Representing Brokers and Financial Advisors in Claims Involving False and Defamatory Form U5s

We represent securities professionals whose reputations have been damaged and who have suffered economic harm as a result of false and defamatory Form U5s. When a brokerage firm files a Form U5 that contains false statements about a broker or financial advisor, the publication of the information in the U5 on publicly available databases can cause severe reputational and financial harm.

What is a Form U5?

Form U5 — “Uniform Termination Notice for Securities Industry Registration” — is a form that FINRA member firms are required to file within thirty days after the termination of one of its registered representatives. The form must be filed regardless of the reason for the termination, and it must be filed even in the case of voluntary resignations. A completed U5 will include the reasons for an involuntary termination. Although firms are legally required to accurately report the reasons for an involuntary termination, there have been many instances where the statements made by brokerage firms in U5s have been found by courts and FINRA arbitration panels to be false and defamatory.

How do False and Defamatory Statements in Form U5s cause reputational damage and financial losses?

False and defamatory statements in U5s filed by brokerage firms can inflict severe and substantial damage on the registered representative who is the subject of the filing. This is because the statements included in a filed U5 about a registered representative’s termination are processed by FINRA, which then makes the information fully available to the public on its BrokerCheck database.  Numerous awards in FINRA arbitration cases have recognized the degree of harm that can be caused by the publication of inaccurate statements in U5s.  The panel to the right sets forth some examples of such cases.

What recourse does a registered representative have when reputational damage and financial loss have been caused by a false and defamatory Form U5?

A broker or financial advisor who has been harmed by a false and defamatory U5 may assert claims for defamation and other legal causes of action against the brokerage firm that filed the U5. Although some cases may be filed in court, most cases that arise from false and defamatory U5s are subject to FINRA arbitration.  These cases are regarded as “industry” (as opposed to “customer”) arbitrations within the FINRA arbitration process and they are subject to FINRA’s Code of Arbitration for Industry Disputes.

Depending on the facts of any given case, available remedies can include an award of monetary damages, including punitive damages.  Recoverable compensatory damages can include “general damages” and “presumed damages.”  General damages are those that typically flow from defamation and include injury to reputation, impairment of standing in the community, personal humiliation and mental anguish.  Pilchesky v. Gatelli, 12 A.3d 430, 444 (Pa. Super. 2011). Presumed damages are a form of compensatory damages in defamation cases, “are the damages we expect the defamation would cause” and “allow a defamation plaintiff to recover compensatory damages without proving the defamatory statement caused actual harm.”  Ralston v. Garabedian, 623 F. Supp. 3d 544, 615 (E.D. Pa. 2022) (citations omitted); see Sprague v. American Bar Ass’n, 276 F. Supp. 2d 365, 368 (E.D. Pa. 2003) (presumed damages “require no proof, but instead, as reflected in their name, are presumed under the law”).

In cases involving false and defamatory U5s, FINRA arbitration panels also have the authority to recommend expungement and to order the amendment of false and defamatory U5s, including the removal of any inaccurate statements.

The panel to the right side of this page includes examples of awards that have been made in favor of registered representatives in FINRA arbitrations involving claims based on false and defamatory U5s.

FINRA Arbitration Awards in Cases Involving False and Defamatory Form U5s

  • Galbreath v. Northwestern Mutual Investment Services, LLC, No. 20-03738, 2024 FINRA ARB. LEXIS 299 (Mar. 21, 2024) - the panel awarded a total of $8 million to three claimants based on claims for defamation and wrongful termination, and recommended expungement of defamatory information from the claimants’ U5s;

  • Nelson v. Credit Suisse Securities (USA) LLC, No. 22-00837, 2024 FINRA ARB. LEXIS 306 (Mar. 20, 2024) - the panel awarded $591,938 of compensatory damages and recommended expungement of defamatory statements in the claimant’s U5;

  • Parziale v. Citizens Securities, Inc., No. 21-01930, 2023 FINRA ARB. LEXIS 927 (Dec. 22, 2023) - the panel awarded the claimant $500,000 of compensatory damages plus interest on a claim involving a false and defamatory U5;

  • Dabbs v. Credit Suisse Securities (USA), Inc., No. 21-02961, 2023 FINRA ARB. LEXIS 847 (Dec. 4, 2023) - the panel awarded the claimant $437,500 of compensatory damages and recommended the expungement of defamatory information in the U5;

  • Han v. J.P. Morgan Securities, LLC, No. 18-02978, 2023 FINRA ARB. LEXIS 399 (July 7, 2023) - the panel majority awarded claimant compensatory damages of $2,500,000 on various claims, including defamation, and recommended expungement of defamatory information in the U5 related to claimant’s termination;

  • Iglesias v. J.P. Morgan Chase Securities, LLC, No. 21-03126, 2023 FINRA ARB. LEXIS 401 (July 3, 2023) — the panel awarded the claimant $300,000 of compensatory damages and recommended expungement of the defamatory statements in the U5;

  • Caston v. American Trust Investment Services, Inc., No. 21-01354, 2023 FINRA ARB. LEXIS 92 (Feb. 16, 2023) — the panel awarded the claimant $154,155 of compensatory damages and $150,000 of punitive damages, and also recommended expungement of the defamatory statements in the U5;

  • Lee v. Fidelity Brokerage Services, LLC, No. 19-03035, 2023 FINRA ARB. LEXIS 19 (Jan. 4, 2023) — the panel awarded claimant $499,999 of compensatory damages and recommended expungement of false statements in the U5;

  • Lenarz v. Wells Fargo Clearing Services, LLC, No. 20-01942, 2022 FINRA ARB. LEXIS 618 (July 1, 2022) — the panel awarded claimant $200,000 of compensatory damages and recommended expungement of false statements in the U5;

  • Fasanella v. Cetera Advisors, LLC, No. 20-02425, 2022 FINRA ARB. LEXIS 427 (April 28, 2022) — the panel awarded claimant $3 million of damages and recommended expungement of the defamatory statements in the U5;

  • Womack v. Commonwealth Financial Network, No. 20-03179, 2022 FINRA ARB. LEXIS 334 (March 29, 2022) — the panel awarded claimant $125,000 of compensatory damages and $50,000 of punitive damages, and also recommended expungement of the defamatory statements in the U5;

  • Olson v. Wells Fargo Advisors, LLC, No. 19-01077 2022 FINRA ARB. LEXIS 253 (Feb. 28, 2022) — the panel awarded compensatory damages of $1.4 million, consisting of $700,000 for fraud and $700,000 for defamation, and in addition awarded $400,000 of punitive damages, including $200,000 for the defamation claim based on finding that the statements in the U5 were “vindictively motivated”;

  • Morton v. Edward Jones, No. 19-03212, 2021 FINRA ARB. LEXIS 1313 (Nov. 12, 2021) — the panel awarded compensatory damages of $160,000 and recommended expungement of the defamatory statements in the U5;

  • Bondi v. Morgan Stanley, No. 20-01834, 2021 FINRA ARB. LEXIS 1232 (Oct. 21, 2021) — the panel awarded $50,000 of compensatory damages, plus $13,000 in attorneys’ fees, and recommended expungement of defamatory statements in the U5;

  • Munizzi v. UBS Financial Services Inc., No. 18-02179 2019 FINRA ARB. LEXIS 2031 (Dec. 11, 2019) — in a case alleging failure to make severance payments to claimant and the filing of a defamatory U5, the panel awarded compensatory damages of $3.15 million and $112,500 of interest, as well as $7.5 million of punitive damages; the panel also awarded claimant attorneys’ fees in the amount of $496,000 and costs of $24,000, and also recommended expungement of the defamatory statements in the U5;

  • Morgan Stanley Smith Barney LLC v. Cebert, FINRA No. 14-01088, 2016 FINRA ARB. LEXIS 613 (Aug. 1, 2016) — in a promissory note case, the broker asserted a counterclaim based on a defamatory Form U5; the panel found in favor of the firm on the note, but also found for the broker on his counterclaim, awarding him $2.38 million of compensatory damages and $500,000 of punitive damages, as well as attorneys’ fees of $833,000 and costs of $149,000; the panel also recommended expungement of the defamatory statements in the U5; and

  • Minevich v. Wells Fargo Advisors, LLC, No. 14-00632, 2011 FINRA ARB. LEXIS 1291 (Dec. 9, 2011) — the panel awarded compensatory damages of $100,000, punitive damages of $400,000 and attorneys’ fees of $31,600, and also recommended expungement of the defamatory information in the U5.