FINRA Approves Registered Rep Background Checks
FINRA has approved new rules that will require firms to verify the accuracy of information provided on Form U4, the form required for new applicants or transfers and includes information on employment background, disciplinary information, and litigation history. The new rules would require firms to adopt written procedures to verify information through due diligence of publicly available criminal, bankruptcy, and litigation records. FINRA also indicated that it plans its own search of public financial records for all reps that have not been fingerprinted during the last 5 years. FINRA will also “conduct periodic reviews of public records to ascertain the accuracy and completeness of the information available to investors, regulators and firms.”
OUR TAKE: The new rules will require a new review process at many firms. Perhaps, the easiest way for firms to implement background checks would be to retain a third party firm that specializes in background checks. Firms should expect that FINRA will hold them accountable if registered reps have issues that could have been uncovered.