FINRA reminds firms of their obligation to provide timely, complete and accurate information on Form U5, Uniform Termination Notice for Securities Industry Registration.

    The ABC's of Article V, Section 3 of the FINRA By-Laws.  Firms are required to file Form U5 no later than 30 days after terminating an associated person’s registration.  After it's been filed, Form U5 must be amended when the firm learns of facts or circumstances that make a previously filed Form U5 inaccurate or incomplete - FINRA expects a firm to file the amended form, at a minimum, the date any internal review has concluded and the findings warrant such an amendment.  And, of course, firms are required to provide the person whose registration has been terminated with a copy of any Form U5 (initial or amended) at the same time that it is filed with FINRA.  An appropriate signatory of a firm is required for each filing. 

    Form U5 Questions.    Each question on Form U5 stands on its own.  FINRA emphasizes the importance of a firm's response to the reason for termination - as found in Sections 3 and 7, and in particular Questions 7B, 7F.  And, a firm may not parse through the questions in a manner that would allow the firm to avoid responding affirmatively to a question. 

FINRA further notes that:

• sufficient detail is necessary - e.g., for purposes of Section 3 on Form U5, it's not sufficient to report only that a person’s registration was terminated because that person violated “firm policy.”  In such a case, the firm must identify the policy, provide sufficient facts and circumstances to enable the reader to understand what conduct was involved, and review other questions on the form to determine whether an affirmative response to any other question is required.

• Question 7F asks whether the individual who's the subject of the Form U5 voluntarily resigned, or was discharged or permitted to resign, after allegations were made that accused the individual of certain types of misconduct.  When terminating a registered person for misconduct subject to disclosure specified in 7F, an is required in the affirmative, irrespective of whether or not the firm is the entity making the allegations of misconduct.  

• firms should err on the side of interpreting the term “investment-related” in an expansive manner  - the scope of the term pertains to securities, commodities, banking, insurance or real estate (including, but not limited to, acting as or being associated with a broker-dealer, issuer, investment company, investment adviser, futures sponsor, bank or savings association).  
  

• the type of conduct described in Form U5 questions need not always pertain to or involve a customer of the terminating firm in order to require an affirmative answer.  Several questions ask about specific types of misconduct without regard to whether such misconduct involved a customer of the terminating firm.  Therefore, the issue of whether the conduct involved a customer of the terminating firm is not necessarily determinative as to whether the conduct may require an affirmative answer to a Form U5 question..

For complete details, click onto:   [ FINRA RegNote 10-39, September ]