Most financial advisers need to obtain several licenses from the Financial Industry Regulatory Authority, or FINRA, to be able to sell securities to customers. To get these licenses, you need to undergo a thorough background check covering many aspects of your personal, professional and financial life. The organization sponsoring your license is responsible for investigating and verifying all the information contained in this disclosure. The information from this background check is available to the public once your license is valid.
Criminal Background
The criminal background disclosure, like all other disclosures, occurs on Form U4, Uniform Application for Securities Industry Registration or Transfer. The questions ask whether you have ever pled guilty or no contest to, been charged with or convicted of a felony. These questions apply to all courts in the U.S. and abroad. You must also answer questions about misdemeanor charges or convictions related to investment activity, financial crimes and a few other specific crimes, including perjury, forgery, counterfeiting, bribery, fraud, making false statements, extortion or conspiracy to commit any of these specified crimes. Charges and convictions of your past employers that stem from activities over which you had control are also covered in this section.
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Professional Conduct
The largest and most comprehensive of the disclosure sections is the one covering professional conduct. You must answer questions about terminations, regulatory actions and customer complaints in which you were involved and civil litigation actions in which you were named as a respondent or defendant. This portion of the background check focuses mainly on negative actions that are related to investment activity: making false statements or omissions, violating finance laws or regulation or engaging in prohibited sales practices. The disclosure allows you to omit certain complaints, arbitration claims and civil litigation actions that are more than two years old or have low alleged damages.
Financial Background
Your personal and professional financial backgrounds are also the subject of scrutiny when attempting to gain the licenses necessary to become a financial adviser. You must disclose all compromises with creditors and bankruptcies involving yourself and companies for which you worked if the compromise or bankruptcy arose from actions you controlled. You may omit compromises and bankruptcies that occurred more than 10 years ago. You must also disclose all liens and judgments against you and whether or not any bonds you have held, such as those required by regulators to conduct business, have been denied, paid out or revoked.
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Mitigating Circ*mstances
FINRA provides pages for you to explain the circ*mstances of anything in your background that might prevent you from becoming licensed. When providing additional details, be sure that you are as honest as possible. A negative response does not necessarily mean that your license will be denied, but making false statements on an application for licensing is an all-but-sure path to having your license denied or revoked.
