marc Schifanelli, Esq. 

Integrity, Dedication

& Competence

Contact US  (240) 882-2402

Form U4/U5 Defamation Actions

     Financial Advisors hired by FINRA member firms like Wells Fargo Advisors, Merrill Lynch, etc. all initially concede on their FINRA Form U-4 "to arbitrate any dispute, claim or controversy that may arise" between the FA and the firm in the FINRA Dispute Resolution forum (excluding employment discrimination cases protected by Federal or State laws, and which may be brought in a formal court action unless the parties agree to have it heard by FINRA arbitrators).  This includes a formal complaint of "Employment-Libel or Slander on Form U-5" seeking expungement of the remarks.

     When a Financial Advisor's employment is terminated, the firm has a regulatory obligation to report the reason for the termination with FINRA - whether it was voluntary resignation or termination for cause. FINRA regs require that the reason be clear and accurate.  

     What too often occurs is malicious or sloppy reporting.  In the worst case, firms find reasons to terminate an FA who they believe is contemplating changing firms. This helps ensure that the FA's book of business is protected and the clients' assets under management remain with the losing firm instead of following the FA.  Less often it's just a sloppy compliance process that results in language that will prevent future employment for the FA just because a new hiring firm will be unable to decide if the FA has violated some FINRA or SEC regulation or other law.       

          Form U-5 defamation actions can be successful, but certain elements must be proven during the course of the case. These include, generally but necessarily, that the statement on the Form U-5 be untrue. In some cases, it's enough to show that the statement is misleading or too vague to provide the reader with an accurate and clear reason for termination.  If successful, FINR will order its Central Records Depository to remove the defamatory remark.

     If you are an FA whose employment has been terminated and you disagree with the reason on your Form U-5, contact us for a complete review and assessment of your case.




Form U4/U5 Defamation Actions

     Unfortunately, sometimes FA's are subjected to  actions by firms or managers that are unlawful under the various Federal and State employment anti-discrimination laws. In these instances, the FA is not required to pursue remedy in FINRA arbitration, but may file a claim in a Federal or State court after exhausting all administrative remedies (i.e., in certain instances a charge must be filed first with the state agency responsible for evaluating claims of discrimination or with the Equal Employment Opportunity Commission - the EEOC).

     In cases that we have successfully handled for FA's, we have discovered the unequal distribution of quality client accounts among male and female FA's regardless of the FA's qualifications; termination of FA's based on their race (including a white FS fired by a black manager, and black FA's termed by a white manager) ; and denial of a previously announced promotion after the FA became pregnant.   

Contact Schifanelli Law, LLP at 410-263-0028 for an initial consultation with a Lawyer in Annapolis.
2450 Riva Road, Suite 201, Annapolis, Maryland 21401.
Serving the Maryland and Washington D.C. Communities.

Integrity, Dedication & Competence

We Know the Ultra-Competitive Environment of the Financial Industry. Whereas Some Firms and Managers treat their FA's Fairly, not all Do.  termination can have serious repercussions for an fA that go above and beyond other professions, Including Form U4/U5 Defamation and immediate repayment of That payable Note or "Bonus."

How We Can Help

Defamatory remarks regarding termination of employment, or remarks that are not sufficiently clear for a gaining firm to understand the basis for the termination, have serious and far-reaching consequences. They can effectively end an otherwise competent and honest Financial Advisor's career. That's because no gaining firm is going to hire an FA that is likely to prove a liability.  Even if the hiring manager willing, Compliance is unlikely to agree to the hire.  Complicating matters,  an unexpected termination may trigger immediate repayment of the "hiring bonus" extended to the FA by the terminating firm.  Without a firm to sponsor the FA, her authority to provide investment advise is effectively cancelled and she can no longer help the clients for whom she has served as FA. Hence, not only does she need to repay her "bonus" balance, she has not means to earn income in the profession.  We have successfully represented Financial Advisors who have been subjected to defamatory remarks entered by their employers on their FINRA Forms U4 / U5 by bringing arbitration actions against the firm, asking not only for monetary compensation, but expungement of the defamatory remarks on the Form U5. 

FINRA Form U4/U5 Defamation &

Payable Note Negotiation

Repayment of Payable Notes and "Bonuses"

     On top of everything else, unexpected termination of the FA's employment (or premature resignation by the FA) can cause the balance on a "payable note" or "recruitment bonus" to become immediately due.  As FA's know, these loans can be substantial and are offered as an incentive to join the lending firm. They also help defray the loss of commissions income during the FA's transition between firms when his immediate mission is to transfer as many of the losing firm's clients as possible. 

     Firms are highly likely to pursue repayment of the balance due if an FA is fired and, like the FA, they are required to bring any claim for the balance in FINRA arbitration. 

     We have successfully assisted FA's in avoiding payment of the balance due on these notes, either entirely or in substantial amount, as a result of arbitration or negotiating with the lending firm.  If you are an FA in any state  and your past employer is seeking action to recover the balance due on a payable note, then we can help.