Experienced Attorneys for Form U5 Disclosures

Form U5 is the Uniform Termination Notice for Securities Industry Registration used by broker-dealers and investment advisers to report information about a variety of matters regarding a registered representative or investment adviser representative (“associated person”) of that firm. The information on Form U5 is stored in the Central Registration Depository (CRD) system, where securities firms and regulatory authorities report a variety of disclosure events regarding associated persons. These events include civil judicial actions, criminal matters, customer disputes and complaints, employment terminations, internal reviews or investigations of an associated person, financial matters (e.g., personal bankruptcy) and regulatory and disciplinary actions.

Financial industry reporting firms are required to file a Form U5 when an associated person leaves a firm for any reason. A firm must provide enough detail on Form U5 so that a reasonable person may understand the circumstances described on the form.

Counsel Can Set Reasonable Expectations for the U5 Disclosure Process

In practice, when an associated person is fired, the disclosure placed in their Form U5 can materially impact the ability to be employed at another financial firm. Conversely, the member firm from which the associated person was terminated has an obligation to provide details so that a reader (i.e., a regulatory agency, a new employer, or potentially, a client) can ascertain why the associated person was let go. For example, it is not sufficient to report that an associated person was terminated for a violation of “firm policy.” Instead, the firm should identify the policy and provide enough detailed facts and circumstances for the reader to be able to appreciate what conduct was involved.

When it comes to U5 matters, generally, it makes sense to consult with experienced regulatory counsel who is familiar with the rules that apply to reporting firms—and to the Form U5 reporting process. Either at the forefront of discussions or behind the scenes, working with an attorney during the initial period after termination can provide an associated person with a deeper understanding of the overall Form U5 reporting process and help to set reasonable expectations.

Where necessary, injecting counsel directly into the discussions can help demonstrate that an associated person is taking the Form U5 disclosures seriously. Experienced securities counsel can serve as a knowledgeable advocate to ensure that all the parties arrive at an accurate disclosure of the relevant details.

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