Unlike most industries, the securities industry is unique in that it requires certain termination information on former associated members to be publicized. FINRA requires firms to report the termination of a representative’s registration/employment within 30 days of the termination through the CRD system. Once a representative leaves or is fired from his or her job with XYZ Financial Services, XYZ has 30 days to file a Form U-5 regarding that separation. Once the U-5 has been processed, it becomes available for FINRA to post on BrokerCheck, which means it is viewable by all regulatory relevant agencies and, often, by the public at large.
Unfortunately, some broker-dealers and RIAs will abuse this process. We have seen these “employers” unleash compliance or “reputation managers” upon rich-target independent branch operators, or conduct an “internal raid.” In short, compliance becomes a business weapon.
Broker-Dealers and RIAs can then use this opportunity to immediately file a false or inacurate U-5, send a highly prejudicial warning/solicitation letter to the adviser’s clients, and/or offer immediate home-office supervision or new OSJ opportunities to all of the branch’s financial advisers. The impact upon the financial adviser is devastating, as he/she is unable to become registered with a new broker-dealer/RIA until the state regulators plod through their investigations of the opportunistic and frequently defamatory U-5 disclosure.
In terms of private legal counsel, the financial adviser’s source of revenue will dry up at the very moment he or she needs to retain an army of lawyers. The non-terminated financial advisers will cherry-pick their old colleague’s clients, increasing the damage to the terminated individual. By the time the adviser is registered with a new broker-dealer or RIA, his or her book is all but gone.
Cosgrove Law Group, LLC has handled many U-5 defamation cases all over the nation during the past several years. Aggrieved advisers have received Awards and settlements ranging from $100,000 to $3,500,000. If you believe you are a victim of U-5 defamation, please contact our firm and speak with one of our experienced attorneys.
¹The CRD is an online registration and licensing database that allows for the filing of required forms related to the securities industry that must be submitted for a multitude of reasons, such as “Form U5 – Uniform Termination Notice for Securities Industry Registration.” Regardless of the circumstances surrounding a representative leaving the firm to which they are registered, a U5 must be filed by the firm with the CRD within 30 days of the date of termination, as well as be provided to the representative. FINRA determines what portions of the CRD filings become publicly available on BrokerCheck.