Firms Must Elaborate On Why Their Financial Adviser Was Terminated

FINRA Regulatory Notice 10-39 reminds brokerage firms of their obligation to report timely, complete and accurate information on Form U-5 (Uniform Termination Notice for Securities Industry Regulation). Historically, firms have used very general terms indicating why their financial adviser was terminated, such as violated “firm policy”, which shows up on his or her CRD. Such vague and ambiguous terminology is meaningless to institutional investors who are responsible for a due diligence search for someone to handle large portions of money entrusted to them. Consequently, it is no longer sufficient to report only that a person violated “firm policy” when they have been fired. If a firm is obligated to report that a registered person was terminated because he or she violated a firm policy, then the firm must identify the policy and provide sufficient facts and circumstances to enable the reader to understand what conduct was involved.

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