FINANCIAL ADVISER TERMINATIONS

It’s what we do here at Cosgrove Law Group, LLC.

              Believe it or not, there are instances in which a broker-dealer seeks out pre-textual reasons for a termination.  Some reasons are more frivolous than others.  For many advisers, an involuntary termination is nothing more than the first chapter of a multi-chapter nightmare.

            The broker-dealer has 30 days from the date of termination to file the U-5, a disclosure to FINRA that modifies the adviser’s U-4 with information regarding the termination.  The U-5 disclosure includes both narratives and the checking of “yes” or “no” boxes.  Notably, which boxes are checked or not will impact what, if any, information is added to the publicly accessible BrokerCheck Report.

            Once the U-5 is filed, and sometimes before that, FINRA and state regulators will make inquiry as to the disclosure.  Before that, however, potential employers will want to know what is, or will be, on the U-5.  During this early post-termination window, while the adviser is trying to get hired and registered, it is common for the former broker-dealer’s agents to solicit the departing adviser’s clients.  Sadly, these solicitations frequently cross the line between fair competition and tortious interference/defamation.

            It should be obvious from this brief summary that it is critical to retain counsel as soon as you begin to even sense that things are going south with your current broker-dealer.  Sometimes the legal department of the broker-dealer will step in and correct its clients’ improper behavior.  Moreover, there are times when the U-5 language initially intended can be modified to be, while still accurate, less prejudicial or inflammatory in nature.  If all else fails, filing an arbitration claim for compensatory and punitive damages and an expungement is a final avenue of recourse.  Please do not try to navigate these treacherous waters by yourself.

The attorneys of Cosgrove Law Group, LLC represent investment advisors, brokers, and other associated persons nationwide in securities employment and regulatory matters, including U-5 defamation matters. Our attorneys also practice in a variety of other areas of law.  If you have a legal matter or concern, please give us a call and speak directly with one of our experienced professionals.