A few years back I was out with some friends and had a bit too much to drink. To make a long unpleasant story short, I was arrested for burglary and assault. The charges were reduced to misdemeanor trespassing. I’m now thinking of changing employers. Do you think this will be a problem?

—D.T., Cleveland

Section 3(a)(39) of the 1934 Exchange Act Section defines what constitutes “Statutory Disqualification” from registration as a registered representative. The pertinent provision references Section 15(b)(4) of the act. Significantly for you, a person is “statutorily disqualified” if he or she was convicted within 10 years prior to filing a registration application or at any time thereafter of any felony or misdemeanor that involved: the purchase or sale of any security; the taking of a false oath; the making of a false report; bribery; perjury; burglary; larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds or securities; or substantially equivalent activities.

The good news is that, since you weren’t convicted of the burglary charge, you wouldn’t fall within the “statutory disqualification” rule. The bad news, however, is that when you file a Form U4 to register with a new employer, it’s likely the arrest will show up when a background check is run. One of the questions on the U4 (and the amended U4) is whether you’ve ever been charged with a felony. FINRA rules require that you report the arrest “promptly” (i.e., within 30 days) by filing an amended U4. I’m assuming from your question that you didn’t do this and didn’t inform your current employer of the arrest. Consequently, it’s the failure to disclose the arrest, not the arrest itself, that will cause you problems and could result in disciplinary sanctions. Generally speaking, it’s better to self-report the incident now and take your lumps before trying to switch employers and winding up in limbo.

I was a registered representative with my broker-dealer for over 20 years. I finally decided I wanted to go independent and become a registered investment adviser. I discussed this with my employer; the firm was happy to help and said I could continue to use it as the custodian and brokerage firm for my accounts. I incorporated, applied for registration and terminated my registration with my employer. About a month later, I was approved but was shocked to learn that my former employer would not deduct my advisory fees from my clients’ accounts, despite my having signed authorizations from the clients. I thought this was standard in the industry and I can’t help but feel that the firm is somehow being vindictive despite its initial willingness to help. Can you help me understand?

—A.N., New York 

It doesn’t sound like your former employer is being vindictive. If you were providing advisory services in an unregistered capacity, you would be in violation of the laws, rules and regulations governing investment advisers, which generally define an “investment adviser” as someone providing advisory services for compensation. And, technically, if the broker-dealer was involved in “aiding” that violation by providing material assistance in compensating you, it could be found to have been “aiding and abetting a violation.” So for the period you were unregistered, the firm cannot be a party to compensating you. Now that you are registered, however, the firm should have no problem deducting your fees directly from the client accounts if you have signed client authorizations to do so.

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