FINRA Background Checks and Sealing Services

Posted By Galluzzo & Arnone || 3-Nov-2016

Criminal arrests can have especially complicated consequences for FINRA-registered securities broker-dealers. Everyone who has been arrested probably remembers having their fingerprints taken by the police during the arrest process. In most state-level criminal cases, those fingerprints from an arrest are transmitted to both the state agencies responsible for maintaining criminal court and arrest records (in New York state, the Division of Cirminal Justice Serviecs in Albany), and to the Interstate Identification Index maintained by the Federal Bureau of Investigation (FBI). When a person gets arrested at the state level, those fingerprints are sent for comparison with what is on file with the local state angency and the federal database to determine whether someone has an arrest record within the state or in some other state in America. The fact that these fingerprints get transmitted to two places can oftentimes prove problematic for FINRA-registered broker-dealers.

Individuals with Series 7 or Series 63 licenses, for example, are required to undergo background checks when they take a new job at a new financial institution. Most professional jobs require people to undergo background checks, and in most cases, the background checks are performed by third-party private investigation firms that check publicly-available information to determine whether someone has an arrest history, for example. Typically, criminal convictions for misdemeanors and felonies are publicly available by contacting state criminal justice agencies (in New York state, the Division of Criminal Justice Services and Office of Court Administration maintain records of convictions) However, dismissed and sealed cases (such as cases that have resulted in ACDs, or adjournments in contemplation of dismissal, under New York state criminal law) are not publicly available, and are not generally discovered by routinely employment background checks. Many FINRA-registered broker-dealers accept ACDs in misdemeanor cases like drug possession (PL 220.03 in New York), theft of services (PL 165.15), petit larceny (PL 155.25), or assault (PL 120.00) and think that the matter has been fully laid to rest and put behind them. After all, the charges have been dismissed and sealed by the court (usually after a short interim period of six months), and the person has not been convicted of any crimes.

The difference for FINRA broker-dealers, however, is that FINRA (and its regulated institutions) has access to law enforcement records at the federal level that are not publicly available. The New York state law that governs the dismissal and sealing of state-law criminal court records does not govern the FBI, who operates under federal law. As such, the arrest record contained in the federal database does not have to be sealed simply because the state law demands that it be sealed. Moreover, oftentimes, the federal database just simply isn't notified or updated at all as to the fact of the dismissal of the criminal charges at the state court level. Thus, as a practical matter, what happens is that a "dismissed case" like an ACD might still be on file as a pending or open case in the federal database. Thus, when a FINRA institution submits the fingerprints of its new prospective employee, the federal record on file might not reflect the dismissal of the state charges, and the employer may be made aware of the arrest that the prospective employee thought had been dismissed.

The attorneys at Galluzzo & Arnone have developed a strategy that seems to help in many cases. We obtain official Certificates of Disposition for your sealed case (available only to you or your attorney or someone to whom you give authorization) and then send a copy of that document to the state agency that maintains arrest records to request that the sealing at the state level be confirmed and that the federal database be notified of the sealing of the case. In our experience, the federal database is typically updated (and thus wiped clean) when the state agency requests that it be updated to reflect the state-level dismissal. The problem really is that the state agency frequently does not actually notify the federal database or request the sealing of the records unless they are specifically asked to do so.

Do not risk losing a lucrative job offer because your criminal attorney did not tie up the loose ends after you got an adjournment in contemplation fo dismissal. Contact the attorneys at Galluzzo & Arnone to perofrm this service for you - at a flat and reasonable rate - and you can have confidence that your new employer is unlikely to know about your old dismissed case.

Categories: FINRA