Elgin, IL asked in Stockbroker Fraud for Illinois

Q: I recently learned my stockbroker has been sued in the past and he never disclosed this. When I confronted him, he told

me he was only required to disclose if I directly asked him. Is this true?

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1 Lawyer Answer

Alex Schmidt

PREMIUM
Answered
  • Criminal Law Lawyer
  • Cranford, NJ

A: Whether a financial advisor registered with FINRA must report to his broker dealer or disclose on his brokercheck when they have” been sued” depends on 2 things:

1. The total settlement amount and whether the registered person was involved in an alleged sales practice violation

2. What the nature of your stockbrokers lawsuit consisted of?

Much will depend on what the broker was being sued for. Whether named in the caption of the lawsuit or not, the registered person must report an arbitration or civil lawsuit on his or her Form U4 if the action pertained to violation of FINRA rules or “sales practice violations”. The Form U4 is the Uniform Application for Securities Industry Registration and has 15 different sections including information about brokers or registered representatives including disclosures about certain past lawsuits. Many other disclosures must be made that can be associated with lawsuits or being sued such as any judgment liens or filing for bankruptcy. In short more information will be needed concerning the nature of your financial advisors lawsuit in order to determine whether a disclosure should have been made.

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