Employee Conduct and Reportable Events

The forms

The Form U4 — the Uniform Application for Securities Industry Registration or Transfer — is filed by the firm in the Central Registration Depository to register a person and to request their exams. It carries identifying information, residential and employment history, and the disclosure questions.

The U4 must be kept current. Amendments are required for changes in residential address, for new disclosure events, and for outside business activities, and the deadlines are short — generally thirty days after learning of the event, and ten business days for certain matters. The obligation is continuing rather than annual.

Filing misleading information as to membership or registration is a violation under FINRA Rule 1122, and the consequences of an omission are frequently more serious than the consequences of the underlying event would have been. If you have something to disclose, disclose it and let compliance assess it.

The Form U5 — the Uniform Termination Notice — is filed by the firm within thirty days of a person leaving, and it states the reason for termination. That statement follows the person in CRD and is seen by every firm considering hiring them. A person may dispute the language, but they cannot remove it unilaterally.

Much of the content of both forms becomes public through BrokerCheck, which is why FINRA Rule 2210 requires firms to reference BrokerCheck in retail communications.

Disclosure events

The events that must be disclosed, and which the exam expects you to recognise:

Criminal matters — felony charges and convictions, and misdemeanors involving investments, fraud, wrongful taking of property, bribery, forgery, counterfeiting, extortion or a conspiracy to commit any of those. Note that a charge is disclosable, not only a conviction.

Regulatory actions by the SEC, a state, a foreign regulator or an SRO.

Civil judicial matters — injunctions and findings involving investment-related activity.

Customer complaints, arbitrations and civil litigation alleging sales practice violations, subject to defined thresholds.

Terminations for cause.

Financial matters — a bankruptcy within the past ten years, an outstanding judgment or lien, and a compromise with creditors.

A bankruptcy or an unpaid tax lien is not a bar to registration in itself; failing to disclose it is a much larger problem than having it.

FINRA Rule 4530 separately requires the firm to report specified events to FINRA within thirty calendar days, including a written customer complaint alleging theft, misappropriation of funds or securities, or forgery.

Complaints and red flags

A written customer complaint is any written statement from a customer, or someone acting for them, alleging a grievance involving the firm or its associated persons. Email counts.

FINRA Rule 4513 requires each member to keep a file of written customer complaints and the action taken, at the office of supervisory jurisdiction, for at least four years.

The representative's obligations are simple and absolute: escalate every complaint to a supervisor immediately; never respond independently; never settle one personally; and never guarantee a customer against loss to make a complaint go away, which violates FINRA Rule 2150. And never alter a record after the fact.

Red flags the outline expects you to recognise in a customer relationship: reluctance to provide identifying or financial information; activity inconsistent with the customer's stated profile; unexplained third-party involvement in an account; a sudden change in a long-standing pattern; and signs of diminished capacity or of a third party exerting pressure on an older customer, which may indicate financial exploitation.

Reportable events and the thresholds

Four sets of rules with numbers the exam asks for directly.

Outside business activities. FINRA Rule 3270 requires prior written notice to the firm before being employed by, or accepting compensation from, any other person, or acting as an independent contractor or sole proprietor. Notice, not permission — but the firm may impose conditions or prohibit the activity.

Private securities transactions. FINRA Rule 3280 requires prior written notice of any securities transaction outside the regular course of employment. Where selling compensation is involved, the firm must approve in writing and then record and supervise the transaction. Doing it without notice is selling away. One change is in flight and worth knowing about: in January 2026 FINRA filed a proposed rule change to replace both Rule 3270 and Rule 3280 with a single Rule 3290, Outside Activities Requirements. As of this writing the SEC has instituted proceedings and has not approved it, so 3270 and 3280 remain the rules in force and the rules the exam tests.

Gifts and gratuities. FINRA Rule 3220 caps gifts at $300 per person per year in relation to the business of the recipient's employer. The limit was raised from $100 effective 30 March 2026, so older study material has the wrong number. Ordinary and usual business entertainment is treated separately under the firm's policies, and separate compensation for services requires the employer's prior written consent.

Political contributions. MSRB Rule G-37 restricts a dealer from engaging in municipal securities business with an issuer for two years after certain political contributions to officials of that issuer, with a narrow de minimis exception for a modest contribution by an individual to a candidate they are entitled to vote for. The consequences fall on the whole firm, which is why firms pre-clear contributions.

One more: an associated person opening a securities account at another firm must give prior written notice to their employing member under FINRA Rule 3210, and the employing member may require duplicate confirmations and statements. That is how a firm supervises its own people's trading.