FINRA has released for comment its proposed amendment to Rule 8312, otherwise known as the BrokerCheck Disclosure rule. As it currently stands, FINRA waits for 15 days before it releases information reported on Form U5. This delay was meant to give a registered representative adequate time to comment.
FINRA has proposed to change the waiting period to three business days. In those circumstances where a representative submits a Form U4 from a new firm before the expiration of the three business days, the Forms U5 and U4 will be released simultaneously under the amended rule. So what does this mean practically speaking?
FINRA thinks that three days is more than enough time to comment to avoid potential customer harm that may arise if the registered representative files his Form U4 before the Form U5. In that situation, FINRA wants to avoid a customer only seeing the information on the U4, which may not accurately reflect the facts and circumstances of the departure.
Even if a registered representative could not submit comments within the proposed three day window, that person could still file a Form U4 through a new firm and state in it that he/she intends to respond more fully in an amended Form U4 to the information in the U5.
FINRA also noted that a registered representative could always sue his/her prior member firm if it releases inaccurate information on the Form U5. In my experience, even if that suit is successful, the best you will likely get is an amended U5. In other words, the bad stuff is still out there, just clarified or softened.
Considering that the underlying premise for this rule change is to avoid customer harm, it is safe to assume that this rule change will happen. When faced with the decision (whether yours or not) to leave one firm and go to another, try to reach an agreement on the Form U5 language. If not, use your three days wisely.
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