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| If You Are the Victim of an Erroneous, Misleading or Libelous/Defamatory U5, You Can Sue for Substantial Remedies Generally you Must Do So Within ONE YEAR |
Securities broker-dealers who are employed by securities firms are put in a difficult position if their employer should choose to terminate their employment for any reason whatsoever. That is so because, if there is any sort of termination initiated by the employer securities firm, no matter how benign, a form U5 must be filed with FINRA. Once a U5 is filed, its existence can make it difficult for brokers to find new employment.
FINRA Requires the Filing of a Form U5 for all Involuntary Separations
The fact that an securities firm employer initiating a separation (termination or involuntary resignation) must complete a form U5 to be filed with FINRA can create somewhat of a dilemma for the employer as well. For example, any statement suggesting that the broker was terminated for any reason other than a "reduction in force" or "layoff" can cast a large shadow over the broker (indeed, any U5 can). That said, if the securities firm files an inaccurate, misleading or libelous U5, it can subject itself to litigation from future employers of the broker, future customers of the broker or the broker himself/herself.
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| Regulates Securities Industry Closely |
No Jury Trials - Only FINRA Arbitrations - for U5 Lawsuits
If you believe you are the victim of a misleading, erroneous or defamatory U5, you cannot proceed by filing an action in court. Whether you are aware or not, you have by taking a job with an entity governed by FINRA forfeited your right to a jury trial and agreed to arbitrate any claims arising out of your employment relationship, including U5-related claims.
If you believe you are the victim of a misleading, erroneous or defamatory U5, you cannot proceed by filing an action in court. Whether you are aware or not, you have by taking a job with an entity governed by FINRA forfeited your right to a jury trial and agreed to arbitrate any claims arising out of your employment relationship, including U5-related claims.
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| FINRA Arbitrations Follow a Specific Procedure |
Filing Fees for U5 Arbitration Claims Can be Substantially More Expensive Than Federal Lawsuits
While the filing fee to file a lawsuit in federal court is $400, the filing fee to commence an arbitration is often in excess of the thousand dollars. In some instances, the employer agrees as part of the arbitration agreement between it and the employee to pay some or all of the costs associated with FINRA arbitration.
While the filing fee to file a lawsuit in federal court is $400, the filing fee to commence an arbitration is often in excess of the thousand dollars. In some instances, the employer agrees as part of the arbitration agreement between it and the employee to pay some or all of the costs associated with FINRA arbitration.
On the other hand, actual litigation in the arbitration forum is usually less expensive than in the court, owing to the limited discovery and limitations on the number of depositions each party can take prior to trial arbitration (very often, no depositions are permitted). Click to jump to FINRA's dispute resolution statistics for U5 (and other) claims.
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| FINRA Arbitrations Cost-Effective |
Arbitration panels consisting of three or more persons with substantial industry knowledge are assigned to U5 arbitration claims involving alleged damages in excess of $100,000. There have been a number of substantial judgments in favor of broker-dealers who were subjected to what arbitration panels determined were inaccurate, misleading, erroneous and/or libelous U5s. Some of more recent awards are:
* Broker-Dealer Awarded $417,000 Award by Arbitration Panel in U5 Libel/Defamation Case
* Royal Bank of Scotland Forced to Pay $2.05 Million on U5 Breach of Contract/Defamation Arbitration Claim
Click to read an excellent summary of some FINRA Arbitration Awards from prior to 2012.
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