We understand that receiving notice of a FINRA investigation regarding a Form U-4 reporting violation can be worrying. As a registered representative under FINRA’s jurisdiction, a complete and accurate U-4 is vital to your continued good standing in the securities industry. In recent years, FINRA has focused on locating and punishing advisors who have failed to report disclosable events such as tax liens, judgments, bankruptcies and foreclosures on their Form U-4. Disciplinary sanctions for having an inaccurate Form U-4 can have serious, career-damaging consequences.
Responding to the FINRA investigation is not optional. You must take it seriously and immediately take steps to respond appropriately. If not handled properly, FINRA will likely take immediate disciplinary measures and your career in the industry could be damaged or ended.
NOTIFYING YOUR FIRM
You have a regulatory obligation to notify your broker/dealer of disclosable events so that it may update your Form U-4. But the manner in which you approach your firm with this information will be crucial. If handled properly, your firm may be your ally; if not, you face having your registration summarily terminated.
Hire an attorney who is experienced in defending advisors and firms in securities regulatory and disciplinary matters. You should not be using a general litigator or the attorney who helped you with your estate plan or who set up your LLC, no matter how highly you think of them. You should have a lawyer who understands the securities industry, and who regularly deals with FINRA staff and attorneys. Qualified counsel can help you frame your answers to the FINRA notice to minimize or avoid further regulatory risk.
Scott Matasar, Esq. is a founding Member at Matasar Jacobs LLC. His legal practice focuses on representing firms and individuals in the securities brokerage industry. Among other things, he regularly defends clients in FINRA customer arbitration cases, represents advisors under investigation by FINRA as well as state and federal regulators, and counsels both firms and advisors on a wide range of securities regulatory and operational issues, including transition matters.