Q:  I've only had two customer complaints in the last five years, neither of which resulted in any payments to customers or arbitrations. But because of my business line, my firm wants to put me on heightened supervision. What are the rules about this?
—W.R., Illinois

A: Although FINRA had proposed a rule to address when a broker should be put on heightened supervision, at present the only specific rule is one dealing with producing managers. For the average broker, there is nothing quite as clear-cut. FINRA Rule 3010 requires that any supervision plan be reasonably designed to ensure compliance with applicable securities laws and regulations and FINRA rules. Consequently, each firm has the flexibility to tailor a plan to fit its business and to address any concerns that might be raised by a broker's past or present activities.

In general, FINRA has indicated that heightened supervision should be considered for brokers whose records reflect disciplinary actions involving sales practice abuse or a history of customer complaints and/or arbitrations that were not resolved in their favor. In 2002, for example, Daniel M. Sibears, senior vice president of FINRA (which was NASD Regulation Inc. at the time), spoke before the U.S. House of Representatives. He said: "Circumstances that may warrant heightened supervisory controls include registered representatives... who have been the subject of numerous customer complaints, disciplinary actions or arbitrations; registered representatives terminated from association with prior firms for regulatory reasons or concerns; [and] registered representatives who have frequently changed their employment..."

A heightened supervisory plan can be a double-edged sword for the firm. If the firm forgoes heightened supervision for a broker who meets the criteria articulated above and that broker has a problem down the road, the firm may have to explain its decision to the regulators, or an arbitration panel. On the other hand, if the firm does have the broker under heightened supervisory procedures and the broker still gets in trouble, the firm may have even greater exposure for not following up on, or properly implementing, the plan.

Q:  When I was 17, I was arrested for felony possession of a controlled substance. I completed a drug treatment program and the case was dismissed four years ago. If I get the matter expunged from my criminal record, must I still answer "yes" to the question on my U4 that asks if I was ever charged with a felony?
—C.W., via e-mail

A: Assuming that was the only criminal incident on your record, once you've provided the necessary documentation to CRD you can answer "No" to question 14(a)(1)(b). After you have the matter expunged by the courts, you must forward the appropriate order of expungement from the court to FINRA's Central Registration Depository. Make sure that FINRA deletes the matter entirely from your record and doesn't merely reclassify it as "non-disclosable." FINRA won't disclose to the general public items that are classified as non-disclosable, unless an item is actually deleted. But the information would still be seen by prospective employers (or anyone else) who obtains your CRD report from a state that provides a complete, unedited version of the report to the public.

Alan J. Foxman, Esq., is an attorney with the law firm of Lavalle, Brown, Ronan & Mullins, P.A., in Boca Raton, Fla. His comments are not intended to be legal advice. He can be reached at afoxman@lavallebrown.com.