Form U4 requests information about various criminal, regulatory, financial, and litigation matters. While many of these disclosures are relevant and important to clients and prospective clients, others are less important. For example, I have seen countless college incidents. Some involve taxi rides, fake IDs, alcohol, or marijuana. This article is intended to help those who have suffered one of these events contemplate their options for removing these (or even more serious) criminal transgressions. In addition, this article might be helpful for a firm with an otherwise clean Form CRS wanting to explore cleaning up one of their owner’s or employee’s disclosure reporting pages.
The specific questions that appear on Form U4 (which cause information to flow through to the Investment Adviser Public Disclosure and Brokercheck) appear below:
As you will see, certain criminal charges require disclosure regardless of the outcome. These include felony charges and charges involving crimes that potentially implicate moral character (e.g., fraud, false statements or omissions, wrongful taking of property)
If you have an affirmative response to one of these questions on your record, there are a few options to consider:
- Is the current disclosure even supposed to be on your record? Many times, I see overly-conservative compliance departments make disclosures to cover themselves. Not all criminal charges or convictions require disclosure. A lawyer with knowledge of the specific state law charges should help you make the determination. Further, an FAQ to Form U4 states: “If a registered person is arrested but not charged with a crime, is the arrest required to be reported? A: No. An arrest without a charge is not required to be reported. (02/13/98)” It could be possible that you were arrested, but not formally charged with the crime. Again, state-specific law will determine whether you could rely on this FAQ.
- Removal of Disclosures.
- It is also possible that a criminal action can be expunged. Each state’s law is a little different on the impact of expungement. For example, an expungement in certain states will make it so the arrest never occurred. In that case, you would not need to report the charge. There is a growing trend under state law to automatically expunge certain cases through diversion programs for certain offenders. However, the effect of expungement is not the same in all states. You will want to closely review your charges, convictions, and the expungement law in your state to determine whether this is a possible exercise.
- Once you have received an order of expungement from a state court, there is a process to provide that expungement to FINRA, who will remove the expunged disclosure.
If you have any questions about whether your specific charges should be disclosed or can be expunged, do not hesitate reaching out.