FINRA

Dec 1, 2023

To print this article, all you need is to be registered or login on Mondaq.com. Being fired is never easy, but it is a particularly challengingand uncertain time for licensed financial advisors and theirclients. Within 30 days of the termination, the advisor's priorfirm must file a Form U5 with the Financial Industry RegulatoryAuthority (FINRA), which provides information about thecircumstances of the termination. In this blog post, we explorewhat advisors can expect if they are fired and the implications ofthe Form U5 filing. Understanding the Form U5 The Form U5 is a regulatory filing financial firms must completewhen a registered representative is terminated or otherwise leavestheir employment. It includes information about the reasons fortermination, any allegations of wrongdoing or pendinginvestigations, and other relevant details. FINRA member-firms mustfile the Form U5 via FINRA's CRD system and maintain accuraterecords of the advisor's employment history and any associateddisclosures. Seeking Legal Counsel First and foremost, it is critical for any terminated financialadvisor to seek the advice of experienced counsel. An experiencedFINRA attorney can provide guidance on navigating potential legalramifications of the termination, analyze potential wrongfultermination claims, and take steps to protect the financialadvisor's professional reputation. Notifying Clients Upon terminating an affiliated financial advisor, the firm isresponsible for notifying affected clients. Clients may receive aletter explaining the termination (or, at a minimum, disclosingthat their chosen advisor is no longer affiliated), and providinginformation about what happens next. Subject to regulationslimiting communications by unlicensed advisors, it is important foradvisors to proactively communicate with clients during this timeto address any concerns and offer reassurance. The Impact on Existing Client Relationships A termination can raise obvious concerns for clients who havedeveloped a relationship of trust with their advisor over time.Clients may have questions about the circumstances of thetermination, the continuity of their investment strategy, or theavailability of ongoing support. Advisors should be prepared toaddress these concerns honestly and transparently to maintainclient trust. Regulatory Review Upon the filing of the Form U5, FINRA will review thetermination and associated disclosures. For terminations involvinginvestment-related conduct or alleged sales practice violations,the advisor should anticipate that FINRA will conduct an 8210inquiry, which could lead to a formal enforcement action. It iscritical to work with counsel in responding to any regulatoryinquiry and understanding how FINRA may approach a potentialenforcement action. Financial advisors should be prepared to workwith counsel to provide any requested documentation or informationpromptly. Updating Employment History Form U5 becomes a permanent part of an advisor's employmenthistory. It will be disclosed to potential employers and may factorinto hiring decisions. Advisors can comment on a terminationdisclosure, or, if it is inaccurate, may challenge that disclosurethrough a FINRA expungement proceeding. Advisors should make it apoint to update their records to accurately reflect thecircumstances of their termination. Rebuilding and Moving Forward Despite the challenges and stigma associated with termination,most financial advisors will have an opportunity to rebuild theircareers at a new firm. It is important to reflect on lessonslearned, focus on personal and professional development, andaddress any weaknesses or areas for improvement. Taking steps torebuild trust with clients and industry peers is crucial for movingforward successfully. Conclusion Financial advisor termination is a complex and challengingexperience. By understanding the implications of the Form U5filing, seeking legal counsel, maintaining open communication withclients, and taking proactive steps to rebuild, advisors cannavigate this period of transition and move forward in theircareers. The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances. AUTHOR(S)