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The Form U5 is a document used to report the termination of financial advisor (FAs) registrations from a firm or in a particular jurisdiction. Although there are different types of Form U5 termination filings, such as reporting full or partial terminations or amending past Forms U5, when it comes to full terminations, there are really only three causes: death, being fired and voluntarily resigning. Let’s dive deeper into understanding these reasons in more detail.
Death & Disability
The most obvious reason for termination is due to death or disability. When an FA is no longer able to work due to poor health or death, that is grounds for terminating their registration. In this type of case, the firm will fill out a Form U5 that provides any pertinent, required information.
Firing
Another cause of reps being unregistered is that their employment is terminated — in other words, the employing firm fired the rep. There are several reasons why someone might be fired from their firm, including violating company policies and procedures, receiving customer or investor complaints, engaging in unethical behavior, or disregarding regulations. In these cases, FAs need to be very careful about how they proceed, because the details about their firing will be made public. Reps should always seek outside counsel when terminated, in order to protect their name and brand, as well as their future business. Many firms can and will retaliate against an FA — using any means necessary — especially if the FA is a high performer.
Voluntary Resignation
The final reason why FAs are unregistered from firms is voluntary resignation. This could mean that the rep no longer wanted to work at the particular firm or decided to pursue another opportunity elsewhere. Hiring an attorney to handle the transition out of a firm is in an FA’s best interest. Even if a rep believes that they’re leaving on good terms, that may not be the case in many instances, especially if they are leaving the firm for a competitor. Be careful, and ensure that your interests are protected by employing counsel throughout the process.
Why The Language On Your Form U5 Matters
The information used on your Form U5 can affect your future career prospects in several ways. When evaluating you for registration or licensure with another firm, regulatory and licensing authorities may take into account how you left your former firm. Additionally, potential customers may access this information before deciding to do business with you. Moreover, if there was improper conduct alleged in connection with your termination (such as failure to follow compliance policies), this could be grounds for disciplinary action from FINRA or other regulatory bodies, depending on the circumstances.
It is extremely important that the language used on your U5 is accurate and truthful, as firms are legally bound by what they file as the reason for termination. If an inaccurate or untruthful statement is made, the FA has the right to challenge its accuracy. Most firms are unlikely to voluntarily amend a Form U5 after its submission due to increased scrutiny from regulators and other agencies. Therefore, having counsel sit down and discuss the specifics before the Form U5 is filed can help ensure the accuracy and truthfulness of the reporting.
If necessary, individuals can dispute inaccuracies. When faced with a Form U5 that isn’t factual or fair, expungement and arbitration may become necessary. The rules and requirements for expungement vary, depending on whether the filing relates to intra-industry disputes or customer disputes. Certain factors must be considered before making any decisions, including but not limited to:
- the severity of the offense or incident in question;
- the amount of time that has passed since the incident occurred;
- any mitigating circumstances (e.g., false accusations);
- whether there has been any prior disciplinary action taken against the individual; and
- the impact that such an action could have on the individual’s reputation within their industry.
Does your Form U5 accurately reflect your reputation?
If you feel that something listed on your CRD report is incorrect or defamatory, keep in mind that AdvisorLaw’s team of attorneys is well-versed in FINRA litigation and arbitration. Through FINRA’s Dispute Resolution forum, we can help individuals appeal inaccurate information listed on their records with FINRA member firms.
If you’ve been recently terminated, believe that termination is imminent, or are looking to transition to a new firm, AdvisorLaw is able to provide all of the relevant guidance and counsel needed to make your transition as seamless as possible.