OUR ATTORNEYS SUE BROKERAGES FOR FORM U-5 ABUSE AND DEFAMATION NATIONWIDE
The Financial Industry Regulatory Authority (FINRA) requires brokerage firms to file a Form U-5 reporting the termination of a registered representative’s employment, along with the reasons for such termination within 30 days of the event. This is an important regulatory requirement for the protection of investors that is sometimes abused by a brokerage firm through false answers and defamatory explanations on the Form U-5 in retaliation to a broker’s departure from the firm’s employment, to avoid competition, and minimize the loss of customers. Notwithstanding the importance of this notice, the attorneys at The Law Offices of Robert Wayne Pearce, P.A. will not stand by and let this process be abused by any brokerage firm when it comes to its broker and investment advisor clients located throughout the country.
WHAT IS DEFAMATION?
Defamation occurs when the brokerage makes a false statement; the statement is defamatory, meaning, in this context, it is a statement on the Form U-5, generally in the “explanation” section, that affects your business reputation; it is published on BrokerCheck and available to the world through the internet; the statement is made either negligently or recklessly; and you are harmed.
FALSE STATEMENTS AND EXPLANATIONS ON ANY U-5 WILL LIKELY HARM YOUR CAREER
The brokerage firm must indicate on the Form U-5 whether the broker left voluntarily, was permitted to resign or was discharged. If their reason was other than voluntary, a brief explanation must be provided. The firm is required to state whether the broker, while employed: was involved in any disciplinary action; the subject of certain investment-related, consumer initiated complaints; was convicted of or pled guilty or nolo contendere (no contest) to a felony or certain misdemeanors; was the subject of a governmental or self-regulatory organization investigation; or was under review by the firm “for fraud or wrongful taking of property, or violating investment statutes, regulations, rules, or industry standards of conduct.” The threat of “yes” answers and false explanations on the Form U-5 have been made by brokerage firms to deter early departures, discourage solicitation of clients at the new firm, extort repayment of up-front bonuses, and other nefarious activities. The explanation section of the Form U-5 has also been abused by firms to discourage the prospective employer from hiring brokers, trigger unwarranted FINRA investigations to delay registration, thwart competition, and for retaliation, solely. These false statements and explanations will permanently be on your record and could harm your career.
WHAT ARE THE OBSTACLES TO A DEFAMATION SUIT?
Once the Form U-5 is filed, the only way that you can get rid of that false and defamatory remark is by filing an arbitration claim against the broker-dealer for defamation. Now depending on where you reside, there are obstacles that must be overcome.
If you live in New York or California, the courts have held those remarks on the Form U-5 to be “absolutely privileged;” your former employer has “absolute immunity,” and while it may not be sued for defamation damages, you can still sue to have the false and defamatory remark expunged from your record. However, with the right lawyer representing you in those states, there other claims that could be filed for that misconduct to recoup your damages.
The majority of states (Arizona, Connecticut, Florida, Hawaii, Idaho, Illinois, Kansas, Maine, Michigan, Minnesota, Missouri, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, and Vermont) hold that those statements on the U-5 are only “qualifiedly privileged,” meaning that if they were not made in “good faith” and with “a reasonable basis,” then they are not protected and you can sue for both damages and expungement.
The brokerage firm defenses are generally: 1) the statements are true; 2) they were made in good faith and not maliciously or recklessly; and 3) they are barred by statutes of limitation, which can be as short as one year in some states.
Generally, brokers will get advance notice about what is going to appear on the U-5 before it is filed. The brokerage firm’s registration department has 30 days to file the document. You have a very small window of opportunity after your employment is terminated to hire an attorney, get that attorney to speak to your former employer, and deter the firm from making your life miserable and causing you the expense of an arbitration to clear your record. If you wait, the regulators will have seen the Form U-5 and possibly hold up your registration. If your prospective employer has seen the disclosure, it could possibly withdraw the offer of employment.
You need to act very quickly when you are terminated from a broker-dealer and receive a draft of the Form U-5 that is going to be filed. If it is false, if it is defamatory, you need to act quickly and hire an attorney who can hopefully talk the broker-dealer out of making a mistake, protecting your CRD and your BrokerCheck without having to file an arbitration.
You should consult with an attorney who is knowledgeable of FINRA rules, practices, and procedures and who possesses the skills necessary to deter firms from making any such statements on the termination notice and recover any damages to the extent they exist. Attorney Pearce has over 40 years of experience with FINRA arbitrations and successfully deterring employers from defaming his clients and, if necessary, asserting and proving defamation claims.
Hear From Our Clients
At The Law Offices of Robert Wayne Pearce, P.A., we believe the ultimate barometer of our success is surpassing the expectation of our clients.
The following clients have direct knowledge of our firm's processes from the inside and experienced our fierce advocacy.
Hear From Our Clients
- “Robert Pearce is part of that unusual breed of lawyers that are able to create empathy with clients and thoroughly adopt their cause”
No half efforts here. He and his group of professionals are outstanding strategists that can execute with precise fervor and unyielding determination. Theirs is a huge wave of facts, research, precedents and preparation, that has impressed me in its thoroughness and creativity, and most importantly with the results. No stone goes unturned and no effort is ever spared. In my book, he and they are those of a very rare kind that one wants to keep for a very long time.- Ramon Flores-Esteves -
- “Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side.”
Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side. He is the consumate plaintiff's lawyer: smart. dedicated, fully able to try a case but a great negotiator in a mediation. He did a wonderful job for us, fully supporting us through the process and more than holding his own against a large national law firm.- Maurice Z. -
- "Mr. Pearce and his staff exceeded all of our expectations."
Mr. Pearce and his staff exceeded all of our expectations. We were able to reach a settlement that was of our complete satisfaction, all within a very smooth, professional and efficient process. Mr. Pearce is now not only our lawyer but our family friend. We highly recommend him and his team!- Severiano L. -
- "For the best fighting chance, Robert Pearce is the lawyer you want in your corner."
This law firm is the real deal. We were so lucky that they took our case as they have so much experience in securities and all the wrongdoing that happens in these investment companies where they mislead you and your money (as in our case) into schemes that are not what you think they are. Mr. Robert Pearce is one of the best lawyers around, a truly professional who will fight for you and will tell you as it is all the time. We could not have gone thru this experience if it was not for all the advice, guidance and support he and all of his staff and associates brought to the game. For the best fighting chance, Robert Pearce is the lawyer you want in your corner.- Astrid M. -
- "He never felt intimidated and his study of the case and perseverance prevailed at all times."
Attorney Robert Pearce was our lawyer in a case against a Brokerage Firm and I'm witness to his ability and intelligence to deal with lawyers from the most prominent law firm in New York which was the key to recovering much of our losses cheered by their negligence. He never felt intimidated and his study of the case and perseverance prevailed at all times.- Jose A. C. -
- "In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars."
No lawyer except Bob said I had a chance of winning. When UBS Lawyers laughingly offered me zero to settle the dispute, Bob became even more determined to prove everybody wrong. Bob was extremely prepared, and always a step ahead of the opposing attorneys throughout the arbitration. In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars.- J. Blanco -
- "Every meeting and phone call was made with dedication and desire to help our family every step of the way."
Robert's team is excellent. They are very competitive in what they do and they are very responsible. Every meeting and phone call was made with dedication and desire to help our family every step of the way. Their professionalism, responsibility and empathy assured us that we were in good hands. Recommend to everyone.- Mayra A. -