Managing The Form U5 When Departing A Firm

After leaving a firm, should you worry about your Form U5? When it comes to leaving a broker-dealer or wirehouse — whether on a voluntary or involuntary basis — every financial advisor should realize the gravity of the language published to the Form U5 and take all possible measures to mitigate any damaging effects to their future and career.

What’s the reasoning behind the departure?

There are several reasons why a financial advisor, wealth manager, or broker may decide to leave a firm. But the information used to describe one’s departure on Form U5 often differs greatly and could be extremely detrimental to an advisor’s career. 

If you decide to leave a firm while under FINRA investigation, or if you were let go by a firm — whether you were fired or advised that resigning was in your best interest — your Form U5 may be of great concern. Even when you decide to leave a firm voluntarily, you still may not be spared the headache of a termination disclosure with allegations. All too often, we see cases where an advisor is confident that they’re leaving a firm on good terms, only to be blindsided by retaliatory or defamatory language published on the Form U5.

Following a departure of any nature, you should seek counsel from experienced attorneys who are knowledgeable about both securities law and FINRA’s arbitration and dispute resolution process. Experienced counsel can help to negotiate the language on your Form U5 with the firm, prior to it being published, and they can guide you in seeking to have an existing disclosure expunged through FINRA’s forum.

Legal representation can mitigate the negative impact of a Form U5 filing.

If you are leaving voluntarily, or if you know that termination is imminent, it’s in your best interest to hire an attorney as early in the process as humanly possible. Firms are given 30 days to file the Form U5 following a representative’s departure. Those 30 days are crucial for attorneys, as it gives them a chance to negotiate the language on your Form U5 with your former employer before it’s published. Consulting with counsel during that time prior to filing will give you a much better chance of leaving with a clean Form U5 and successfully moving on to another firm. 

Do you have a defamatory U5 termination disclosure on your record? Call us today at (303) 952-4025 or contact us for a complimentary consultation!

Upon securing counsel, you will typically be interviewed by the attorney so that they can learn more from you about the events that led to your exit. Most likely, the attorney will then contact the firm directly to discuss the Form U5 and try to acquire information from the firm’s perspective concerning your departure. The attorney can then respond on your behalf with suggestions for the language that will be published in your Form U5 to describe the events. The attorney’s suggested language is usually friendlier or more acceptable to you than what the firm had planned to publish, or it better explains the issue. 

That process is undertaken in the hope that the attorney can persuade the firm to reconsider any harmful language and utilize the attorney’s less harmful suggestions when ultimately filing the Form U5. It’s important to keep in mind, though, that firms are not legally required to consult with your attorney before filing Forms U5. Even though firms are required to file accurate Forms U5 and could face civil and regulatory action if they don’t comply, that doesn’t always mean that the consequences will act as a deterrent. In most cases, the firms with which we work are willing to come to an agreement regarding Form U5 language, because in the end, the firm will be less likely to face an arbitration action based on a defamatory-in-nature Form U5 filing.

Take measures to prevent negative Form U5 language.

The type of language used on your Form U5 can not only affect your ability to be hired by the next firm, it may also trigger a FINRA examination and registration issues. That’s why financial advisors and brokers need their Forms U5 to show the most favorable language possible. When you leave a firm, don’t wait to hire representation. Those 30 days between termination and filing can make or break your reputation and lead to a long, and in some cases expensive, fight to reclaim your good name. Moreover, it’s considerably easier to address a Form U5 before it’s filed than to deal with negative allegations that have already been published to BrokerCheck and the CRD, not to mention a Form U5 that is defamatory in nature. 

If you’re interested in receiving a complimentary consultation regarding an upcoming or existing U5, contact our team today.

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