
Item 14H&I – Civil Judicial and Customer Complaint/Arbitration Disclosure. Here, applicants are instructed to disclose any investment-related matters under these questions. Again, investment-related is specifically defined and on the U-4 is much more broad than securities. According to the definition, it encompasses insurance, real estate, and commodities along with securities.
Bottom line – read the U-4 and its instructions carefully. If you have a question, seek knowledgeable counsel.