Form U4 Reporting Requirements

Form U4 does two different jobs in this unit: it has to stay accurate on its own deadlines, and, separately, it carries an arbitration clause that triggers its own disclosure duty to the person signing it.

How Quickly Must a Firm Amend Form U4?

• Under FINRA's By-Laws, every Form U4 application for registration must be kept current at all times through amendment.
• General deadline: the firm must file the amendment not later than 30 days after learning of the facts or circumstances giving rise to it.
• Statutory disqualification: if the amendment involves a statutory disqualification, the firm must file it not later than 10 days after the disqualification occurs.

Exam Tip: Gotchas

• The 10-day clock is not a shorter version of the general rule. It applies only to an amendment involving a statutory disqualification. Every other Form U4 amendment runs on the 30-day clock.
• This 30-day Form U4 clock is a different clock from the 30-calendar-day event-reporting clock earlier in this unit. One amends a registration form; the other reports an event to FINRA. A single arbitration claim naming an associated person can start both.

What Disclosure Must a Firm Give Before an Associated Person Signs Form U4?

• The Form U4 arbitration disclosure rule requires a firm to give an associated person a written disclosure whenever the person is asked to sign an initial or amended Form U4, or to acknowledge an amendment to it in writing. That acknowledgment may be electronic.
• Form U4's own predispute arbitration clause sits inside the form itself. The disclosure names the exact item and page where the clause sits, and tells the person to go and read it before signing.
• Signing that clause commits the associated person to arbitrate a dispute with the firm, a customer, or another person required to arbitrate under the rules of the self-regulatory organizations (SROs) the person is registering with.
• Signing gives up the right to sue a member, a customer, or another associated person in court, including the right to a trial by jury, except as the rules of the arbitration forum where a claim is filed provide otherwise.
• This is a different disclosure from the predispute arbitration disclosure rule covered in the account-opening unit, which covers the clause a firm puts in a customer's account paperwork. One discloses the arbitration clause inside Form U4 to the person signing it; the other discloses a customer's own arbitration agreement to that customer.

Exam Tip: Gotchas

• Do not merge these two disclosures. The account-opening unit's predispute arbitration disclosure rule runs to seven points and goes to a customer. The Form U4 arbitration disclosure rule runs to nine numbered items and goes to the associated person signing the form.

What Do the Nine Numbered Items Cover?

• Item 1 states that signing commits the person to arbitrate.
• Items 2 through 4 are the three carve-outs below.
• Items 5 through 9 describe how arbitration differs from court:
  • an award is generally final and binding, and a party's ability to have a court reverse or modify it is very limited;
  • discovery is more limited than in court;
  • arbitrators need not explain their award, unless, in an eligible case, all parties jointly request an explained decision at least 20 days before the first scheduled hearing date;
  • the panel may include industry-affiliated arbitrators, as well as public ones; and
  • some forums impose time limits on bringing a claim, though a claim ruled ineligible for arbitration may still go to court.

Exam Tip: Gotchas

• The 20-day explained-decision item is the same figure the customer-facing predispute arbitration disclosure uses, measured the same way: from the first scheduled hearing date, and only on a joint request from all parties. A shared item does not make the two disclosures the same disclosure.

What Are the Three Carve-Outs from Form U4's Arbitration Clause?

• A statutory employment-discrimination claim. It may be arbitrated only if the parties agree, either before or after the dispute arose.
• A claim under a whistleblower statute that prohibits predispute arbitration agreements. It may be arbitrated only if the parties agree after the dispute arose.
• A sexual assault or sexual harassment claim. A party who agreed to arbitrate before the dispute arose may still elect, after the dispute arises, not to arbitrate it. The claim can still be arbitrated if the parties agree to that after the dispute arose.

Exam Tip: Gotchas

• The sexual assault and sexual harassment carve-out works differently from the other two. The other two never became arbitrable without a separate agreement. This one starts out arbitrable, and the claiming party can opt out of it after the dispute arises.

Does Disclosing an Event on Form U4 Excuse a Separate Report to FINRA?

• Yes, for one narrow case. A reportable event does not need a separate report to FINRA if the firm discloses it on Form U4 and marks the disclosure as satisfying that reporting duty. The full non-duplication rules for Form U4 and Form U5, including why the two exceptions are different sizes, are covered earlier in this unit.

What Should You Check on Exam Day?

• Default to the 30-day amendment clock; reserve the 10-day clock for a statutory disqualification.
• Count the Form U4 arbitration disclosure's items: nine, not seven.
• Keep the Form U4 arbitration disclosure separate from the customer-facing predispute arbitration disclosure; different form, different audience, different item count.
• Remember the sexual assault and sexual harassment carve-out allows an opt-out after the dispute arises, unlike the other two carve-outs.
• Treat a marked Form U4 disclosure as excusing only the matching FINRA report, not every filing duty.