Under normal circumstances, Form U5 filings play a necessary and important regulatory role in the retail securities industry, notifying FINRA and the marketplace that an advisor is no longer registered with their firm and why. Unfortunately, certain firms are increasingly using the Form U5 process as a competitive tool and to engage in economic warfare.
By putting misleading or even false information about the circumstances of the advisor’s separation in the disclosure sections of the Form U5, these firms are sabotaging the departed registered representative’s reputation, making it difficult or impossible for them to find a new job. And by using the Form U5 to create a false impression that the advisor left while under a cloud, firms are using the Form U5 process to scare clients into not following their advisor to a new firm, once they finally find one that will onboard them.
If your former firm is defaming you on your Form U5, it is important to take action to respond immediately. The longer the misleading Form U5 disclosures remain visible to potential employers on the CRD and to your clients on BrokerCheck, the greater the potential damage to your professional reputation and book of business.
Hire an attorney who is experienced in negotiating Form U5 disclosures and amendments with broker/dealer firms’ compliance departments, and in bringing legal action to obtain expungements if necessary. You should not be using a general litigator or the attorney who helped you with your estate plan or who set up your LLC, no matter how highly you think of them. You should have a lawyer who understands the realities of how securities industry works, and knows how to bring leverage to bear to compel your former firm to correct your Form U5. Qualified counsel can often negotiate Form U5 language that will enable you to find a new job and keep your clients without having to resort to filing suit against your prior firm for amendment or expungement.
Scott Matasar, Esq. is a founding Member at Matasar Jacobs LLC. His legal practice focuses on representing firms and individuals in the securities brokerage industry. Among other things, he regularly defends clients in FINRA customer arbitration cases, represents advisors under investigation by FINRA as well as state and federal regulators, and counsels both firms and advisors on a wide range of securities regulatory and operational issues, including transition matters.