FINRA publishes a quarterly review to provide firms with a sampling of recent disciplinary actions involving misconduct by registered representatives.

“Willfully Failing to Disclose Material Information on a Form U4”

Recently, FINRA settled a matter involving a registered representative who willfully failed to amend his Form U4 to disclose tax liens and judgments, and failed for six months to disclose a bankruptcy filing on his Form U4.

During a five-year period, the Internal Revenue Service (IRS) issued two federal tax liens against the registered representative, the representative entered into two agreed-upon tax judgments and a civil judge entered
a judgment against the representative.

This registered representative failed to disclose the federal tax lien and three judgments on the Form U4 that the representative filed while employed with a member firm for nearly 11 years, notwithstanding that on several occasions, the representative submitted attestations or reports, or met with
firm auditors, and confirmed that he understood his obligations to report liens and judgments and that he had none to report.

While employed by the same member firm, the representative filed a voluntary
petition for bankruptcy protection under Chapter 7 of the Bankruptcy Act. After filing the bankruptcy petition, this representative filed reports with the member firm, in which he attested that he understood his obligation to keep his Form U4 current, and the member firm reminded the representative of his obligation to report bankruptcy filings on the Form U4.

This representative waited approximately six months to report his bankruptcy
filing to his member firm and to amend his Form U4.

FINRA concluded that the representative’s failures to disclose a federal tax lien, judgments, and a bankruptcy filing on the Form U4 were willful and violated Article V, Section 2(c) of NASD’s and FINRA’s By-Laws (applications for registration), NASD Rule 2110‡ (ethical standards) and FINRA Rule 2010 (ethical standards).

FINRA has suspended the representative in all capacities for six months and fined him $10,000.

(This ends the FINRA article.)

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