Broker Awarded $4 Million for Defamatory U5
A FINRA arbitration panel has awarded a broker $4 Million in compensatory and punitive damages and related fees against his former employer that the panel determined defamed the broker on his U5. The broker’s U5 indicated that the broker had been terminated for cause for sales practice violations related to auction rate securities. The arbitration panel determined that the broker was terminated, not for sales practice violations, but because he was “part of the old regime” and “makes too much money.” The panel noted that the broker utilized materials approved by the firm and made representations about the ARS market provided by his firm. The panel opined that the firm completed the U5 in a “manner to make it unlikely he would work as a broker in the future and take clients with him to a new broker-dealer.”
OUR TAKE: Be very careful what you put on the U5. FINRA has made clear that firms should not sugar-coat termination decisions. Nevertheless, go too far and you could risk a lawsuit.