Late Disclosure Fee Frequently Asked Questions

Timely and complete reporting of all information required by the FINRA By-Laws and rules, as well as the federal securities laws is critical. The Securities and Exchange Commission, FINRA, other self-regulatory organizations and state securities regulators use the information to make licensing and registration decisions, among other things. FINRA also uses the information in FINRA BrokerCheck, which investors use for researching the professional backgrounds of firms and brokers. To further encourage firms to file timely and complete Forms U4 and U5 and amendments to these forms, FINRA charges a late disclosure fee when a firm fails to report a disclosure event in a timely manner. Below is a list of frequently asked questions regarding the late disclosure fee.

Effective March 31, 2016

Late Disclosure Filings

1. What form filing types are subject to the late disclosure fee?

Any Form U4 amendment, initial Form U5 and Form U5 amendment that reports a new disclosure event (i.e., contains a new Disclosure Reporting Page (DRP)) or a status update to a previously reported disclosure event (i.e., contains an amended DRP reporting a change in status) is subject to the late disclosure fee. Broker-Dealer form filings (Form BD and Form BD amendments) are not subject to the late disclosure fee.

2. What is a disclosure event?

A disclosure event is any matter covered by the questions on Forms U4 and U5 that pertain to criminal actions; regulatory disciplinary actions; civil judicial actions; customer complaints, arbitrations and civil litigations; terminations; and financial matters (Questions 14A through 14M on Form U4 and Questions 7A through 7F on Form U5).

3. When is a form filing considered late?

The circumstances under which a form filing generally will be considered late are set forth in the chart below.

4. If a late form filing contains an affirmative response to a disclosure question or a change in a response to a disclosure question (e.g., "yes" to "no" or "no" to "yes") and does not include a DRP reporting a new disclosure event or a change in status to a previously reported disclosure event, will the filing trigger the late disclosure fee?

No. FINRA assesses a late disclosure fee only on form filings that report details on a DRP of a new disclosure event or a change in status to a previously reported disclosure event.

5. Is a late disclosure fee assessed if an amended form filing is submitted in response to a CRD deficiency or inquiry letter and the form filing includes an amended DRP that adds additional details (e.g., docket/case number, comment) or clarifies previously reported details but does not report a change in status of the disclosure event?

No. FINRA will not assess a late disclosure fee in cases where a firm is responding to a CRD deficiency or inquiry letter requesting additional or clarifying details, provided the amended DRP does not include a status update to the previously reported disclosure event (or, if it does, the status update is timely reported).

6. Will FINRA assess a late disclosure fee if a registered individual's current firm reports a judgment/lien that should have been reported by a prior firm and that was satisfied before the individual joined the current firm, or it reports a bankruptcy event that should have been reported by a prior firm and that was older than 10 years at the time the individual became registered with the current firm?

Yes. Information on an individual's Form U4 must be updated and kept current on Web CRD. However, if an individual's current firm reports a judgment/lien that should have been reported by a prior firm and that was satisfied before the individual became registered with the current firm, FINRA will, upon request, credit any late disclosure fees assessed in connection with the current firm's reporting of such judgment/lien. Similarly, FINRA will credit any late disclosure fees assessed in connection with the current firm's reporting of a bankruptcy event that should have been reported by a prior firm and that was older than 10 years at the time the individual became registered with the current firm. Any such credits will be made to the firm's Flex-Funding Account.

Late Disclosure Fee Calculations/Assessments

1. How much is the late disclosure fee?

The late disclosure fee is $100 for the first day a form filing is late and $25 for each subsequent day, up to a maximum of $1,575.

2. Is the late disclosure fee assessed in addition to the disclosure processing fee?

Yes. The late disclosure fee is a separate fee and is assessed in addition to the disclosure processing fee.

3. How is the late disclosure fee assessed?

FINRA assesses the late disclosure fee starting on the calendar day following the last date on which the event was required to be reported under FINRA rules. In most cases when a firm submits a late disclosure filing, Web CRD will calculate the late disclosure fee and debit the firm's Flex-Funding Account $100 for the first calendar day and $25 per calendar day thereafter, up to a maximum charge of $1,575. In certain cases, the late disclosure fee may be charged manually (for example, a disclosure event that subjects a person to a statutory disqualification must be reported within 10 days rather than 30 days).

4. Which DRP fields will be used to calculate the late disclosure fee?

The following table identifies the specific DRP fields, by DRP type, that will be used to assist in calculating the late disclosure fee:

5. How many late disclosure fees will be assessed if a single form filing contains more than one late disclosure event (i.e., the form filing contains multiple DRPs reporting different late disclosures)?

If a single form filing contains more than one late disclosure event, only one late disclosure fee will be assessed. In such circumstances, FINRA will assess the late disclosure fee based on the disclosure event that has been outstanding the longest.

6. What should a firm do if it wishes to dispute a late disclosure fee?

Web CRD automatically assesses a late disclosure fee at the time a form filing is submitted if a disclosure event is not reported in a timely manner. In limited circumstances, a firm may be eligible to receive a reduction or refund of a late disclosure fee. For example, an adjustment to a late disclosure fee may be appropriate when a firm does not timely file an amended U4 updating a bankruptcy disclosure because the representative who obtained a bankruptcy discharge did not receive notice of the order within 30 days. A late disclosure fee adjustment also may be appropriate when a firm reports the wrong date of an event or its disposition due to a clerical error. In such situations, a firm should contact FINRA Registration and Disclosure staff by calling the FINRA Support Center at (301) 869-6699 to have the matter researched, and if appropriate, an adjustment made to the late fee.

7. What is the maximum late disclosure fee for a firm that reports a judgment/lien that was satisfied prior to the date that the firm reports it?

Given the structure of Question 14M on Form U4, in situations where a firm reports late a judgment or lien that was satisfied when a registered person was associated with that firm, FINRA will apply the fee schedule in effect at the time the judgment or lien was satisfied. Accordingly, if a firm reports late a judgment or lien that was satisfied prior to the effective date of the current maximum late disclosure fee, FINRA will, upon request, adjust the late disclosure fees assessed in connection with the firm's reporting of such judgment or lien to reflect the maximum fee that was in effect at the time the judgment or lien was satisfied. For instance, if today, a firm reports a lien that was satisfied by an individual associated with the reporting firm in 2010, FINRA will adjust the late disclosure fees assessed in connection with the firm's reporting of the lien to reflect the maximum fee that was in effect in 2010, which was $300. Any such adjustment will be made to the firm's Flex-Funding Account. To request an adjustment of the late disclosure fee, a firm should contact FINRA Registration and Disclosure staff by calling the FINRA Support Center at (301) 869-6699.

CRD Accounting

1. How can firms determine if they have been assessed a late disclosure fee?

Firms can utilize E-Bill to determine if FINRA assessed a late disclosure fee by reviewing the details of their Flex-Funding account. For additional information regarding E-Bill, please refer to the E-Bill User's Guide.

Tips for Reducing and/or Avoiding the Late Disclosure Fee

Firms can take the following steps to reduce and/or avoid the late disclosure fee:

• Actively monitor the CRD Outstanding Disclosure Letter Notice Queue to identify and address aged disclosure requests. This queue is available on the Web CRD Site Map in the "Firm Queues" section of the column heading "Individual." Instructions for finding the queue and a description of what is contained within the queue can be found in the
  Web CRD - Firm Queues For Individuals Navigation Guide
• Use an amended DRP (not a new, duplicate DRP) to report a change in status to a previously reported disclosure event. To avoid creating a duplicate DRP, amend an existing DRP by using the "edit" function rather than the "create" function.
• Consider requesting an Ad Hoc Report that identifies all "current" U4/U5 disclosures with a pending status (i.e., not yet resolved/final). To request an Ad Hoc Report, firms should email [email protected] with details of their request. Please note that FINRA assesses fees for Ad Hoc Reports.
• Set up an automatic e-mail notification by designating an individual to receive
  Classic CRD - Firm Notification
  outside of Web CRD by email.