Articles Posted in Form U5 and CRD Expungements

The securities industry has become known for its “one strike and you’re out” mentality around Form U4 and U5 “marks” resulting from termination and customer complaints. FINRA Rule 4111 makes firms report employee U4/U5 “mark” statistics firmwide and formerly “explainable” situations are now acting like bars to employment in the industry.  Unfortunately, this means that even good, honest registered representatives can face prejudice purely because of erroneous documentation, or defamatory language, particularly from former employers.  If you are a registered representative that has faced unnecessary hardship because of false documentation or defamatory language from an employer, you should contact a securities law attorney, like the lawyers at Malecki Law in New York, to review your case.

The Form U5 is a form that contains mandatory disclosures, which discloses why a registered representative leaves an investment firm.  The Form U5 is available to prospective firm employers, and certain U5 disclosures must also be posted on BrokerCheck, which is publicly available. Investment firm employers generally review the Form U5 of prospective employees meticulously, especially the “Reason for Termination” section.  Language used by a former employer in this section, however minor, may have a significant impact on the future employer’s hiring decision.  There have been 195 defamatory FINRA cases in 2023; 104 of which, were Form U5-based disputes.

Malecki Law recently obtained a favorable FINRA arbitration award in an intra-industry matter, O’Keefe v. UBS Financial Services, Inc.  Malecki Law’s attorneys Jacqueline Candella, and Adam Schreck represented Claimant registered representative O’Keefe. Associates Candella and Schreck tried the case at an in-person hearing in New York City.  O’Keefe requested that his Form U5 be amended to reflect his voluntary termination from his previous employer, and to expunge the false and misleading “Termination Explanation.”  The Chairperson granted Claimant’s request, explaining that the expungement was, “based on the incorrect and defamatory nature of the information,” written on the Form U5.  If you were faced with a similar Form U5 issue, you should consult with FINRA experts, like the lawyers at Malecki Law in New York.

Weighing in on all things financial services, top securities industry lawyer, Jenice L. Malecki, commented on two matters going on at the Financial Industry Regulatory Authority (FINRA).

First, under fire again, it looks like another FINRA arbitration is poised for potential vacatur because of the conduct of an over-reaching, advocatory-styled arbitrator who would not give a customer their day in court.  A Florida state court is now entertaining a case where the Alabama Securities Commission is seeking to vacate an award that granted expungement of customer complaints from a UBS broker’s record.

Ms. Malecki discussed with Financial Planning Magazine how this is not only bad for the customer, but also bad for the broker.  It taints the proceedings and runs up the bills unnecessarily.  Moreover, this broker will also now have a hotly contested court case on his record when all he did was follow FINRA’s rules.  The broker did not exclude the client, the arbitrator did.  There needs to be  a stronger and better monitored process at FINRA for the sake of all interested parties, as well as stronger monitoring of that process by FINRA – not just letting arbitrators act like self-appointed judges without oversight.  Even the best judges in the world are subject to oversight, but FINRA arbitrators are not.  The scenario presented is not shocking.  It was just a matter of time before something like this happened, and FINRA should have seen this coming for years.

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