FINRA is making enhancements to its disclosure review process that will permit firms to rely on FINRA’s background investigation and verification process for purposes of compliance with the requirement to conduct a search of public records relating to bankruptcies, judgments and liens.
Specifically, FINRA will conduct a public records search within fifteen calendar days from the date of an applicant’s Form U4 (Uniform Application for Securities Industry Registration or Transfer). To the extent the information provided to FINRA is different from what was reported in the applicant’s Form U4, FINRA will notify the member fim within 15 days of the initial filing of the Form U-4. These enhancements are likely to: (1) reduce the costs to firms associated with conducting background investigation of 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.
Moreover, member firms may rely on FINRA’s verification process for purposes of compliance with the requirement under FINRA Rule 3110(e) (Responsibility of Member to Investigate Applicants for Registration) to conduct a search of public records relating to bankruptcies, judgments and liens. Therefore, if a member firm does not receive notice from FINRA regarding the results of its public records search within fifteen calendar days after the filing of an applicant’s Form U4, the firm is deemed to have satisfied its obligation to conduct a public records search of information relating to bankruptcies, judgments and liens for that applicant.