When you work as a representative of a broker dealer or investment advisory firm, you are required to register with the appropriate jurisdiction and/or self-regulatory organizations like the Financial Industry Regulatory Authority (FINRA). If you leave your firm for any reason, your employer files a Form U5 with those jurisdictions and self-regulatory organizations to show you’ve left the firm.
If there are details about why you left that are relevant to your registration, the firm is supposed to include those on Form U5. These details could include anything from allegations that you violated firm policy to accusations of fraud.
Moreover, the firm is required to update the Form U5 with new details until final disposition, which could include new reportable matters and the associated details.
Those details will be on BrokerCheck. They will be visible to future employers and investors. If your termination involved any acrimony, those details may not be flattering. That could derail your career.
What can you do if what the firm says is unflattering – or even defamatory?
The first thing you can try is to notify your former employer that you disagree with the statement they made on your Form U5. They may be willing to update the form.
You may have to file a formal complaint in arbitration
If there are statements on your Form U5 that are actually false, you have rights through FINRA. You can dispute purely factual matters through the BrokerCheck accuracy dispute process. However, if you want to dispute the reason given for your termination on a Form U5, you may need to file a FINRA defamation complaint.
This will be resolved in arbitration through FINRA. You and your former firm will agree on the arbitrator or arbitrators, who will generally be industry experts. Arbitration is a bit like a more casual type of court. Instead of a judge, you have arbitrators, who you and your former firm will pay. These neutral arbitrators will hear your dispute and issue a binding decision.
This is a very common problem, unfortunately. According to FINRA, allegations of libel or slander on Form U5 were the second most common type of intra-industry controversy so far this year.
Earlier this year, attorney Michael Valenti of Valenti Hanley PLLC represented a registered broker-dealer in a FINRA arbitration over a defamatory Form U5. It was a David and Goliath situation against J.P. Morgan Securities, but Mr. Valenti won a unanimous decision in favor of our client. J.P. Morgan was required to amend the Form U5 as specified by the arbitrators and to pay our client $1.4 million in compensation.