SEC Approves New FINRA Background Check Requirements for Reps

Posted on January 14th, 2015 at 11:21 AM

From the Desk of Jim Eccleston at Eccleston Law Offices:

A new FINRA proposal that requires brokerages to strengthen the background reviews they conduct on new hires has been approved by the SEC.  The new rule will be implemented in July, 2015.

Under the new requirement, firms must adopt written procedures to verify the accuracy and completeness of a broker's registration information on Form U4. That document is the foundation of the broker profiles contained on the FINRA’s BrokerCheck database that investors can review before hiring a financial adviser.

Both for new registrants and those newly hired, firms must conduct a search of “reasonably available public records”, such as those pertaining to criminal history, bankruptcy, civil litigation, liens and business records. The background check must be completed within 30 days of a U4 being filed with FINRA.

However, the additional requirements likely will increase compliance time and costs for financial firms. Likewise, financial advisers will need to be increasingly vigilant in protecting their employment records, including taking action in arbitration to correct false and defamatory remarks. 

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

Tags: FINRA, SEC, James Eccleston, Eccleston Law, bankruptcy, civil litigation, criminal history

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