Continuing our series on the U5, today we turn to the termination disclosure – question 7F on the U5
So, what does it mean if a firm answers “YES” and reports that you left after allegations were made that accused you of violating investment-related statutes, regulations, rules or standards, or that you committed fraud or the wrongful taking of property? Essentially, it means that there was an allegation made – by a client, a co-worker, firm management, compliance – or someone else – that there was an issue that led to your departure – whether you voluntarily resigned or were fired.
These disclosures may be something mundane relating to a violation of the firm’s internal compliance procedures that did not result in harm to any customer, or it may be something more serious like an allegation that you committed fraud or stole funds from a client. The possibilities really cover a wide range.
What you need to know is that these disclosures to 7F will be publicly visible on your Brokercheck report after a few days, and it will almost always lead to FINRA conducting a review – and that could lead to an enforcement action against you.
This disclosure may also make it much more difficult for you to get hired by other firms, and may make it harder to get registered by some of the states, as some states will want to get additional information from you, and the former firm, before registering you with a new firm.
Because of this, if there has to be a negative disclosure, you want the disclosure to be as favorable as possible to you. To that end, as we discussed in an earlier video, it really makes sense to work with a lawyer on this BEFORE the U5 is filed. Once the U5 is filed, it will generally be very difficult to effect any change to that language.
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.