FINRA’s Career-Ending Form U5

Financial advisors and wealth managers must recognize the severe and growing consequences of negative Forms U5. The Financial Industry Regulatory Authority (FINRA) is employing a two-pronged attack on its registered representatives through the recently implemented Rule 4111 and proposed changes to its disclosure expungement and dispute resolution processes.

The Immediate Impact of FINRA Rule 4111

The mounting pressure from FINRA’s Rule 4111 (Restricted Firm Obligations) is forcing many broker-dealers to take drastic measures. To avoid crippling, costly restrictions like the Restricted Deposit Requirement (RDR), many firms have been compelled to fire reps en masse to fall beneath the numeric disclosure thresholds.

• Recruiters now struggle to place advisors with "discharged" Forms U5, often deeming them "damaged goods."
• This leaves affected advisors with only one choice: pursue expungement to remove damaging disclosures from their public BrokerCheck records.

If FINRA's controversial expungement proposal is passed, the path to relief will be significantly narrowed. This change could essentially eliminate a rep's right to due process, meaning:

• Any complaint, regulatory violation, or termination—regardless of its merit—could be permanently attached to an advisor’s name for the rest of their career.
• This indefinite disclosure can severely limit career prospects, as negative Form U5 information is maintained in the CRD system and accessible via BrokerCheck.

We know firsthand how easily financial advisors and wealth managers end up with unfair or negative Form U5 disclosures.

• Firms frequently weaponize the Form U5 against departing reps, often to preserve high retention rates or retain valuable customer assets.
• In these scenarios, even reps who maintained good relationships with their firm or manager are often treated as "just another cog in the machine."

Recently, an advisor with over 15 years of a pristine record sought our help to remove a negative Form U5 termination allegation. The advisor was terminated the day after informing her firm of her resignation, and the firm immediately filed a Form U5 alleging impersonation of a client via telephone.

• Despite no formal complaint being filed, the misleading public termination disclosure damaged her career for two years.
• Through FINRA arbitration, AdvisorLaw proved that the allegations were misleading and defamatory in nature.
• Our advisor will soon have disclosure-free CRD and BrokerCheck records once again.
• Note: These types of expungements make up a quarter of all arbitration cases that AdvisorLaw handles.