U-4/5 Disclosure Language
FINRA operates the Web CRD (“Central Registration Depository”), the central licensing and registration system for the securities industry. The system contains the qualification, employment and disclosure histories of all active registered persons in the United States.
A broker’s CRD disclosure history is a significant element of her employment in the securities industry. CRD disclosure histories are routinely reviewed by prospective employers, state and industry licensing agencies, and customers (through FINRA’s BrokerCheck function). The SEC, FINRA, and state securities regulators will likely examine a broker’s CRD disclosure history in the course of their investigations. It is essential for a registered person that the U-4/5 disclosure language used by current or former employers is truthful and accurate.
When a broker leaves the employ of a brokerage firm, the firm is required to file a U-5 within 30 days of the termination of the broker’s registration. The U-5 must list the reason for the termination if the termination is other than voluntary. Firms (including prior employers of a registered representative) are also required to file a U-4 (for current employees; U-5s are filed for former employees) upon the occurrence of certain events, including, but not limited to, the filing of a customer arbitration claim and receipt of a written customer complaint. Some of those events require the filing of the U-4/5 within 10 days of receipt by the firm.
The U-4/5 disclosure language used by the firm can have significant immediate AND long-term ramifications for the broker. If you are a broker whose current or former employer is about to file a U-4/5 amendment reporting an incident, you may require the immediate assistance of securities attorneys, such as Lubiner, Schmidt & Palumbo. Our attorneys can contact the employer’s legal and/or compliance departments and negotiate with the employer’s professionals the precise language of the proposed disclosure so as to minimize any negative impact from the U-4/5 disclosure language used by the employer.
Conversely, if you are a broker-dealer and you are required to file a U-4/5 amendment involving a contentious employment issue, a former broker who left the firm “under a cloud,” etc., you may want to consult the securities lawyers at Lubiner, Schmidt & Palumbo prior to the filing. We can help insure that the U-4/5 disclosure language is truthful, concise and accurate, thereby reducing or eliminating the risk of receiving a complaint or arbitration claim for defamation and/or libel.
The securities attorneys at Lubiner, Schmidt & Palumbo can help you, whether you are a financial advisor, in-house attorney or compliance professional, if you are faced with questions and concerns regarding U-4/5 disclosure language.