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What Should I do about my U5 when I leave a firm?

Posted by Joel Beck | Oct 09, 2018 | 0 Comments

Today, we're going to address the question of “What should I do about my U5 when I leave a firm?” This is a great question that every financial advisor needs to consider when leaving a firm.

In an earlier video, I explained what a U5 is and what it does. In today's video, we're going to speak briefly about the U5 in the context of what needs to happen once you leave a firm.

Generally, the biggest area of concern is if you leave a firm when the firm has been investigating you for any reason, or if you were let go by the firm – whether you were fired or were told it was in your best interest to resign. If you leave voluntarily, with no other issues, then we'd expect the U5 to be clean, without any yes answers to any of the disclosure questions.

If you leave a firm after being fired or permitted to resign, or leave while you are under an internal investigation of any kind, the smart thing to do is to talk with experienced counsel to get an advocate in your corner before the U5 is filed. You can't sit on your hands long – the firm must file the U5 within 30 days of your leaving the firm. So, it makes sense to get counsel involved immediately once you leave a firm.

What can a lawyer do? The lawyer will interview you, get up to speed on your perspective of what happened that led to your leaving the firm. Then, he can reach out to the firm to speak with their legal or compliance people about the forthcoming U5, try to gather information about your departure from the firm's perspective, and seek to review their proposed U5 language. After that, the lawyer can respond to the firm and offer alternative language that is more favorable or acceptable to you, or maybe better explains the situation, for the firm to consider, and hopefully use when they file the U5.

Financial Advisors have to understand that this communication with your former firm is not a negotiation. The Firm has an obligation under the rules to file an accurate U5. If they don't they can face both civil and regulatory action – and they really don't want to deal with either of those. Although the obligation is on them to file the U5, and they can do that without any input from you or without your approval of the U5 language, most firms will engage in a dialogue with your lawyer about the U5. If they can get your lawyer to agree on U5 language, that helps ensure them that they won't face an arbitration claim for defamation based upon a bad U5.

Because the language of your U5 is going to impact your ability to get a job, as well as may lead to a FINRA examination and problems getting registered in some states – you want your U5 to be filed in a way that is as favorable as possible to you. That means, you need to get a lawyer involved from the get go once you leave a firm. It is far easier to try to deal with the U5 before it is filed, than after a bad U5 has come out. You can't unring a bell, and you can't totally remove bad U5 language, and its consequences, after it has been filed.

Check back for more posts and videos as this U5 series will continue, and check the resources below as well.

If you need to speak with experienced regulatory and compliance counsel about your situation, we invite you to contact us.

Related Resources:

What is the Form U5?

About the Author

Joel Beck

Joel Beck founded The Beck Law Firm, LLC in 2007. His firm focused on business law and estate planning needs of clients, two areas that he was drawn to based upon personal and business experiences in his life, including a ten-year career at NASD (now known as FINRA).


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