Registration and Continuing Education

Who must register

A person engaged in the securities business of a member firm — soliciting business, taking orders, giving investment advice about securities, supervising those activities, or training people to do them — must be registered in an appropriate category.

A non-registered associated person may perform clerical and ministerial functions: taking messages, providing quotations at a customer's unsolicited request, forwarding paperwork, and arranging appointments. What they may not do is discuss investments, accept an order, give advice, or receive transaction-based compensation. That last point is the hard boundary — commission-sharing with an unregistered person is prohibited under FINRA Rule 2040 and is a common enforcement finding.

Some categories of person associated with a member are exempt from registration, including those whose functions are solely clerical or ministerial and those not actively engaged in the securities business.

Failing to register a person who should be registered is a violation by the firm, and the individual acting unregistered is a violation too.

A registration is with a firm and does not travel with the person. When someone leaves, the registration is terminated; the next firm's filing is what restores it.

Background checks and disqualification

The Form U4 that a firm files to register someone asks a long set of disclosure questions covering criminal charges and convictions, regulatory actions, civil judicial matters, customer complaints, terminations, bankruptcies within the last ten years, outstanding judgments and liens, and compromises with creditors.

The firm must investigate the applicant's good character, business reputation, qualifications and experience, and must verify the information on the U4. Fingerprints are submitted for a criminal history check. Because the firm conducts its own investigation, a discrepancy surfaces — and filing misleading information or omitting it is itself a violation under FINRA Rule 1122, which has ended careers that the underlying disclosure would not have.

Much of what a U4 discloses becomes public through BrokerCheck.

A statutory disqualification is a defined legal status arising from certain felony convictions or securities-related misdemeanors within the past ten years, expulsion or bar from an SRO, certain regulatory orders, and other specified findings. A statutorily disqualified person may not associate with a member unless FINRA and the SEC approve an application to permit it. The category is specific: it is not a synonym for anything unfavourable in a person's past.

FINRA registration is separate from state registration. Most states additionally require an agent to pass the Series 63 and be registered in that state before transacting with its residents. Being FINRA-registered and not yet approved in a particular state is normal and temporary, and during it the representative may not do business with that state's residents. These state requirements are the blue-sky laws.

Continuing education

Two obligations begin immediately on registration, under FINRA Rule 1240.

The Regulatory Element is annual. Every registered person must complete it by December 31 each year, for each registration category held, through FINRA's online CE platform reached from the FinPro gateway. FINRA publishes the year's learning topics by October 1. A person who does not complete it becomes CE inactive and may not perform any activity requiring registration until they do.

The Firm Element is the firm's own annual training programme, developed from its needs analysis and written training plan, sized to its business and its regulatory concerns, covering the products and strategies its people actually sell, and documented.

The Maintaining Qualifications Program is the third piece and it matters when someone leaves the industry. An individual who terminates a representative or principal registration may elect to keep that qualification alive for up to five years by completing CE annually, rather than requalifying by exam if they return. Eligibility requires having been registered in the category for at least a year immediately before termination, not being statutorily disqualified, and not having been CE inactive for two consecutive years; enrollment must happen within two years of the termination date. Without it, a qualification generally expires two years after termination.