A Nevada advisor’s recent victory against wirehouse Merrill Lynch demonstrates the importance of utilizing FINRA arbitration to challenge inaccurate, misleading, or false information found in one’s employment record. An advisor’s employment history, recorded within the Central Registration Depository (CRD), is largely treated as publicly available information through BrokerCheck and may include information set forth on a Form U5 (Uniform Termination Notice for Securities Industry Registration), as was the case in this matter. Essentially, a U5 record follows an advisor from firm to firm. If it contains incorrect or misleading information, commonly known as “U5 defamation” in the securities industry, it can have serious ramifications, including lost job opportunities and clientele.

In this recent matter, a long-time stockbroker and investment adviser won expungement of her U5 record, in addition to being awarded $50,000 in damages, after an arbitrator found that Merrill Lynch showed “reckless disregard for the truth” in connection with its investigation and subsequent firing of the employee. The claimant, Colette E. Wigart, worked at Merrill Lynch at one of its Nevada offices for nearly three years, from 2015 to 2018, following approximately 25 years of industry experience at other firms, including Morgan Stanley. Ms. Wigart’s record was free from disciplinary matters until an incident at Merrill Lynch.

Specifically, according to the firm’s U5 disclosure (of August 2018), Ms. Wigart was terminated for “conduct involving improperly seeking to obtain compensation by opening a Bank of America savings account on behalf of a client without the client’s authorization.” Ms. Wigart, who initiated a FINRA arbitration by filing a Statement of Claim in February 2020, sought expungement of alleged defamatory material from her Form U5, as well as consequential damages.

Had Merrill Lynch’s characterization of Ms. Wigert’s discharge been true, it likely would have warranted some form of disciplinary action by Merrill. This was not the case, however. The arbitrator found that not only did the client authorize the savings account, but it was “well-known” that the client suffered from memory impairment. Despite this, Merrill Lynch reportedly failed to interview the client during the investigation, accepting the client’s allegation “at face value.” As a consequence of her termination, Ms. Wigart was unable to find new employment, despite her extensive industry experience.

A Form U5 disclosure is required whenever a person registered with a broker-dealer or a registered investment adviser (RIA) terminates his or her employment with a particular firm. The form shall be filed within 30 days of the employee leaving the firm, and further, it discloses the reason for the departure—whether it was voluntary or involuntary or if some other reason existed. The U5 must contain certain information, such as if the advisor left the firm because of an industry rule or firm policy violation—a serious disclosure that can immediately impact one’s ability to find new employment. Moreover, should FINRA or a state regulator deem a U5’s information to be of interest, the advisor could also become subject to an investigation and possibly an enforcement action.

Given the gravity of the information contained on a Form U5 upon leaving a broker-dealer or RIA, it is critical that the accuracy of that information be evaluated and, where necessary and appropriate, challenged through a FINRA arbitration proceeding seeking expungement. The attorneys at Giarrusso Law Group LLC have significant experience in handling U5 expungement and defamation claims on behalf of financial advisors. We are adept at guiding securities industry professionals through the expungement process, from initial analysis of an advisor’s employment history and records through assessing, where appropriate, prosecuting a claim. Advisors who wish to discuss a potential claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation