Beginning July 9, 2018, FINRA will conduct an individual
public records search on every applicant when a broker-dealer files a form U-4
application for registration. FINRA
currently performs this search for all registered persons—but only annually. This additional records search—
which will satisfy the requirement to perform a search
of records for judgments, bankruptcies, and liens only—will provide added
benefit to member firms and registered persons, according to FINRA. In FINRA’s May 18, 2018 Information Notice,
FINRA claims this additional search is “likely to: (1) reduce the costs to
firms associated with conducting these public records checks, which often
involve finding and hiring a vendor; (2) result in more timely reporting of
disclosure information to the benefit of regulators, investors and firms; and
(3) result in a significant reduction of late disclosure fees related to
judgments and liens[1].”
Numbers (1) and (2) seem like probable benefits to
both the member firms and the registered persons. Saying the same for number (3), however,
appears to be a stretch. Regardless, the
burden of these public records searches is real, especially to smaller broker-dealers. FINRA taking over this requirement is a
welcome change and one that makes sense given that it is already performing the
annual searches. Firms and agents will
still need to respond to and file any items that are found in these searches, but
the searches themselves will no longer have to be performed in-house or by a
third-party vender for each registered hire.
Finally, firms and registered persons are still required
to report unsatisfied liens and judgments within 30 calendar days of learning
of the event as long as the agent is registered and to report other activity, such
as certain criminal matters per FINRA Rules.
[1] Firms and registered persons are
required to report unsatisfied liens and judgments within 30 calendar days of
learning of the event. FINRA determines whether a filing is late based on the
date the registered person learned of the judgment or lien and, if it is late,
will assess the late disclosure fee based on that date. See Information Notice
8/17/12 (Late Disclosure Fee Related to Reporting of Judgment/Lien Events).
Occasionally, an individual is unaware of the existence of a judgment or lien.
The public records search facilitates the identification and timely reporting
of these events
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