New York Securities Fraud Lawyers Blog
On July 29, 2024, a FINRA Arbitration Panel issued a favorable award to a former registered representative of a broker-dealer represented by Malecki Law, Malecki Law’s second favorable expungement award of the 2024 Summer. The securities industry has increasingly become a “one strike, you’re out” sector, but retaining experienced Expungement Counsel, like Malecki Law, can help financial professionals correct the record when a previous employer misrepresents the circumstances of their employment termination.
Whenever a registered financial professional is terminated or otherwise transitions away from employment with a FINRA member firm, such member firm is obligated to file a Form U5 with FINRA containing mandatory disclosures about such termination or transition. Firms are obligated to file a Form U5 within 30 days after a registered representative is terminated from the firm. The information disclosed on a Form U5 is typically available to the public via BrokerCheck, but registered representatives are seldom given the opportunity to review or comment on Form U5 language before filing. If false or defamatory information is included on a registered representative’s Form U5, the registered representative’s only recourse is to file an arbitration claim for expungement with FINRA.
Malecki Law’s recent expungement award relates to a registered representative who was terminated for allegedly violating a firm’s and FINRA’s outside business activity policy. The registered representative was a dedicated, diligent employee, who routinely went out of their way to do right by their firm. Eventually, the registered representative received an employment offer from a company in the field in which they had always dreamt of working. The registered representative accepted the offer and submitted their resignation to their FINRA member firm, indicating that they were moving to a firm outside of the securities industry. Rather than accept the resignation, the member firm asked the registered representative to remain at the firm for an additional two months to aid in the transition. After receiving approval from their new company, the registered representative agreed to stay at the firm in a limited capacity to help with the transition for a substantial cut in their pay. If false, misleading, or defamatory language has been filed on your Form U5, you should consult a seasoned Securities Arbitration Attorney, like the ones at Malecki Law in New York City, to see if you have a viable expungement claim.
After weeks of aiding in the transition, the registered representative began their employment with the new firm. About a month later, after the transitions had been completed, the firm terminated the registered representative, alleging that they failed to seek approval for their new employment with the firm. The firm proceeded to file three separate versions of the registered representative’s Form U5, each of which told a different story and was demonstrably false. Recognizing the potential impact on their career and in order to set the record straight, the registered representative was forced to file a FINRA arbitration seeking expungement of the misleading information filed on their Form U5.
The case was fully litigated, with opposition by the brokerage firm, unlike many expungement arbitrations. After a three-day hearing on the merits, an Arbitration Panel awarded the registered representative a “clean” Form U5 by recommending that the applicable termination disclosures be expunged based on the defamatory nature of the information in the disclosures. In granting the expungement, the Panel recommended that the Form U5 indicate that the registered representative was “Voluntarily” terminated without further disclosures.
The implicit “one strike, you’re out” mantra in the securities industry has rendered many otherwise deserving former registered representatives unemployable, but it is reassuring when FINRA Arbitration Panels recognize this disparity and vindicate a registered representatives rights. Ms. Malecki is “thrilled” that the arbitration panel did the “right thing” for this very brilliant, dedicated, and deserving professional and saw the false and defamatory nature of the Form U5. If disclosures filed by your previous employer have impacted your ability to find a new job, you should speak with a Securities Employment Lawyer, like the ones at NYC’s Malecki Law, to determine whether corrective action can be taken.