U-4/U-5 Expungements

In the securities industry, it is essential for a broker to keep their record with the Central Registration Depositary (“CRD”) as clean as possible from customer complaints and other negative disclosures. The CRD is the central licensing and registration system for the U.S. securities industry and its regulatory agencies. There are certain events that trigger firms filing a Form U-4 for its current registered representatives and Form U-5s for terminated registered representatives. For example, when a firm terminates a registered representative it is required to complete a Form U-5 indicating the basis for termination. Both financial firms and industry professionals are required to amend their Form U-4/U-5s when certain reportable events occur. Depending on the nature of that event, the time to file an amended Form U-4/U-5 may be as little as 10 days. Failing to timely file an amended Form U-4/U-5 is a violation of FINRA rules and may result in disciplinary actions by the FINRA Department of Enforcement.

Lax & Neville LLP represents registered representatives in negotiating Form U-4 and Form U-5 language with firms prior to filing, or in arbitrations seeking expungement of Form U-4s and U-5s containing false and defamatory information. It is essential for a registered representative to have their record with CRD contain accurate information since false information may ultimately harm their business and prevent them from employment or registration at the brokerage firm of their choice. Our attorneys understand the importance of brokers’ maintaining clean regulatory records, and have been successful in representing brokers in obtaining expungement relief from FINRA arbitration panels.

Unfortunately, not only do terminations sometimes result in false or defamatory disclosures by brokerage firms, but given the vast arrays of product problems that have arisen in recent years, many brokers have seen their records tarnished with numerous customer complaint disclosures arising out of product problems. Product problem investments frequently involve complex and speculative investment products that are inappropriately marketed by brokerage firms to investors. FINRA Rules 12805 and 13805 establish the procedures arbitrators must follow before recommending expungement under FINRA Rule 2080. Pursuant to FINRA Rule 2080, a broker is able to seek expungement for one of three reasons:

  1. the claim, allegation or information is factually impossible or clearly erroneous;
  2. the registered person was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation or conversion of funds; or
  3. the claim, allegation or information is false.

Our firm has been successful in representing various brokers seeking expungement of customer complaints from their records. For example, our firm won expungement relief for a registered representative formerly employed by UBS Financial Services, Inc. who was seeking expungement of nine customer complaints from his record, and our firm won a hard fought and significant expungement relief in a case against Merrill Lynch which was notable because the arbitration panel found that Merrill Lynch’s conduct was initiated for competitive purposes. If you are a registered representative with a false or inaccurate disclosure on your record, contact Lax & Neville LLP.

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