FINRA Clarifies Level of Detail Required on Forms U-5


FINRA clarifies in Notice to Members 10-39 that member firms must provide sufficient detail on terminations for cause by "identify[ing] the policy, provide sufficient facts and circumstances to enable the reader to understand what conduct was involved, and review other questions on the form to determine whether an affirmative response to any other question is required." The level of detail required in Forms U-5 has long been a subject of discussion and disagreement among legal and compliance personnel within the financial services industry.

Additionally, it has often been misunderstood and misrepresented in employment arbitrations relating to defamation claims on Form U-5 language. This notice should go a long way toward explaining to arbitrators who may not be familiar with the regulatory requirements that Forms U-5 must be sufficiently detailed to enable the reader to understand the true circumstances of a registered representative’s employment termination.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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