Law360, New York (January 15, 2015, PM EST) -- A dark chapter in a stockbroker's life could end up haunting his firm now that the Financial Industry Regulatory Authority has announced plans to probe compliance with rules on reporting things like convictions and liens that are disclosed in a public database about the industry's roughly 640,000 registered representatives.The self-regulatory organization's rules require registered representatives and their firms to update when they've been hit with a significant financial or legal adversity.
Way back when, somewhere around the time when you entered the securities industry, you were asked to fill out, review, and/or sign an ominous looking document called the Uniform Application For Securities Industry Registration Or Transfer ("Form U4"). It may be turning brown and crumbling with age in the back of your desk drawer.As part of submitting your Form U4 you are forced to agree to arbitrate "any dispute, claim or controversy" that occurs between you and your firm, you and a customer, and any other covered individuals or entities.On top of that arm twisting that forces registered persons into mandatory intra-industry and customer arbitration, you are also compelled to agree that "any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction." So - next time you want to rage and fulminate against how unfair Wall Street is and where the hell do they get the right to force you into mandatory arbitration and when did you agree that an arbitration award could be rendered a state/federal court judgment - just take a gander at the above paragraph #5 of your Form U4.And if you somehow failed to amend your U4 to reflect your current address and the copy winds up in some postal black hole? I further stipulate and agree that any civil action or administrative proceeding instituted by the SEC, CFTC or a jurisdiction may be commenced by the service of process as described herein, and that service of an administrative subpoena shall be effected by such service, and that service as aforesaid shall be taken and held in all courts and administrative tribunals to be valid and binding as if personal service thereof had been made.SIDE BAR: At some point in your Wall Street career, you may get served by a regulator with a complaint, subpoena, or other pleading/document attendant to an effort to compel your testimony or the production of documents - or to start a process whereby you may be censured, fined, suspended, and/or barred.In this Paragraph #7, you have consented to the service of such paperwork upon you by: A word of warning.
You know that clever legal advice you got from that moron at the office water cooler?
I request that a copy of any notice, process, pleading, subpoena or other document served hereunder be SIDE BAR: You know all those states in which you are registered?
Guess what - you designated a legal representative in each state as your "attorney upon whom may be served any notice, process, pleading, subpoena or other document in any action or proceeding" against you in connection with securities, commodities, or investment advisory activities involving alleged violations of a given state's laws.
You may also be found wanting in the good faith department if you "should have known." Willfully blinding yourself to facts and circumstances will not likely allow you to crawl out the window.
Finally, note that there are administrative, civil, and criminal penalties for lying on the Form U4.
SIDE BAR: When you submitted the Form U4, you agreed to "submit to the authority of the jurisdictions and SROs. Now that's a big "except." Of course the barrier set under law for successfully suing regulators is quite high and typically includes some form of "immunity" for a regulator (or its employees and agents). Maybe you weren't exactly planning on disclosing some embarrassing detail?