Defamation can ruin a career. A defamation claim can arise when you leave a firm with a book of business and learn that the old firm is telling untruths to your clients in an attempt to retain the business. You may also learn that personnel at your firm have made disparaging remarks to prospective employers. Or you may learn that your old firm reported falsely on your U5 the reasons and circumstances as to why you left.
These issues need to be dealt with swiftly and often impact an advisor’s ability to be employed in the securities industry. When an advisor and firm terminate their relationship, the firm is obligated to file form U5 with FINRA within thirty days of the date of termination. Form U5 requires the firm to provide certain disclosures and accurate information concerning the reasons for a financial advisor’s termination. The broker’s U5 is submitted electronically to FINRA. While a registered representative may have an opportunity to comment or negotiate the disclosure language doing so without seasoned counsel can be perilous. These strategic decisions can also impact regulatory inquiries made by FINRA, SEC and other bodies including the CFP Board.
Defamation claims can be appropriate where the firm’s inaccurate filing has harmed the broker’s reputation and has led to subsequent employment rejections by other financial firms or other harm incurred in the transition of a book of business to a new employer.