Every hire arrives with a regulatory history. Once you file that person's paperwork, the history becomes your firm's statement to regulators.
The Financial Industry Regulatory Authority (FINRA) defines the people you hire. To conduct hiring and registration of associated persons, start with the definitions in FINRA By-Laws Article I. Under paragraph (rr), a person associated with a member is any natural person who is registered or has applied for registration. The term also covers every sole proprietor, partner, officer, director and branch manager. It also covers anyone in the securities business who controls or is controlled by the firm, whether registered or not.
The business is open to anyone by default. FINRA closes the door only on people who are unqualified or whose record shows they can't be trusted with customers. FINRA By-Laws Article III, Qualifications of Members and Associated Persons, decides who may be associated:
- Section 1: Any person is eligible to become an associated person of members unless Section 3 excludes them.
- Section 2: The Board has authority to adopt qualification requirements for training, experience and competence.
Common mistakes
- One clock for all U4 changes. Using 30 days for a disqualification amendment (see the two U4 clocks in Content).
- Back-office parking. A clerical job alone doesn't cure a bar or disqualification under Rule 8311.
- Outdated prerequisites. Any Series 24 answer listing the Series 17, 37/38 or 62 as a current route is wrong.
Bottom line
- Rule 3110(e): investigate before filing, verify the U4 with a public records search within 30 calendar days, and review the prior Form U5 within 60 days.
- Form U4 amendments are due 30 days after learning the facts, or 10 days after a statutory disqualification occurs.
- Form U5 is due 30 days after termination with a copy to the person, and FINRA keeps jurisdiction for two years (a timely misconduct amendment restarts it).
- Statutory disqualification under Exchange Act Section 3(a)(39) includes an SRO bar or suspension still in effect, a felony or listed misdemeanor conviction within ten years, and willful false statements in filings.
Exam shortcut
Sort every timing question by its trigger word before choosing a number: "Occurs" with a disqualification means 10 days. "Learns" means 30 days for a U4 or U5 amendment. "Files" points to Rule 3110(e): 30 days to verify and 60 to review the old U5. "Terminates" means 30 days for the U5 and two years of FINRA jurisdiction.
The full lesson (about 3,817 words, 25 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- A2
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