Form U-5 Expungements

What A Form U-5 Expungement Attorney Does

A Form U-5 expungement attorney adeptly negotiates, with brokerage firms, the information to be included on the Form U-5s which the firms will file with securities regulators to report the termination of the brokers’ employment. Further, when pre-filing negotiations do not succeed, a Form U-5 expungement lawyer zealously arbitrates, on behalf of brokers, FINRA proceedings seeking to expunge negative statements made on the brokers’ Form U-5s.

How Form U-5 Expungement Proceedings Arise

Form U-5 (Uniform Termination Notice for Securities Industry Registration) is a template which, within thirty days, brokerage firms are required to complete and submit to securities regulators to report the cessation of a broker’s employment. On the Form U-5, the brokerage firm is required to set forth the reason for the broker’s termination, and whether the broker voluntarily left, was permitted to quit, or was fired.

So, too, on a broker’s Form U-5, the brokerage firm is required to report (i) whether any governmental agency or self-regulatory organization (an “SRO”) is or was investigating, or has brought any disciplinary action involving, the broker, and (ii) whether the brokerage firm is or was internally investigating the broker for, or whether the firm terminated the broker after some person accused the broker of, disobeying securities statutes or rules.

Further, the brokerage firm is required to report (iii) whether, while employed by the firm, the broker was charged with or convicted of certain criminal offenses, and (iv) whether, while the broker was employed for the firm, any person filed customer complaints, arbitration claims, or civil lawsuits against the broker.

If the brokerage firm’s response to any of these Disclosure Questions is “yes,” then, on the applicable Disclosure Reporting Page (“DRP”) contained in the broker’s Form U-5, the firm must set forth complete details of the events or proceedings.

The data set forth on a broker’s Form U-5 is set down in each broker’s Central Registration Depository (“CRD”) file, and is made accessible to other broker-dealers for them to use in determining whether to employ the broker. The CRD system is an online registration and licensing system that contains data utilized by the U.S. Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority, Inc. (“FINRA”), other self-regulatory organizations (“SROs”), and state securities regulators to make licensing and registration determinations, among other things.

FINRA’s BrokerCheck website (“BrokerCheck”) gets its information from the CRD system. By means of BrokerCheck, investors and the public may readily review much of the data on a broker’s Form U-5, such as the brokerage firm’s rationale for terminating the broker’s employment and the above-mentioned Investigation, Internal Review, Criminal, Regulatory Action, Customer Complaint/Arbitration/Civil Litigation, and Termination Disclosures.

Should a brokerage firm want to strike back at a broker, the firm may place defamatory information on the Form U-5 that harms the broker’s reputation and seriously hinders the broker’s ability to obtain a new job.

In addition, there is a growing trend in which brokerage firms utilize Form U-5s as an anti-competitive weapon. That is, with increasing frequency, financial services firms denigrate brokers on Uniform Termination Notices in order to discourage customers from following the brokers to new firms.

In addition to defamatory, employment-related information, a broker’s CRD file may include false or misleading complaints by customers against the broker. Such unfounded or inaccurate complaints by customers injure the broker’s reputation and seriously impede the broker’s ability to bring in or retain other customers.

At the Law Offices of David S. Rich, LLC, we have substantial experience arbitrating, on behalf of brokers, FINRA proceedings seeking to expunge harmful statements made on the brokers’ Form U-5s.

Form U-5 Negotiation

First of all, it is crucial that, immediately upon being fired by his or her brokerage firm, a broker retain the borough of Manhattan Form U-5 Negotiation Attorney to negotiate the information that the former employer will place on the broker’s Form’s U-5. This negotiable information includes (i) the rationale for the broker’s termination, (ii) whether the broker voluntarily left, was permitted to quit, or was fired, and (iii) the above-mentioned Investigation, Internal Review, Criminal, Regulatory Action, Customer Complaint/Arbitration/Civil Litigation, and Termination Disclosures.

For instance, a discharged broker, through his or her attorney, may ask the brokerage firm to set forth on the broker’s Form U-5, and may supply facts warranting a statement by the firm that, the reason for the broker’s firing (or for the firm allowing the broker to resign) was something ambiguous and relatively innocuous, such as loss of confidence by the brokerage firm in the broker, or a dispute between the firm and the broker that was reconciled satisfactorily after termination.

So, too, a terminated broker, through counsel, may request that the financial services firm state on the broker’s Uniform Termination Notice, and may provide facts justifying a statement by the firm that, the conduct by the broker that prompted his discharge or his negotiated departure were not investment-related, securities-related, , sales practice-related, or customer-related.

There is flexibility for such negotiation of the text of a broker’s Form U-5. This is so because FINRA mandates only that a brokerage firm, in answering Form U-5 queries, “provide sufficient detail . . . such that a reasonable person may understand the circumstances that triggered the affirmative response.”

On behalf of brokers, the Law Offices of David S. Rich, LLC skillfully negotiates, with brokerage firms, the information to be placed on the Form U-5s which the firms will submit to securities regulators to disclose the cessation of the brokers’ employment. If you are a recently discharged employee in the securities industry and you believe that your former employer may make disparaging statements on your Form U-5, contact the Law Offices of David S. Rich, LLC.

FINRA Arbitration Of Form U-5 Expungement Proceedings

Expungement of Harmful Statements Made By The Broker’s Former Employer On The Broker’s Form U-5. Providently, when pre-filing negotiations do not work, there is a mechanism by which a broker may be able to expunge (that is, to remove or excise) disparaging statements made by his or her former brokerage firm on the broker’s Form U-5.

IN particular, a broker may bring, against his former employer, a FINRA arbitration demanding expungement, from the CRD, from the broker’s Form U-5 submitted by the broker’s former employer at the time of the broker’s discharge, and from any Form U-5 or Uniform Application for Securities Industry Registration (“Form U-4”) submitted or amended after the broker’s termination, specified employment-related information about the broker, based on the defamatory nature of the information provided by the former employer.

In other words, FINRA arbitration panels have the authority to direct the expungement of information in the CRD system which is defamatory in nature.

If you want to expunge disparaging statements made by your former employer on your Form U-5, contact the Law Offices of David S. Rich, LLC. We represent securities industry professionals seeking to expunge their Form U-5s, their Form U-4s, and their CRD files, including:

• Retail brokers
• Investment bankers
• Managing directors, vice presidents, and senior vice presidents
• Stock, bond, options, derivatives, currency, commodities and futures traders
• Financial advisors, financial analysts and research analysts
• Sales executives, sales directors and sales representatives
• Investment managers
• Account executives
• Other financial services employees

Expungement, From A Broker’s CRD File, Of Customer Dispute Information. So, too, and providently, there is a process by which a broker may be able to expunge, from the CRD system, customer complaints against the broker. Brokers seeking expungement of a customer complaint from their record must either (i) obtain a FINRA arbitration award granting such expungement and secure a Court Order confirming that arbitration award, or (ii) obtain a Court Order directing such expungement.

In order to have a customer complaint expunged from his CRD file, a broker must prove that:

1.  the claim, allegation or information is factually impossible or clearly erroneous;
2.  the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or
3.  the claim, allegation or information is false.

Further, in order for a FINRA arbitration panel to grant expungement of customer dispute information, the panel must do as follows:

1. Hearing. The FINRA arbitration panel must hold a recorded hearing session, by telephone or in person, regarding the appropriateness of expungement.
2. Settlements. In cases involving settlements, the FINRA panel must review settlement documents and consider the amount of payments made to any party and any other terms and conditions of a settlement.
3. Explained award. In the arbitration award, the FINRA arbitration panel must indicate which of the three, above-mentioned grounds for expungement serve(s) as the basis for its expungement order. Further, the arbitration panel must provide a brief written explanation of the reason(s) for its finding that one or more of the above-mentioned grounds for expungement applies to the facts of the case.

If you are a securities industry professional who wants to expunge customer complaints from your record, contact the Law Offices of David S. Rich, LLC.

You May Have A Cause Of Action For Expungement Of Negative Statements Which Your Former Brokerage Firm Made On Your Form U-5

Expungement Of Employment-Related Information From The Central Registration Depository. In an intra-industry dispute, FINRA will expunge information from the Central Registration Depository without a court order if the arbitration panel awards expungement relief based on the defamatory nature of the information contained in the CRD system and explicitly states in the award that it is recommending expungement on that basis.

If, however, the arbitration panel does not state that it is awarding expungement relief based on the defamatory nature of the information, then FINRA will expunge the information contained in the CRD only if the arbitration award granting expungement relief is confirmed by a court of competent jurisdiction.

Defamation. Because, as noted above, FINRA arbitration panels have the authority to order the expungement of information in the CRD system which is defamatory in nature, a broker in Manhattan, in a FINRA arbitration seeking expungement, should specifically identify the negative statements made by the broker’s ex-employer in the broker’s Form U-5 and should prove that those statements are defamatory. In this regard, the following principles of NY Law are helpful.

Libel is a method of defamation expressed in writing or print.

In Manhattan, NY, the elements of the cause of action for libel are: (1) a written defamatory statement of fact regarding the plaintiff; (2) published to a third party by the defendant; (3) defendant’s fault, varying in degree depending on whether plaintiff is a private or a public party; (4) falsity of the defamatory statement; and (5) injury to plaintiff.

As to the defendant’s fault, a private person who sues for defamation concerning a matter of private concern merely needs to prove that the defendant acted negligently in making the statement.

Where a plaintiff is disparaged in a professional or business capacity, injury is assumed.

A statement is defamatory if it tends to expose a person to public contempt, hatred, ridicule, aversion or disgrace, or to induce an evil or unsavory opinion of the plaintiff in the minds of a substantial number of the community.

In order to evaluate a statement’s content to determine if the statement has a defamatory meaning, a court must consider what the ordinary and average reader would likely understand the use of these words as meaning.

In cases of specialized audiences, such as the readers of Form U-5s, the statement’s defamatory meaning is to be judged by the average and ordinary reader of the particular publication.

Time Limits. FINRA Rule 13206(a) states, in pertinent part, “No claim shall be eligible for submission to [FINRA] arbitration . . . where six years have elapsed from the occurrence or event giving rise to the claim.” Therefore, a broker has six years from his former employer’s filing of a Form U-5, to bring, against his ex-employer, a FINRA arbitration seeking expungement of that Form U-5.

The Law Offices of David S. Rich, LLC aggressively arbitrates, on behalf of brokers, FINRA proceedings seeking to expunge negative statements made on the brokers’ Form U-5s. If you are a securities industry professional with harmful information on your Form U-5 which you need expunged, contact the Law Offices of David S. Rich, LLC.

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