Forms U4 and U5 and Your Conduct Record

Your conduct record follows you from firm to firm, and customers can read most of it. Two forms build it: the Form U4 when you join a firm, and the Form U5 when you leave. This lesson covers what goes on them, how fast they must be updated, and who reads the result.

Form U4: the application that registers you

The Form U4 (the Uniform Application for Securities Industry Registration or Transfer) registers a person with a firm. The firm files it, not you. It goes into the Central Registration Depository (CRD), the registration database FINRA runs.

The U4 asks for your identity, five years of residential history, ten years of employment history, and the registrations you want. Then come the disclosure questions: criminal charges, regulatory actions, civil court findings, customer complaints, terminations, and financial events such as bankruptcy and unpaid judgments.

Signing the U4 also signs you up for arbitration. You agree to settle disputes with your firm at FINRA, not in court. FINRA Rule 2263 makes the firm give you a written explanation of that agreement each time you sign or acknowledge a U4.

Keeping the U4 current

Your U4 must stay accurate as long as you are registered. When an answer changes, the firm files an amendment.

The deadline is 30 days after the firm learns of the fact. One event runs faster. An event that disqualifies you by law, called a statutory disqualification, must be amended within 10 days.

You tell your firm, and your firm files. A representative who hides a new felony charge from compliance breaks the rule too.

Form U5: the exit form

The Form U5 (the Uniform Termination Notice for Securities Industry Registration) ends a registration. The firm files it within 30 days of the day your association ends, and gives you a copy at the same time.

The U5 states why you left: voluntary resignation, permitted to resign, discharged, other, or deceased. It carries disclosure answers too, so a complaint or an internal review that surfaced on your way out shows up here. If the firm learns new facts later, it files an amended U5 within 30 days.

Leaving does not end FINRA's authority over you. FINRA keeps jurisdiction for two years after your registration ends, long enough to investigate and bring a case.

Filing something misleading

A false answer costs more than the event you were hiding. FINRA Rule 1122 bars a firm or an associated person from filing registration information that is incomplete or inaccurate in a misleading way. The rule also bars leaving that filing uncorrected once FINRA gives notice.

Sanctions run from a fine and a suspension up to a bar from the industry. A willful failure to disclose a material fact on a U4 is worse. It is itself a statutory disqualification, so one dishonest answer can end a career.

The firm checks your answers. FINRA Rule 3110(e) makes it verify what you put on the U4.

Customer complaints on the record

A customer complaint is a grievance from a customer, or from someone acting for them, about the firm or one of its people.

FINRA Rule 4513 makes the firm keep written customer complaints, and a record of what it did about each one. Both live at each office of supervisory jurisdiction (an office that carries supervisory duties). It keeps them for four years.

Reporting to FINRA runs on two clocks under Rule 4530. Every quarter the firm sends statistics and summaries of its written customer complaints, by the 15th day of the month after the quarter ends. Within 30 days it reports any written complaint alleging theft, misappropriation of funds or securities, or forgery.

A complaint reaches your own U4 when it is written, investment related, and alleges a sales practice violation, with damages of $5,000 or more. A sales practice violation means conduct that breaks the rules for dealing with customers, such as an unsuitable recommendation. A complaint alleging forgery or theft goes on the U4 whatever the amount. So does a claim settled for $15,000 or more.

Red flags

A red flag is a fact that does not fit, and it puts you on notice to ask questions. The exam expects you to take it to your supervisor or compliance.

Common examples:

• A colleague borrows from a customer, or appears on a customer's account or will.
• Money leaves a customer's account for a third party, or the address changes before a large withdrawal.
• Trading runs far past what the customer's stated goals support.
• An elderly customer arrives with a new companion who answers for them.
• A representative uses personal email for firm business, or has a customer sign a blank form.

A record raises red flags too. A pattern of complaints, or several firm changes in a short time, tells a hiring firm to look harder.

BrokerCheck: what the public sees

BrokerCheck is FINRA's free public website that reports what the CRD holds on firms and registered people. FINRA Rule 8312 sets what it shows: current registrations, the exams you passed, ten years of employment history, and your disclosure events.

Your record stays visible after you leave. FINRA reports on a former registered person for ten years after the registration ends, and a final regulatory action stays there permanently.

Customers do not have to go looking. Under FINRA Rule 2267 each firm tells its customers about BrokerCheck in writing once a year, giving the hotline number and website address.

How this gets tested

Most items give you a situation and ask for the form, the filer, or the deadline. Three facts answer many of them. The firm files both forms, and a U4 amendment is due in 30 days. The U5 is due 30 days after the person leaves.

Watch for the exception. A statutory disqualification moves the U4 amendment deadline to 10 days.

Another set of items asks what happens after you leave. FINRA can still bring a case for two years, and BrokerCheck outlasts that by years.