FINRA Finalizes Mandatory Background Check Rule


On April 24, 2014, the Financial Industry Regulatory Authority (FINRA) announced that its board of governors had approved rules requiring that firms to run background checks on new hires, whether new brokers or transfers, to verify the information on their U4s.  Amended FINRA Rule 3110, the supervision rule, will also require firms to establish procedures for verifying information on their representatives’ U4s.  FINRA itself will search public financial records and criminal records for registered representatives and registered individuals who have not been fingerprinted in the last five years, respectively.

The amendments follow approval of other changes to the supervision rule which have been approved by the SEC and appear designed to strengthen review of representatives and their actions.  FINRA has taken a number of steps to address concerns that some have voiced about information available when customers make determinations about who to hire.  Among other measures, FINRA released an enhanced version of BrokerCheck late in 2013.

FINRA’s new amendment rule will next be submitted for approval by the SEC.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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