A few days ago, FINRA released an Information Notice entitled, Change to Form U4 Regarding the Reporting of Judgment/Lien Events. The effective date of the change was October 26, 2013.
In a nutshell, FINRA has amended the DRP of the U4 for reporting of unsatisfied liens and judgments to add a question requiring disclosure of the date on which a registered rep. learns of the unsatisfied lien or judgment. In doing this, FINRA seems to hope to automate the process for charging late disclosure fees against firms reporting these matters late, and, I believe, also seeking information that it can use in examinations of brokers who fail to timely disclose information on their Form U4.
For as long as I can recall, brokers have had an obligation to affirmatively disclose on their U4 the existence of any unsatisfied liens or judgments against them - as well as other personal financial information such as whether the broker has filed for bankruptcy. With the economy has it has been the last many years, many brokers - like others in the community - have struggled with their personal finances and have had liens and judgments against them for various reasons. In my view, brokers are often not aware of the existence of these items, or are not aware of the need to report the matter on their Form U4 once they do learn of the event.
To help keep costs down for firms by not incurring late fees when U4 amendments are filed, broker-dealer firms may wish to remind brokers about the types of events that trigger a U4 update requirement, and then set in place policies for brokers to report the items to the firm so that the firm has adequate time to do follow up as needed to gather all necessary information to file the U4 amendment on time.
Violations relating to Form U4 disclosures (or the lack thereof) can be detrimental to a broker's career. For more information on those, check out the Broker-Dealer/RIA Form U-4 Issues category on the right hand side of the blog.