What a New Firm Checks Before It Hires You: BrokerCheck, Your U4 and the Background Check

The short answer: Before a broker-dealer files your Form U4, FINRA Rule 3110(e) requires it to investigate your good character, business reputation, qualifications and experience. Within 30 days of filing it must have checked the form under written verification procedures, including a national public records search, and within 60 days it must review your most recent Form U5. The firm reads all of this in CRD, which holds more than BrokerCheck shows, including why your last firm says you left. Certain records put the hire itself in front of FINRA before the firm can proceed. Little of it should be a surprise if you read your own record first.

Advisors weighing a move usually think about the offer and the clients. The new firm is thinking about the record, because FINRA holds it responsible for what it should have found. Our guide to Form U4 and Form U5 covers what each form does; this one covers how a hiring firm reads them.

What the rule requires of the hiring firm

FINRA Rule 3110(e), effective July 1, 2015, sets out the hiring firm's main duties:

1. Investigate before filing. The firm must "ascertain by investigation the good character, business reputation, qualifications and experience" of an applicant before it applies to register the applicant. FINRA places no limit on the scope of that investigation and says the firm must obtain all the information it needs to make an evaluation.
2. Read the last Form U5. If the applicant was registered before, the firm must review the most recent Form U5, with any amendments, within 60 days of filing the application, or show FINRA it made reasonable efforts to do so.
3. Verify the Form U4 within 30 days. The firm must have written procedures reasonably designed to verify the accuracy and completeness of an initial or transfer Form U4 no later than 30 calendar days after it is filed, and FINRA encourages firms to finish before filing.
4. Search public records. Those procedures must include a search of reasonably available public records. FINRA describes the base requirement as criminal records, bankruptcies, judgments and liens, and says the rule "does not require firms to obtain a credit report." Since July 9, 2018, FINRA has run its own bankruptcy, judgment and lien search and tells the firm about anything that differs from what the Form U4 reported; firms may rely on it for that part.

On the Form U4 itself, the firm's signatory certifies that it has contacted all of the applicant's employers for the past three years and taken appropriate steps to verify the information. The applicant, for their part, signs an authorization letting former employers furnish information including the complete reasons for termination, and a release of liability for doing so. Fingerprints follow the filing: if the firm does not submit them within 30 days, the registration goes inactive.

FINRA's guidance on hiring people with a record goes further than the rule. It asks firms to discuss with the applicant each customer complaint and regulatory action and assess its merit, ask about matters not yet in CRD, and have someone above branch level review the history before hiring.

What the hiring firm sees that BrokerCheck does not

BrokerCheck and CRD are drawn from the same filings, and CRD holds more. CRD is FINRA's registration database. BrokerCheck is the free public report built from it, showing registrations, ten years of employment history, qualifications and disclosure events.

FINRA Rule 8312 keeps several things off BrokerCheck. Two matter most in a move:

• The Form U5 reason for termination. Section 3 of the Form U5 asks the departing firm to choose Discharged, Permitted to Resign, Voluntary, Deceased or Other, with an explanation for the first, second and last. BrokerCheck does not publish that answer.
• Internal review disclosure. Question 7B asks whether the person was under internal review for fraud, wrongful taking of property or rule violations at termination. BrokerCheck does not publish that answer either.

A hiring broker-dealer reads both in CRD, because Rule 3110(e) requires it to review the Form U5; the rule binds broker-dealers, and CRD's pre-registration search is not available to firms that are only investment advisers. So a public report that looks clean can sit beside a U5 the new firm will ask about. A termination after allegations, reported under Question 7F, is not on Rule 8312's exclusion list. What each termination label means, and how firms are expected to describe it, is covered in what "discharged" means on a Form U5. FINRA expects the departing firm to be specific: in its guidance, reporting only that a person violated "firm policy" is not enough, and the firm must identify the policy and give sufficient facts.

The record keeps moving while you interview. Form U4 amendments are due within 30 days of learning of a reportable event, or within 10 days for a statutory disqualification, and a new item that arises during a move belongs on the transfer filing too.

The thresholds that put items on the record

Only some complaints become disclosures. Under Form U4 Question 14I:

• Written complaints made in the last 24 months are reportable if they allege a sales practice violation and claim $5,000 or more in damages (a complaint that names no amount is reported unless the firm decides in good faith that damages are under $5,000), or allege forgery, theft, misappropriation or conversion at any amount.
• Settlements of a complaint, arbitration or lawsuit alleging sales practice violations are reportable at $15,000 or more (for settlements on or after May 18, 2009).
• Arbitration awards and civil judgments against the person are reportable regardless of amount, and pending arbitrations and lawsuits alleging sales practice violations are reportable while pending.

A reported complaint that later settles below $15,000 still leaves a record: the person updates the disclosure page with the outcome, and the earlier answer stays on the form for two years from the date the firm received the complaint. Complaints that age out of active reporting can remain on BrokerCheck as historic complaints.

For scale, FINRA counted about 920,000 registered professionals from January 2016 through December 2021, of whom about 8% had at least one customer dispute disclosure on their CRD record. An academic study of FINRA records from 2005 to 2015, counting only customer disputes that settled or ended in an award or judgment, final regulatory, civil and criminal matters, and separations after allegations, found about 7% of advisers had a misconduct record, and that 44% of advisers who lost their job after misconduct were working in the industry again within a year.

The records that put the hire itself under review

For most advisors, the hiring firm's review ends with questions and answers. For some, FINRA reviews the hire.

Rule 1017(a)(7). Since September 1, 2021, a firm must file a continuing membership application, unless it first requests a materiality consultation with FINRA, whenever a person seeking to become a registered person, principal, owner or control person "has, in the prior five years, one or more final criminal matters or two or more specified risk events." A specified risk event includes a final customer arbitration award, civil judgment or settlement of $15,000 or more in which the person was a named party, and a final regulatory or civil action with sanctions of $15,000 or more or a bar, expulsion or suspension. The firm may not go ahead until FINRA finds the change immaterial or approves the application. FINRA weighs, among other things, whether the matters involve customers, the person's planned role, and the supervisors' own records.

Statutory disqualification. A person subject to a statutory disqualification, such as a felony conviction within ten years or a bar, may not associate with a member firm unless FINRA approves it through an eligibility proceeding, and almost all approvals come with a heightened supervision plan.

Heightened supervision. FINRA's 2018 guidance tells firms that hire a person with a recent history of customer complaints, disciplinary actions or adverse arbitration decisions to decide whether special supervision is needed, and says a failure to assess it would be closely evaluated in any failure-to-supervise review. In practice that means a designated principal, extra training, written acknowledgments and closer review.

The firm's own metrics. Under FINRA Rule 4111, a firm's annual risk metrics count its registered persons' events, including terminations after allegations and internal reviews at a previous firm. A firm with too many can be designated a Restricted Firm, with a cash deposit and conditions, and since June 1, 2023 BrokerCheck shows that designation. A hire's record is part of the firm's own calculation.

A new firm's Form CRS can change too: its disciplinary-history answer covers its financial professionals, so a hire with reportable history can turn the firm's No into a Yes.

How long a gap between firms can run

Moving directly from one firm to another, a transfer Form U4 carries your registrations with you. The clocks matter when there is a gap:

• Under two years since the last registration as a representative, a person can register again without re-testing.
• Two years or more, Rule 1210 requires a representative exam again, unless you have kept the qualification through FINRA's Maintaining Qualifications Program.
• Four years or more since you passed the SIE or were last registered, whichever is later, the SIE must be retaken too, unless SIE credit applies through the Maintaining Qualifications Program.
• The Maintaining Qualifications Program lets a person keep a terminated qualification for up to five years by completing annual continuing education, for a $100 annual fee, if they elect it with the Form U5 or within two years of leaving and were registered in the category for at least a year.

FINRA keeps jurisdiction over a person for at least two years after the last registration ends. For advisors leaving the broker-dealer world for an RIA, how the Series 7 lapses and what the state exams require is covered in lapsing your Series 7 when you go RIA.

Expungement, and its limits

Customer dispute information can come off CRD, and so off BrokerCheck, only through Rule 2080: a court order directing expungement or confirming an arbitration award that grants it, on a finding that the claim is factually impossible or clearly erroneous, that the person was not involved, or that the claim is false. Since FINRA's rule changes took effect on October 16, 2023, requests filed separately from a customer case go to a three-person panel drawn from a special roster, state regulators are notified and may take part, time limits apply, and the panel must agree unanimously. FINRA reports that panels awarded relief on 174 of 254 such occurrences decided in 2025. An award still needs a court to confirm it. Rule 2080 covers customer disputes only; it does not remove a regulatory action, a criminal matter or a bankruptcy. Termination information on a Form U5 follows a separate path through FINRA arbitration, set out in how long a termination stays on your U5.

Read your own record first

The firm you leave must give you a copy of your Form U5 when it files it, within 30 days of your termination. FINRA's FinPro Gateway lets a registered person view their CRD record, including registrations, qualifications, continuing education, employment and disclosure history, and download the latest Forms U4 and U5. Reading both before any conversation with a new firm means every question it asks has an answer ready and the documents to back it.

On the RIA side, the same Form U4 registers investment adviser representatives, and an SEC-registered adviser's brochure supplement must disclose each covered advisor's material legal and disciplinary events, generally for ten years after the event, so part of an advisor's record follows them into the new firm's own disclosures.

Legal advice on a specific record comes from your own counsel.

If your firm terminated you, the order of steps is different; what to do when you are terminated starts there. How a record shapes which firms are realistic, and how to present it, takes a conversation. Request an Introduction.