November 15, 2018 Articles

A Question of Privilege: The Still Unsettled Law Surrounding FINRA’s Form U5 Uniform Termination Notice

Does qualified or absolute privilege apply to Form U5 disclosures?

By Beth Howland

In furthering its mission to protect investors and market integrity, the Financial Industry Regulatory Authority (FINRA) has established various rules and regulations for its broker-dealer firm members, including with respect to the termination of a firm employee (or “associated person”). Specifically, FINRA member firms must file a Uniform Termination Notice for Securities Industry Registration, commonly called a Form U5, within 30 days after terminating an associated person’s employment. The member firm must disclose on the Form U5 whether the separation was voluntary, a permitted resignation, or a termination. If the separation was voluntary, the member firm is not required to describe the circumstances surrounding the separation. However, when a member firm describes a terminated employee as having been “permitted to resign,” “discharged,” or “other,” it must also provide an explanation of the circumstances surrounding the separation. The disclosures provided on a Form U5 then become part of the associated person’s Central Registration Depository (CRD) record, which the public can access through BrokerCheck, FINRA’s online investor protection tool.

Premium Content For:
  • Litigation Section
Join - Now