Saturday, February 03, 2007

Hidden U5 form can blackball financial professionals


A story “Some Brokers Can’t Flee Past” on page C1 of the February 2, 2007 The Wall Street Journal, by Joanna Slater, discusses the U5 form that must be filed to the NASD (National Association of Securities Dealers) wherever a trader, broker, or investment banker leaves a securities firm. Supposedly this information is supposed to be confidential, but some of it has apparently wound up in public sources, potentially even the Web. That possibility brings up a topic previously discussed on this blog, about companies that offer to protect "online reputations" of individuals.

Unlike the conventional employment market where employers are reluctant to say anything substantial on reference requests, securities employers use the U5 form to determine if the professional has been involved in misconduct. There are substantial legal impediments to challenging a false U5 form, which apparently resides in a doctrine called “absolute privilege.” It is much more difficult to correct than an erroneous credit report. Therefore, a U5 report could blackball a person from working in the industry.

I once started the interview process to become a life insurance agent (in 2005) and I may have seen questions about this form on the application form.

1 comment:

Anonymous said...

This has created a nightmare situation for me. My firm brought a simple mistake I made (which did not harm the firm or any of its clients) to my attention. After I explained how I made the mistake, they told me that our legal and compliance department would "review" this mistake, and make a decision by the close of business regarding my continued employment. Within 10 minutes after this meeting, I was approached and advised by an individual in management to, "consider my options...should they choose to fire you, it would ruin your financial services career." Based on this, and the HR representative later advising me that, "historically, our compliance department has not ruled in favor of continued employment for violations resembling my mistake," I resigned under duress. Now, they've appealed to the unemployment department, stating that my job was never at risk. As a result, my unemployment has been denied. I've read the rulings for unemployment, and it suggests that "if any reasonable person would have quit" that the decision to quit could be justified. What can I do? I was basically coerced into resigning; however, they did put "voluntary" on my U5 (not that it matters in this financial jobs market).