Quick Answer
Two channels run on a 30-day clock. The firm reports listed events to FINRA, such as regulatory findings, felony charges, theft or forgery complaints, and its own discipline of an associated person. Separately, the firm amends the person's Form U4 for disclosure items such as tax liens, bankruptcies, unsatisfied judgments, and written complaints alleging $5,000 or more.
Many of the conduct rules covered in this unit generate events that must be reported to the Financial Industry Regulatory Authority (FINRA). Two separate requirements apply: FINRA's reporting requirements rule, which lists the events a firm must report to FINRA, and the duty to keep Form U4 current, which covers the disclosure questions on the registration form.
The 30-Day Reporting Window
- Member firms must report the events listed in FINRA's reporting requirements rule within 30 calendar days of when the firm knows or should have known of the event
- The firm files a Form U4 amendment within 30 days of learning of the facts; an amendment involving a statutory disqualification is due within 10 days after the disqualification occurs
- Both the firm and the individual have reporting obligations
- Failure to report is itself a separate violation subject to additional sanctions
Exam Tip: Gotchas
- The reporting window is 30 days, not 10 days or 60 days.
- Charges for a felony, or for a misdemeanor in a listed category such as fraud, trigger reporting, not just convictions. The charge starts the clock.
- Failure to report is a separate violation with its own penalties.
Events the Firm Reports to FINRA
FINRA's reporting requirements rule lists these events for the member firm or an associated person:
| Event | Details |
|---|---|
| Violation findings | Found to have violated securities-, insurance-, commodities-, financial- or investment-related laws, rules or standards of conduct by a regulator, self-regulatory organization, or business or professional organization |
| Theft or forgery complaints | Any written customer complaint alleging theft or misappropriation of funds or securities, or forgery, at any dollar amount |
| Regulatory proceedings | Named as a defendant or respondent in a proceeding a regulator or self-regulatory organization brings alleging a securities, insurance or commodities violation |
| Regulatory discipline | Denied registration, expelled, enjoined, directed to cease and desist, suspended, barred, or otherwise disciplined by a securities, insurance or commodities regulator or self-regulatory organization |
| Criminal matters | Indicted for, convicted of, or pleading guilty or no contest to any felony, or to a listed misdemeanor, such as one involving the purchase or sale of a security, theft, forgery, bribery, perjury, embezzlement, or misappropriation of funds or securities |
| Disciplined firms | A director, officer, partner, controlling stockholder, sole proprietor, or associated person of a financial firm that was suspended, expelled, or had its registration denied or revoked, or of a bank, trust company, or other financial institution convicted of, or pleading no contest to, a felony or misdemeanor |
| Litigation and claims | Securities- or commodities-related civil litigation or arbitration, financial-related insurance litigation or arbitration, or a damages claim by a customer, broker or dealer about financial services, disposed of by judgment, award or settlement over $15,000 (over $25,000 when the member firm itself is the party) |
| Statutory disqualification | Subject to a statutory disqualification, or doing business with a person who is, unless that person has been approved to be a member or associated with one |
| Firm discipline | The firm suspends or terminates an associated person, withholds compensation or fines the person more than $2,500, or otherwise significantly limits the person's activities |
The firm must also report within 30 days when it concludes, or reasonably should have concluded, that it or an associated person violated securities-, insurance-, commodities-, financial- or investment-related laws, rules or standards of conduct.
A felony conviction within the past 10 years also triggers statutory disqualification.
Form U4 Disclosure Items
Form U4 has its own disclosure questions, and the firm files a U4 amendment within 30 days of learning of a change. Some items overlap with the rule's list, but the financial items (tax liens, bankruptcy, unsatisfied judgments) and the $5,000 complaint threshold belong to Form U4 alone:
| Item | Details |
|---|---|
| Criminal charges and convictions | Felony charges and convictions, and charges or convictions for financial-related misdemeanors involving theft, fraud, forgery, bribery, securities, banking, or insurance |
| Customer complaints | Written complaints alleging damages of $5,000 or more |
| Termination disclosure | Discharged, permitted to resign, or voluntarily resigned after allegations of violations; also disclosed on Form U5 |
| Regulatory actions | Actions taken by any regulator, such as the Securities and Exchange Commission (SEC), a state, or a foreign regulator |
| Tax liens | Federal, state, or local tax liens |
| Bankruptcy | Personal bankruptcy filing (Chapter 7, 11, or 13) |
| Unsatisfied judgments | Civil court judgments that remain unpaid |
Some events belong to both channels. A felony charge, for example, is a listed event and a Form U4 disclosure. The firm need not file a separate report of a listed event about an individual if it discloses the event on Form U4 in the required format and indicates that the disclosure also satisfies the reporting requirements rule.
Key Points About Reportable Events
- Criminal charges for a felony, or for a misdemeanor in a listed category such as fraud, must be reported, not just convictions. The charge triggers reporting even before a trial occurs
- Financial events (liens, bankruptcies, judgments) must be disclosed on Form U4 even though they are not criminal matters. They are not on the reporting requirements rule's list of events
- Recordkeeping: A firm must keep a written record of every customer complaint on file, at any dollar amount. Keeping a complaint on file at the firm is a separate duty from reporting it to FINRA
- Quarterly reporting: In addition to the 30-day event reporting, firms must submit quarterly statistical summaries of all written customer complaints to FINRA, regardless of dollar amount, by the 15th day of the month after the quarter
- Disclosures on the individual's Form U4 and Form U5 become part of the individual's record on BrokerCheck
Exam Tip: Gotchas
- Liens and bankruptcies must be disclosed even though they are financial (not criminal) events. When a registered person files for personal bankruptcy, the firm must amend the person's Form U4 within 30 days of learning of it. This information becomes publicly available through BrokerCheck.
- A complaint below $5,000 still gets kept on file and rolled into the firm's quarterly summary to FINRA. The $5,000 threshold decides only whether the complaint must be disclosed on Form U4.
- A written complaint alleging theft, misappropriation, or forgery must be reported to FINRA within 30 days at any dollar amount.
Dual Reporting Obligations
- Associated person: Must promptly report any listed event to their member firm
- Member firm: Must report the event to FINRA within 30 days
Think of it this way: The reporting chain works like a relay. The individual hands off the report to the firm, then the firm hands it to FINRA. Each runner is responsible for their own leg. If either drops the baton, that runner faces their own separate penalty.
- If either party fails to report, each faces separate sanctions
- Electronic submissions are made through the FINRA Gateway
Exam Tip: Gotchas
- Both the individual and the firm have separate reporting duties. If either fails to report, each faces independent sanctions.
- Customer complaints at the $5,000 threshold must be disclosed on Form U4 regardless of merit.
What Should You Check on Exam Day?
- Can you state the reporting window, in days, that firms have after learning of a reportable event?
- Do you know that criminal charges trigger reporting, not just convictions?
- Can you explain the dollar threshold that makes a customer complaint disclosable on Form U4, and which complaints the firm reports to FINRA at any amount?
- Can you tell an event on the reporting requirements rule's list from a Form U4 disclosure item such as a tax lien or bankruptcy?
- Can you explain the separate reporting duties of the associated person and the member firm?