What is the Financial Industry Regulatory Authority Form U4?
The Form U4 is short for Uniform Application for Securities Registration or Transfer. The Financial Industry Regulatory Authority (FINRA) requires its financial advisors to be registered before they can facilitate the purchase, sale, or transfer of securities. FINRA operates as private organization, but with oversight from the Securities and Exchange Commission.
The Form U4 uniform application for securities initiates FINRA registration. A financial advisor must have securities industry registration before they can work for a FINRA member firm. Once completed, the reporting firm submits the the initial Form U4 to FINRA. Forms are filed electronically
Firms have a continuing obligation to keep information from the U4 form accurate and up to date. If changes occur, firms must amend to replace previously filed U4 forms.
What must be reported on the U4 Form to establish securities industry registration?
The Form U4 Uniform Application for Securities is broken into 15 questions/sections that member firms and brokers must answer. These questions can be distilled into three parts:
- General questions
- Disclosure questions
These Form U4 questions seek generic information from the broker and broker dealer.
Sections 1 and 2- General Information and Fingerprinting
This includes name; CRD number; the address of the branch where the registered representative works; and registered persons’ start date.
Representatives must be fingerprinted for security purposes to confirm identity and other verifying account information.
Sections 3 through 5- Registrations and Licensing
If a registered representative is concurrently registered with multiple broker dealer or investment adviser firms, FINRA licensed investment adviser representatives must disclose that concurrent registration in this section. Registered representatives must also disclose registration with affiliates.
SRO stands for self regulatory organization. This section of the Form U4 requires identification of the relevant securities industry licenses associated persons hold.
State securities licensure is disclosed as well. Depending on the states in which the associated person is registered, they become subject to oversight from state securities regulators, as well as FINRA.
Section 7- Examination requests
A broker dealer may make an examination request on behalf of any of its employees or agents who qualify to sit for a securities license exam. This section of the Form U4 is where a broker dealer may make such a request.
Section 8- Professional designations
Broker dealers must disclose any securities related professional designations on the form U4. These designation include, for example: Certified Financial Planner, Chartered Financial Analyst, Chartered Financial Consultant, Personal Financial Specialist, and Chartered Investment Counselor.
Sections 9-11- Identifying information, other names, and residential history
This Form U4 section requires name and physical description information including, name, height, weight, and place of birth. This section also provides an area to include any other previous names the broker may have used.
These questions require firms to provide the representative’s residential history from any date within the past 5 years.
Section 12- Employment history
These inquiries require member firms to provide the applicant’s employment history from the past 10 years.
Section 13- Other business
This section of the Form U4 requires divulgence of investment-related outside business activities. Brokers and member firms must disclose investment and security-related outside business activities so that potential clients and member firms can properly supervise investment related transactions.
Failure to disclose investment-related outside business activities can result in the sale of unapproved investment products known as selling away.
Disclosure inquiries cover section 14 of the FINRA Form U4. These involve divulgence of negative background information that may speak to the financial advisors’ or licensed investment adviser representatives’ propensity to engage in financial misconduct.
A firm that gives affirmative answers to the following questions must provide additional information on the Form U4’s “Disclosure Reporting Pages.” Disclosure Reporting Pages (DRP) require additional detail about the underlying issue.
Items 14A and 14B-Criminal History
This section of the Form U4 requires divulgence of criminal charges or convictions of any felony, or any investment-related or truth-related misdemeanor. Examples of truth-related criminal charges might include petty counterfeiting, stealing, or forgery.
This section of the FINRA Form U4 also requires advisors to divulge if a company over which the individual exercised control was convicted or charged with the crimes described above.
A firm that answers the Form U4 criminal inquiries affirmatively must then provide additional detail. This includes the name and case number of the criminal matter. Its status (pending, on appeal, or final), and the specific charge and/or conviction. It further asks for the outcome of the case. Meaning, applicants must state whether they were acquitted, had the case dismissed, were found guilty, or pled guilty, among other potential dispositions.
Brokers are then permitted to provide an explanation of the circumstances of the criminal disclosure.
Section 14C through 14G-Regulatory Action
The regulatory action section of the FINRA Form U4 provides numerous, detailed questions about whether the applicant has ever been the subject of regulatory inquiry by any federal, foreign, or state securities regulators. These inquiries drill into the applicants ethical conduct with specificity. They go so far as to inquire about violations of the Securities Exchange Act of 1934, and the Securities Act of 1933.
The items also require disclosure of past regulatory inquiry into the applicant’s ethical history, including whether the advisor was ever found by a regulator to have committed securities fraud, fraudulent transfers, failure to supervise, or making false statements (among other related issues and findings)
Firms that provide affirmative answers to any of these items must provide additional detail about the circumstances in the DRP reporting pages similar to those described above as they pertain criminal disclosure.
Section 14H- Civil Judicial History
This item requires disclosure of any civil litigation where a court ever found the advisor liable for any investment-related misconduct. Like the previous items, a firm that answers this question in the affirmative must provide additional information through the DRP pages.
Section 14I- Customer Complaints/Arbitration/Civil litigation history
This section of the Form U4 requires a firm to or applicant to disclose whether they were involved in any customer complaints that resulted in FINRA arbitration or civil litigation in which the customer made allegations that the advisor was involved in securities related misconduct.
Note that this disclosure item only requires alleged “involvement” in securities-related misconduct to trigger disclosure. It does not require that the customers or clients who complain to name name a financial advisor as a party to their lawsuit. As a practical matter, the broker of record over the customer accounts are generally considered “involved” in customer complaints. We have discussed the subjective nature of the meaning of “involvement” in the context of FINRA’s proposed rule changes to the FINRA expungement process.
Additional information is required in the DRP reporting section for this item if a firm answers in the affirmative.
Section 14J-Termination History from broker dealers
This question asks whether the advisor has been permitted to resign or was terminated from employment while under investigation for engaging in securities-related misconduct.
This question can be tricky for individuals seeking to register with a new firm because occasionally the individual could have been under investigation for something while employed at the firm from which they resigned, but didn’t know it.
Brokers should note this issue when reviewing the information provided on a new Form U4 after changing firms.
Section 14K-14M- Financial History
Financial advisors and their firm must disclose if they have filed for bankruptcy in the last 10 years. This includes personal bankruptcies or bankruptcies of a firm or business that the financial advisor controlled.
These inquiries also ask if the financial advisor has ever been denied or revoked a bond, or if they have outstanding judgments or liens. Tax liens must be reported under this inquiry, which is the most common lien registered persons report on the U4 Form.
An Affirmative response to this inquiry requires additional information in the DRP page associated with it.
Section 15 of the Form U4 requires signature for the financial advisor seeking to register with a FINRA firm. And a signature from a qualified representative from the registering/employing FINRA firm.
FINRA maintains a signature requirement so that signatories may attest to the accuracy of the information on the forms filed. The firm representative who signs the Form U4 also demonstrates that the firm has approved the advisor for employment.
Does the information the broker dealers disclose on FINRA Form U4 get reported to the Central Registration Depository?
Yes. Information from the Form U4 is submitted to FINRA, which then uses the information to populate the Central Registration Depository. The Central Registration Depository is the primary registration database for brokers and broker dealers.
For a comprehensive discussion on FINRA reporting requirements to the CRD system, review our page dedicated to FINRA Rule 4530, which governs the scope of what a broker dealer firm and registered representatives must report. It also provides an overview of the forms used to comply with FINRA Rule 4530.
Does the securities industry registration information from Form U4 appear on FINRA BrokerCheck?
FINRA BrokerCheck has access to the information from the CRD system. But BrokerCheck does not make all information from the CRD system that it can access publicly available.
In general, information about the advisors’ industry registration or transfer history; employment history; customer complaint information (omitting clients’ names for privacy); business contact information, and most information from section 14 described above gets disclosed on BrokerCheck.
(Please review our BrokerCheck “How-to” Guide for instruction on using this online tool).
Can advisors expunge Form U4 information that appears on BrokerCheck?
(EDITOR’S NOTE: The FINRA expungement rules are changing. Soon, it will be even more difficult to remove meritless disclosures from BrokerCheck.)
What is the difference between U4 Form and Form U5 uniform termination notice?
The Form U4 is the application for securities industry registration. The U4 is used by the hiring firm to register a new advisor; or, to register an advisor who has moved from another firm. The Form U5 is filed after a firm terminates an advisor, or when an advisor resigns.
Who else can access information from the Form U4?
Only FINRA firms can access complete information from the Form U4. Some jurisdictions also make complete access to the information available upon request.
*The Law Offices of Patrick R. Mahoney is a full service law firm with extensive experience handling FINRA arbitration cases. This page is for information purposes only and does not constitute legal advice.