FINRA Broker Check U4 Required Starting June 6th 2016
Financial Industry Regulatory Authority
FINRA is tasked with protecting investors and upholding market integrity by regulating the securities industry. They are an independent, not-for-profit organization authorized by Congress to protect America’s investors. This is the group that watches over brokers like myself and others to help prevent fraud. There was a new regulatory notice (15-50) that was approved by the SEC that amendments FINRA Rule 2210 (Communications with the Public).
Regulatory Notice 15-50
The new rule, as stated on the FINRA website, states that the new law will "require each of a member firm’s websites to include a readily apparent reference and hyperlink to BrokerCheck on (1) the initial Web page that the firm intends to be viewed by retail investors, and (2) any other Web page that includes a professional profile of one or more registered persons who conduct business with retail investors. The rule amendments become effective June 6, 2016."
FINRA Broker Check U4
In the past it took some digging to find information about a broker to find employment history (U4), qualifications, tests passed and states licensed. Now even if a broker does list the information (or does not) they are going to be required to make a link and reference to BrokerCheck. The FINRA broker check api (application program interface) allows a user to quickly search for a broker by name or CRD # (Central Registration Depository). Anybody can then use the BrokerCheck report to see employment history, certifications, and licenses—as well as regulatory actions, violations or complaints you might want to know about.
The form U4 is the Uniform Application for Securities Industry Registration or Transfer. Representatives of broker-dealers, investment advisers, or issuers of securities must use this form to become registered in the appropriate jurisdictions and/or SROs.
Information to Focus on in a BrokerCheck Report
Broker qualifications will provide a little information on the type of regulatory organization and the number of states licensed. The full list of states licensed will be displayed on the next page. The tests the broker has passed will give you an idea as to what the broker is allowed to do.
Pay close attention to the Disclosure Events section. Specifically look for a No answer to the question "Are there events disclosed about this Investment Adviser Representative?". A "Yes" response means that there was some sort of criminal actions, regulatory disciplinary actions, customer complaints, arbitration, civil litigation, termination or financial matters like bankruptcy. If this is the case then the investment adviser representative is required to disclose additional details of the event or proceeding on the appropriate Disclosure Reporting Page on the U4 form.
Be sure to check that the broker you are looking up is currently employed by and registered with a firm. If there if any doubt about their history or where they are currently working more information can be found on the Registration and Employment History. If a broker says they have a certain number of years experience, check for yourself. Below is my current employment registration and it says he has been registered with InvestaCorp sense 11/29/1999, coming up on 17 years.My profile says he has 20 years of industry experience which can be found in the Registration and Employment History section showing that Gregg actually started at American Scandia in November of 1995.
This section is broken up into current employment, a list of states licensed and industry exams passed. If there is no current employment this would be a major red flag when searching for a potential broker. If the broker is not licensed in the state you currently live in make sure to ask if they are going to get licensed so that they can work with you.
Registration and Employment History
This is the last section of the U4. Registration history dates specifically go over when a broker was with a specific firm and the CRD code of the firm. Employment history goes over the last ten years of an individual brokers employment history as reported by the individual broker on the most recently filled Form U4. Look for any big gaps in dates that may lave any questions in your head. If anything looks suspicious here or in the other business activities make sure to ask who ever it is you are looking up.
Other business activities will list any groups or activities the broker is engaged in as a partner, officer, employee, trustee, agent or otherwise. This section only includes investment related activities but is a good way to know what your broker is affiliated with.
Overall the The changes being made a great. There is an increase in transparency and this will only help to give investors more knowledge as to who they are dealing with. Before it may have been a little more difficult to find information about a broker. Now, with the requirement of brokers having to add BrokerCheck onto their website it will be easy to dive into a brokers history.