Your U5 Form: How It Can Affect Your Next Move

Your U5 form may affect your next move, but how exactly? Here's what you should know for your future career endeavors.

We interrupt our regularly scheduled blog “Finding The Right Recruiter For You: Part 2” to share with you this particularly important information. There is a major difference between a clean Broker Check as appears on the FINRA site and your U5 form when it comes to being hired. I am sure this is not earth-shattering news but one that you as a candidate must be extremely conscious of, especially after you have received or accepted an offer from a firm. What is disclosed on your U5 can either make you or could derail any firm from hiring you today or in the future.

A Story To Set The Stage

Let’s dive into this further with a quick story. Our firm had a client that was ready to start, FINRA Broker Check was clean, and we asked the candidate if there were any issues that my firm needed to be aware of. They answered in the negative. U4 was perfect, then came in the dreaded responses of the U5 form. Needless to say, the reasons for termination were addressed and the candidate was not able to start at the new firm. A lawyer had to get involved and the process went on for a couple of years, since he was not aware of any issues that prevented him from getting hired. He subsequently was forced to leave the industry. Here is the kicker: Broker Check showed no disclosures at the time the offer was presented. Is there a way for your U5 form and future to avoid this path? 

What Does FINRA Say? 

As a legal disclaimer: I am not presenting any legal advice, but the information I am sharing is a compilation of research of different web sites that I have done. First a clarifying term taken from the FINRA website (finra.org) regarding your U5 form:

         When a licensed professional is terminated for any reason, FINRA rules require the firm to complete a U-5. Form U5 requires firms to indicate whether a termination was full, and if so, give a Reason for Termination (“Discharged,” “Other,” “Permitted to Resign,” “Deceased,” or “Voluntary”), and a Termination Explanation if the reason for termination was “Permitted to Resign,” “Discharged,” or “Other.”

Is Your U5 Form Really A Big Deal?

Should you find that you are looking for a new position and you have left a previous firm where a U5 was filed, you should immediately review that document. If you find that there is derogatory information, it is suggested that you reach out to a competent attorney for legal advice. Do not think that just because a firm’s HR department or hiring manager is not concerned about what is conveyed on your U5 form that you will be hired. A U5 is thoroughly vetted by the Compliance Department and/or Legal Department, and they are not going to be persuaded by a hiring manager if there are potential outstanding issues. Now that you know what was in the past, it’s time to look at your current resignation plan. Assuming you have an offer and have accepted it, you will once again have to be aware of what your current firm will share when they file the updated U5 within thirty days of your departure. Again, another quote from the FINRA site:

         If the separation was unfriendly, or if the Broker was simply “permitted to resign,” the firm must give a reason. It could cite an innocuous sounding “mutual agreement,” or it could say a lot more. FINRA requires member firms to provide sufficient detail when responding to Form U5.

Leaving Your Mark On Your U5 Form

Here you now have an advantage as you have not left your current firm and you have the ability to discuss what is going to be put on your U5 form. If you find out that something is not to your liking, again a competent attorney could help solve this issue. On the other hand, if you get to suggest language to the firm, choose language that clearly shows that the termination either voluntarily or not was explained so that a reasonable person can understand the circumstances that triggered, if any, the negative response on the U5. Most importantly, it should equate to language that will not cause the firm that is providing you an offer from following through and getting you on-board.

Final Thoughts

In closing, I did not want this to be a treatise on U5s. I want to make you aware that this review of your U5 form should become a mandatory step when contemplating movement to a new firm. Next week we will return with the conclusion of “Finding the Right Recruiter For You: Part 2.”

Conclusion

If you would like to discuss your options, please reach out for a confidential conversation at 760-477-1284 or email at harlan@hfriedmansearch.com. He can also be reached on LinkedIn. Subscribe to our monthly newsletter here, which is a compilation of our weekly blogs, so you never miss one. You can find our listing in the “supplier and services” section of the Red Book under the title of “executive recruiting”.

About Harlan Friedman, JD & Founding Member, H. Friedman Search LLC. Harlan is a thirty-year veteran Public Finance Banker turned recruiter who specializes in the placement of all levels Public Finance Bankers, Healthcare Bankers, Municipal Advisors, Compliance Officers, Issuers, and Bond Counsels.