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Regulation and Compliance > Federal Regulation > FINRA

FINRA Clarifies Disclosure Rules for PPP Loans

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The Financial Industry Regulatory Authority has clarified its position on advisors taking small-business loans as part of the COVID-19 stimulus package.

On Monday, the regulator said advisors will not have to report the forgivable loans under the Paycheck Protection Program on FINRA Form U4, the securities industry’s registration and transfer form. 

The issue was raised last week by popular blogger and planner Michael Kitces of, who wrote online: “Advisors contemplating PPP loans with the intention of seeking forgiveness should also consider the potential impact of such forgiveness on their U-4, and whether such forgiveness may result in a disclosure event.”

But that won’t be the case, FINRA said in a recent online update about regulatory relief tied to the coronavirus pandemic. 

(Upcoming webinar: Tax Impact of Stimulus’ RMD Waiver, Early Withdrawals: Bloink & Byrnes)

“Because a PPP loan contemplates forgiveness of some or all of the loan …, such forgiveness will not involve a new agreement by the creditor, but will be an event consistent with the loan’s original terms,” it explained. 

“In those circumstances, the forgiveness of a PPP loan will not be a ‘compromise with creditors’ for purposes of Form U4 Question 14K,” FINRA added. “Any forgiveness beyond the original terms of the loan would be considered a ‘compromise with creditors.’”

That was the input that Jeff Levine, lead financial planning nerd for and a colleague of Kitces at Buckingham Wealth Partners, wanted to hear.  

“Good news for FINRA-regulated reps looking for #Paycheck Protection Program assistance!,” Levine said on Twitter late Monday. “Earlier today FINRA updated FAQs to address the open question of whether #PPP forgiveness would require disclosure on the U-4. As predicted, answer is ‘No.’ Good to have in writing though!”

Covered Loans

In another matter related to PPP loans, FINRA stated that member firms including a covered loan as a liability on their balance sheets may add the forgivable expense amount back to net capital.

They can do so only to the extent that they have “recorded expenses for the costs and payments making up the forgivable expense amount” and “provided that the add-back to net capital [does] not exceed the amount of the balance sheet liability for the covered loan that the firm reasonably expects to be forgiven,” the self-regulator said. 

It explained further that since the add-back cannot be greater than the balance sheet liability for the covered loan, “the add-back cannot increase net capital by more than the balance sheet liability for the covered loan.”

Documentation tied to the basis of the add-back must be created and kept by the advisor’s firm. The firm also needs to report the add-back on its FOCUS Reports (in Item 3525, which covers other deductions/allowable credits. 

Fingerprinting Exemption

Late last week, FINRA said non-registered associated persons required to be fingerprinted have been granted a temporary exemption from this process by the Securities and Exchange Commission. 

The exemption is in place until May 30, 2020, “or such time that the SEC may extend its temporary relief.”

Firms with individuals seeking more time must write to the SEC about the matter by May 30, 2020. 

“Member firms must maintain a record of those associated persons relying on the SEC’s exemptive relief,” FINRA added. “Such record[s] must contain the hire date, and if applicable, the termination date of those associated persons.

— Check out Democrats Unveil Interim Relief Plan; Lawmaker Pushes for PE Access to PPP Loans on ThinkAdvisor.


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