Every now and then, I get a call from a stockbroker who has had some type of criminal history disclosure on his Form U4 and wants to know if that can be removed. Typically, the event relates to some type of youthful indiscretion in high school or college or soon thereafter, that may or may not have resulted in a conviction in the criminal court case. But, that issue has followed the broker around and often requires disclosure on the Form U4, as well as the Form ADV brochure supplement if the broker is also associated with a registered investment adviser firm. This disclosure can cast a shadow over the broker should clients or prospects view the BrokerCheck ® report, and may even inhibit career growth and employment with other firms.
Sometimes when the criminal charge never resulted in a conviction, expungement of the matter from the broker’s criminal history record is fairly easy under applicable state law. Once the issue is expunged in the court system, having the disclosure removed from the broker’s Form U4 is rather straightforward. On the other hand, some cases are more complex, especially those in which result in a conviction of one of the charges. In this post, I’ll share a case study about one of these more complex matters involving a Georgia criminal case that we recently resolved successfully for our client.
Mr. X contacted The Beck Law Firm, LLC wanting to seek removal of a criminal history disclosure from his Form U4, as he was worried that the disclosure might impact his ability to advance his career. Nearly ten years ago, when Mr. X was a college student, Mr. X and another person were detained by the police during a traffic stop and were then arrested when the police found marijuana, a marijuana pipe and a small amount of cocaine following a search.
Mr. X was ultimately charged with four offenses by the District Attorney’s office. He was charged with two counts of possession of marijuana, which were misdemeanors. Mr. X was also charged with two felonies, one for the possession of the cocaine and one for the possession of tools for the commission of a crime, allegedly due to the marijuana pipe (it is interesting that the possession of marijuana charge was a misdemeanor, but that the prosecutor charged Mr. X with a felony charge for allegedly being in possession of a pipe used to smoke the marijuana).
Mr. X retained counsel and resolved the case in a relatively favorable way. The prosecutors dismissed the two felony charges and he pled guilty to the two marijuana possession charges. Mr. X was placed on probation for a period of time and ordered to pay a fine, among other things. While still in college, he completed the requirements of the court and his probation was terminated early. He has not had any incidents with law enforcement since that time, with the exception of some minor traffic tickets.
Mr. X later graduated college and then began working in the financial services field. He became registered as a representative of a broker-dealer, and had to disclose certain information on his U4 about his criminal record. In doing so, he reported on the U4 that he had been charged and convicted of the two misdemeanor marijuana possession charges, and charged with the two felonies that were ultimately dismissed. Information about the matter was then on display for the entire world to see including his employer, his prospective employers, his clients, his prospective clients, and his competition.
Once we were engaged to represent Mr. X, we began a thorough review of the records from the court case and conducted research into Georgia laws in effect ten years ago as well as in 2015 to determine if there was any way possible to seek to expunge any or all of the criminal history from Mr. X’s record. If we could get the two felony charges expunged, we thought, then we could likely remove all trace of the criminal disclosure from Mr. X’s Form U4, or at least shield the matter from public view.
Research into Georgia law in place at the time of the convictions revealed that there was not a prescribed manner in effect to allow for the felony charges to be expunged on which we could rely to help Mr. X. Since the time of those convictions, however, Georgia enacted a revised statute concerning expungement (called records restriction) and provided very limited means to expunge (restrict) felony charges that were dismissed even if the defendant was convicted of other misdemeanor charges, provided that certain conditions were met. This provided a glimmer of hope that we could craft a petition to the court in such a way to obtain the relief desired so that two felony charges – for which Mr. X was never convicted – would not continue to create problems for him, or have the potential to do so in the future.
The issue remained of whether we could convince the judge that restricting the criminal history was reasonable and appropriate, that it did not go against the public interest, and that the law allowed such a step to be made. This was not a straightforward and easy case. As we moved forward following the research, we determined that this process may be easier if the local prosecutor’s office did not object to our goal of expunging the two felony charges. Fortunately, the DA’s office did not oppose our request and was actually very helpful in agreeing to our motion to restrict the criminal history information concerning the two felony charges. We filed our motion/brief with the court and the judge agreed to the motion without a hearing being necessary. As a result, the criminal history information relating to the two felony charges was sealed/restricted at the court clerk’s office, and with the GBI’s Georgia Crime Information Center (GCIC). We then were able to successfully petition FINRA to remove all information regarding the two felony charges from the CRD ® system, and to seal the information about the misdemeanor charges, which would not be reportable on the Form U4 in and of themselves, from public dissemination.
As a result of the foregoing actions, Mr. X now has a clean Form U4 and no negative disclosures on his BrokerCheck® report. Further, he can now answer – correctly under applicable law – that he has never been charged with a felony. The college indiscretion from many years ago will no longer pose the risk of harming his professional and personal life. For this result, Mr. X., and we, were pleased with the successful outcome.
We were fortunate to have the right set of facts, and the right laws, in effect to be able to accomplish this result for Mr. X. Not all scenarios would produce similar results. But, registered representatives with criminal history disclosures on their records, especially for charges that did not result in a conviction, should consider exploring whether they may be allowed any records restriction or expungement under applicable law.
UPDATE JUNE 2017: We continue to get calls from financial advisors seeking to clean up their Form U4. Now, we have prepared a FREE report, The Financial Advisor’s Guide to a Cleaner Form U4, that you can download online. In this report, we answer several FAQs that advisors have about their U4, and also provide answers to four questions that advisors SHOULD be asking about, but often are not. Get your copy of this free report today.
Update August 2018: Here’s another case study of cleaning up an advisor’s U4.
Update February 2019: Joel blogged about Georgia’s record restriction statute, and the additional option of seeking to seal the court file via motion for those cases where criminal charges did not result in a conviction. Check out this post here:
Georgia Records Restriction: Sealing Non-Conviction Criminal Records