We’re continuing our series on the U5, and today we turn to the internal review disclosure. The precise question on the U5 says this: “Currently is, or at termination was, the individual under internal review for fraud or wrongful taking of property or violating investment-related statutes, regulations, rules or industry standards of conduct?” See Question 7B on the Form U5.
A ”yes” answer to that question doesn’t sound good, and it isn’t. But, in some situations this disclosure may be the best possible one to be on your U5. You see, generally speaking, the internal review disclosure will NOT appear to the public on your Brokercheck report. It will still be seen by the regulators and may likely cause a regualtory investigation to begin. And, other firms that you speak with about employment opportunities will see this disclosure on your U5 as well, but the good news is that it does not appear to the public – under the current rules.
The purpose of this disclosure is to report situations that fit the question. It is not for internal issues or disputes between the firm and you relating to employment matters and not compliance matters. For example, this should not be used to report issues regarding a promissory note owed to the firm or other things like that. The U5 instructions state: “The internal review disclosure is used to report matters relating to compliance, not matters of a competitive nature. Responses should not include situations involving employment related disputes between the firm and the individual.”
In our next post on the U5, we’ll talk about the termination disclosure.
If you have a U5 issue that you need assistance with, or expect to have a U5 filed soon because you have left a firm, we invite you to contact us to discuss your need.