Unit 15 – Registration and Continuing Education

Form U4

member completes and submits to CRD registering an associated person of a member firm with FINRA but is not effective until qualifying exams are passed (i.e. Series 7 and Series 65), must be check marked for each state and if firm is member of an exchange (i.e. NYSE) then exchange requirements must be met – not a one-time filing

Info required on U4

• name (and aliases)

• address, 5-year residency history

• 10-year employment history (including unemployment periods and full-time education)

• charges or convictions related to investment business and detailed explanation of them

Disclosure reporting pages (DRP)

on Form U4 that requires detailed explanation to any questions about charges or convictions relating to investment business

Not required info on U4

marital status, education, and citizenship (not required to be a U.S. citizen)

Blue-sky laws

state rules that a representative must satisfy registration requirements of each applicable state they do business

When to complete or amend U4

when joining a new member firm a new form is required or when changes to information on existing form an amendment must be filed, changes must be filed within 30 days after firm is made aware and those involving statutory disqualifications must be filed within 10 days

Form U4 requirements

sponsorship by a FINRA broker-dealer and complete/honest disclosure on all required forms (not disclosing or misstatement may result in being barred from industry for life) - must be kept on record for 3 years after the associate leaves the firm

Before submitting U4

firm must ascertain person’s business reputation, character, education, qualification and experience – must certify background check and credentials are in order

Central Registration Depository (CRD)

database containing records/info (form U4) regarding licensing status, employment status and history, fingerprints, disciplinary disclosures for all RRs and firms in the U.S. industry

Fingerprinting required roles

anyone who supervises a person, directors, officers, and partners, and any employees or associated persons involved in sales and handle cash or customer securities (ex. clerical staff handling incoming mail since they have access to cash or securities)

Fingerprints

submitted to the U.S. Department of Justice for identification and processing, also U.S. attorney general or the FBI, registered BDs must have on record

Clerical employees (ministerial persons)

not required to be fingerprinted as they do not handle cash or securities, a supportive role

Fingerprinting exception

for RRs that only sell mutual funds, variable annuities, or direct participation programs

Statutory disqualification from FINRA

outcome of disciplinary sanctions by SEC, a state regulator, a SRO, a foreign financial regulator, or a foreign equivalent of an SRO

Disqualifying events

serious regulatory, criminal, or ethics violations that can prevent industry registration (rejection reasons)

• suspended or expelled by FINRA/SRO/or foreign regulator

• SEC disciplinary order (revoked, suspended, or barred)

• caused another person or firm to be expelled or suspended

• lied on registration app (Form U4)

• felony conviction within last 10-years (or securities/money-related misdemeanor)

• court junction prohibiting securities activities

BrokerCheck

FINRA’s program enabling public to check on the disciplinary and registration history of any RR and firm, required on all FINRA member firm websites

Form U5

used when a person leaves employment with a member firm, must be filed within 30 days of termination date and firm must provide a copy to former employee within same time frame (late filing fee charged to member firm if fail to do so) - also includes states registrations that will end at the same time

Form U5 requirement

members must indicate reason for separation and provide an explanation if appropriate, failure to provide accurate info could lead to disciplinary action

5 reasons for termination on U5 (DPDVO)

1) discharged

2) permitted to resign

3) deceased

4) voluntary

5) other

details must be disclosed if discharged, permitted to resign, or other is marked

Voluntary resignation

assumed to be under circumstances that will not affect future eligibility for employment within the industry

Amendments to U5

must occur within 30 days of discovery and any involving a statutory disqualification must be filed within 10 business days of discovery

Partial termination

allowed on Form U5 indicating which registrations are ending, occurs when a person ends some but not all of their registrations (i.e. a principal might step away from supervision and work as a representative with no principal designations)

Licenses expire when

full termination, reassociation, military service

Full termination

after a Form U5 is filed, FINRA and other regulators retain jurisdiction for 2 years but regulators may still require a terminated person to provide evidence and answer questions during this period

Reassociation

within the 2 years, a person may associate with another (or the same) member firm without retaking the qualifying exams, if they do no re-affiliate with a member firm within the 2 years they have to retake and pass exams

Maintaining Qualifications Program (MQP)

RR may extend 2 years and keep qualifications for up to 5 years if continuing education is completed annually, rules around good standing and eligibility still apply

SIE exam

allows a person to take a qualifying exam and affiliate with a member firm for up to 4 years without retaking the exam, if more than 4 years have passed before passing a qualifying exam (series 7) they have to retake - when association terminated with a firm they have 4 years to re-affiliate or they must retake the exam

Failing qualified exams

waiting period before the next attempt is 30 days following first 2 unsuccessful tries, once failing a 3rd time each attempt requires a 180 day waiting period

Military service

if RR leaves the industry for regular military service, that person's license is placed in a special inactive status that continues until 90 days after leaving military service (in which 2 year time frame begins), allows RR to serve in military for extended period without having to retest to return to the industry

Continuing commissions

may be allowed under a contract that existed before termination, often done for retirees and may allow for payments to heirs (payments are for existing business relationships only, not new business)

Continuing education (CE)

securities industry requirement for RRs to stay current with industry rules and regulations, regulatory element (taken by all registered persons) and firm element (applies to those with public contact who are supervisors)

Firm element CE

annual training plan prepared by firms for all RRs who have direct contact with the public focusing on business activities, personnel performance, review of recent regulatory developments, and supervisory needs (significant portion being normal business activities and representative’s duties) – must be completed by December 131st of each year and can be virtual or in person

CE inactive

failure to complete the regulatory or firm element by December 31st results in RR’s registration becoming deactivated (by FINRA for regulatory element), program requirement must be completed before returning to active status

Regulatory element CE

prepared by the regulator (FINRA) and requires all RRs complete a computer-based training session by December 31st of each year or FINRA will deactivate registration until completed – content is determined by FINRA and will be based on either the RR or principal status of the person, requirement will be met at a FINRA designated site