The Financial Industry Regulatory Authority (“FINRA”) approved an amendment to its Supervision Rule that will require firms to perform background checks on applicants for registration, in an announcement made in an April 24, 2014 press release. These background checks would be mandatory for “first-time applications as well as transfers,” with the ultimate goal to “verify the accuracy and completeness of the information contained in an applicant’s U-4 form.” The U-4 form, also called the Uniform Application for Securities Industry Registration or Transfer, is used by regulatory agencies to gather employment, disciplinary and other background information on individuals who seek to become registered representatives of self-regulatory organizations (“SRO”s) or other entities.
Other measures are set to supplement these background checks and to be instituted concurrently, including requirements for firms to create and adopt written procedures for background checks, particularly involving public record searches. An initial search of public records for all registered representatives will be performed by FINRA, as well as a search on publically-available criminal records of those registered representatives who have not been fingerprinted in the last five (5) years. Along with the goal of verifying reported U-4 form information, this new amendment also supports FINRA’s aim to best “assess firm and registered individual [reporting] compliance,” making it an essential amendment to consider in a firm-wide compliance efforts.
In other news, CCLS’s Risk Management Update (RMU) for April 2014, entitled “Social Media Guidance for Broker-Dealers,” has been posted to our website. This is an excellent, detailed follow-up to last week’s blog post on the SEC’s Social Media and the Testimonial Rule Guidance for March 2014. To read the full PDF article of this RMU, click here. To explore CCLS’s library of monthly RMU’s, please click here to go to our website.
For further information on this and other related subjects, please contact us at firstname.lastname@example.org or (619) 278-0020.
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