The Financial Industry Regulatory Authority (FINRA) has stringent regulations in place. As part of these regulations, individual financial advisors are required to disclose any criminal issues or allegations on their Form U4 and undergo background checks. In this blog, we will explore FINRA criminal disclosures, which misdemeanors can disqualify advisors, and how AdvisorLaw can assist in removing or mitigating these disclosures to help advisors successfully navigate their careers.
Understanding FINRA’s Stance On Criminal Disclosures
FINRA mandates that its members report any felony allegations, indictments, convictions, guilty pleas, or no-contest pleas. Additionally, misdemeanor offenses involving fraudulent or deceitful acts are disclosable to FINRA. These offenses may include false reports, bribery, perjury, theft, forgery, and more. Member firms must report such offenses within 30 days, to maintain compliance with FINRA regulations.
Disqualifications & Background Checks
Felony convictions automatically disqualify individuals from obtaining or maintaining a FINRA license. Certain misdemeanor convictions involving fraudulent activities or offenses related to securities, investments, insurance, or commodities laws can also result in disqualifications. FINRA conducts thorough background checks that cover criminal records, civil judgments, liens, bankruptcies, and business records. However, expunged criminal cases do not appear in these background checks.
AdvisorLaw’s Role
AdvisorLaw specializes in providing guidance and support to financial advisors, especially in complex situations like those surrounding criminal disclosures. We understand that certain criminal issues on a U4 or background check can have a significant impact on an advisor’s career prospects.
AdvisorLaw can help advisors navigate the process by:
- Providing Expert Guidance: AdvisorLaw’s team of professionals is well-versed in FINRA regulations and can provide detailed guidance on the reporting requirements for criminal disclosures. We can provide advisors with a clear understanding of what needs to be reported, and when.
- Expungement Assistance: AdvisorLaw assists advisors in seeking expungement for erroneous or outdated disclosures on their U4. Through the FINRA Rule 2080 waiver request process, we can initiate a waiver request and, if necessary, proceed to arbitration to remove or mitigate these disclosures.
- Individual Eligibility Review: In cases where advisors have felony convictions within the previous ten years or certain fraudulent misdemeanor convictions, AdvisorLaw can help with an individual review by FINRA. This review considers the nature of the offense and the advisor’s overall eligibility, offering an opportunity for a fair assessment.
AdvisorLaw Secures Expungement Of Criminal Disclosure For Illinois Advisor
AdvisorLaw achieved a significant milestone by successfully expunging a longstanding criminal disclosure from the records of an Illinois-based financial advisor. Led by Tad Burton, J.D., AdvisorLaw skillfully navigated the expungement process, ultimately removing the criminal disclosure from the advisor’s CRD and public BrokerCheck profiles.
Case Details
The advisor had carried a criminal disclosure on his record for approximately 15 years, originating from an incident during his college years in Iowa. In 2001, he was charged with felony possession of marijuana with intent to deliver, which was later amended to misdemeanor possession of marijuana and misdemeanor public intoxication. After pleading guilty, the advisor received probation for 180 days and paid fines totaling approximately $470. In May 2008, he completed the payment of fines and subsequently joined the securities industry. Determined to shed the burden of this disclosure, the advisor sought the expertise of AdvisorLaw.
AdvisorLaw’s Approach
Understanding the advisor’s aversion to returning to Iowa, Tad Burton, J.D. employed a strategic approach to achieve expungement without the need for the advisor’s physical presence. Initially, Mr. Burton assisted the advisor in submitting an application to expunge the case from all records in the state of Iowa. In October 2022, after reviewing the advisor’s application, case docket, and financial history, the State of Iowa recognized that sufficient time had passed since the conviction, all financial obligations were fulfilled, and no pending charges existed. Consequently, the charges were expunged from the advisor’s record, per Iowa code.
Following the confirmation of Iowa’s expungement, Mr. Burton promptly submitted a request to FINRA, on November 30, 2022, seeking the removal of the criminal disclosure from the advisor’s CRD and BrokerCheck records. The request provided a comprehensive overview of the case history and presented compelling arguments, emphasizing the adverse impact on the advisor’s professional reputation and the lack of benefit to the investing public.
Positive Outcome
FINRA conducted a thorough review of the documentation provided by the State of Iowa, the advisor’s records, and Mr. Burton’s written request and arguments. On December 13, 2022, less than two weeks after receiving the request, a FINRA analyst responded, confirming the completion of the review process in accordance with FINRA Rule 8312. As a result of FINRA’s review, the criminal disclosure was successfully removed from the advisor’s BrokerCheck record. Remarkably, the entire process was accomplished without requiring the advisor’s physical presence.
AdvisorLaw’s Expertise & Dedication
The successful expungement of this criminal disclosure for the Illinois-based advisor showcases AdvisorLaw’s ability to navigate complex FINRA disclosure expungement cases. By leveraging our legal expertise and dedication, we effectively represented the advisor’s interests and secured the removal of the disclosure from both public BrokerCheck and CRD records. This favorable outcome empowers the advisor to pursue further professional opportunities and attract new clients — without the burden of explaining a past misstep.
Navigating FINRA’s regulations regarding criminal disclosures is crucial for financial advisors to maintain their integrity and protect their professional reputation. AdvisorLaw understands the complexities of the disclosure process and provides expert guidance and support to advisors dealing with criminal disclosures on their U4 or background checks. With our in-depth knowledge of FINRA rules and a commitment to our client’s success, we help advisors remove or mitigate these disclosures, enabling them to pursue successful careers in the financial industry.
If you are an advisor facing criminal disclosure issues or seeking assistance with FINRA compliance, reach out to AdvisorLaw today. Our team is dedicated to advocating for financial advisors and providing a fair and equitable resolution for our clients.