[ by Howard Haykin ]

FINRA has amended Rule 4530 to eliminate duplicative reporting and provide the option to file required documents online using a new form.  Toward this end, FINRA provides member firms with: 

1. an exception for reporting information that is reported on the Form U4;
2. an exception for reporting findings and actions by FINRA; and,
3. the option of filing required documents online using a new form.

The changes will be implemented on 2 dates:   3/4/13:   (i) exception for reporting information that is reported on Form U4 (Rule 4530(e));  and, (ii) exception for reporting
findings and actions by FINRA (Rule 4530.10);  7/1/13:   (i) option of filing required documents online using the new form (Rule 4530(g)).

#1.   Exception for Information Reported on the Form U4.   Currently, Rule 4530(e) eliminates duplicative reporting of information that is reported on the Form U5 - i.e., a firm is not required to report a specified event if it reports that event on the Form U5 consistent with the requirements of that form.  Amended Rule 4530(e) provides a similar exception for specified events reported on the Form U4.  The process for satisfying the Form U4 exception, however, will differ slightly, in part, because of differences in the reporting criteria between Form U4 and Rule 4530 events. 

• To satisfy the Form U4 exception:
• Member firm will be required to affirmatively indicate that the data reported on a Form U4 Disclosure Reporting Page (DRP) through the CRD also will be applied to satisfy its corresponding FINRA Rule 4530 reporting obligation.
• Specifically, FINRA will enable filers to designate through functionality - i.e., checkboxes - in the CRD system that the data reported on the following specified Form U4 DRPs also be applied to satisfy the corresponding requirement under Rule 4530(a)(1): 

(i) Criminal;
(ii) Regulatory Action;
(iii) Civil Judicial; and
(iv) Customer Complaint/Arbitration/Civil Litigation.

• Firms can elect to use this new functionality or can continue to report an event via the Rule 4530 application in the FINRA Firm Gateway. 
• Finally, similar to the Form U5 exception, the Form U4 exception will not apply to the reporting of quarterly statistical and summary customer complaint information pursuant to Rule 4530(d).

#2.   Exception for FINRA Findings and Actions.   Rule 4530(a)(1)(A) requires a member firm to report external findings regarding the firm or an associated person. Rules 4530(a)(1)(C) and (D) require a member firm to report regulatory actions against the firm or an associated person.  Rules 4530(a)(1)(A), (C) and (D) do not expressly exclude findings and actions by FINRA.  However, because FINRA staff has access to such information through its own systems, FINRA has added Supplementary Material .10 to Rule 4530 to provide that, for purposes of Rules 4530(a)(1)(A), (C) and (D) only, member firms are not required to report findings and actions by FINRA. This exception is generally consistent with the exception under Rule 4530(f) for arbitration claims filed in the FINRA Dispute Resolution forum.

#3.   Availability of Online Filings and New Form.   Rule 4530(f) requires firms to promptly file with FINRA copies of specified criminal actions, civil complaints and arbitration claims. Firms currently have the option of filing the required documents either electronically (as a scanned email attachment or scanned and saved on a disk) or in paper form, but they do not have the option of filing these documents with FINRA online.

• FINRA has adopted Rule 4530(g) to give firms the option of filing the documents required under Rule 4530(f) online via FINRA’s Firm Gateway. 
• Online filings will be submitted on a new form, which will be available through the Firm Gateway on 7/1/13. 
• Member firms that choose to file their documents online will be required to complete the mandatory fields on the new online form - e.g., name and telephone number of contact person, and name of complainant or plaintiff, and attach to the form a scanned copy of the documents required under Rule 4530(f), in a format such as portable document format (PDF).
• Firms will continue to have the option of filing the documents required under Rule 4530(f) via mail or email. In addition, the requirement to provide limited summary information regarding the documents applies only to firms that choose to file the documents with FINRA online using the new form; the requirement does not apply to firms that use other permissible electronic means (e.g., email) to file the documents with FINRA.

FINRA Staff Contacts.   Direct questions to:  Afshin Atabaki, Office of General Counsel, at (202) 728-8902.  Direct technical questions re: Form U4 exception to:  FINRA’s Gateway Call Center at (301) 590-6500. Direct tech questions re: online filing option and the new form to:  FINRA Help Desk at (800) 321-6273.

For further details, go to:   [ FINRA RegNote 13-8, February 2013 ].